From what I have read about Aikido, it was orginally a martial art without any competition or grading. When it was introduced into the west, that is when grading came about because in the west we are more "material" driven so we like to have something to show for our efforts.
At my Dojo my Sensi watches throught out all your lessons and when he feels that you are good enough he will give you then next belt up.
Something that we do to help this is at the end of some lessons we have what we call one in the middle. Which is just like it sounds one person in the middle, and everyone else attacks one at a time. Normally everyone does the same attack but when he is close to giving out belts he gives us about three different moves to do in the middle. So if we can take an attack and use different moves rather than just one it shows that we are learning and can think quickly from one attack to another.