Thank you for the response. I agree that an emphasis on rank is detrimental for training. That's why I never teach for tests.
My only focus on rank for my students is to encourage them to test when eligible and ready.... I agree with Kato sensei when he says he does not like tests because people are at their worst on them.
You seem to be equating tests and rank, which is a common enough sentiment in aikido. However, they are not the same thing. It is possible to have rank without testing. This is the case for all aikikai promotions over 3- or 4-dan, and I've read that Gaku Homma, an independent teacher in Denver, administers his ranking system without any formal testing at any level. He just promotes people when he thinks they should be promoted.
I suppose it would also be possible to have tests without rank, but what would be the point? Nobody would care about the type of tests used in aikido if there wasn't the carrot of rank dangling out in front of them, and that's actually a pretty good indication that such tests have little value. By way of contrast, a test involving a competitive element, as in judo, kendo, or BJJ, would have interest and meaning even if there was nothing at stake. Any test that does not have such intrinsic usefulness as a martial training tool will not suddenly become endowed with it by virtue of being used as a criterion for awarding rank. All such tests do is turn attention away from the important elements of training to the unimportant ones.
As a teacher, there is nothing a test can tell me about a student that I don't already know. Like rank itself, tests are really are designed to serve groups, not individuals, and one way they do this is to tell people in the community (besides the student's teacher) things about a student that they might not know yet. In large organizations, the person in charge of the organization is not likely to be the student's direct teacher, so tests provide an opportunity for this person to look closely at a student that he otherwise does not get to see. I think an excellent case can be made that this is a poor model for teaching martial arts anyway, since without direct, personal exposure to a teacher it is impossible to learn anything of value. Simply showing up at a seminar and testing in front of someone is not sufficient for this transmission to take place.
Tests also tend to restrict training to the kinds of things that are tested and to discourage growth in directions that are not tested. This also serves organizations by keeping people working in similar directions and preventing them for spending too much time with ideas that might prompt them to seek training elsewhere or even consider leaving the organization. I think these effects are also very undesirable in martial arts, particularly non-competitive ones where there are no standard rules of competition for which people must train. I consider one of the greatest benefits of non-competitive arts to be the freedom from the limitations of a particular rule set, yet the exact point of testing is to restrict this freedom and force people to train in one particular way.
While this tendency of testing to limit training can be mitigated to a certain extent, as you describe, I don't think it can be avoided entirely. Even in the second dojo at which I trained (and the one at which I also tested), the test curriculum had a significant influence on training. There were classes I attended where all the techniques taught were directly from the requirements of a particular kyu test, although nothing was said about it. When I say that rank did not play a major role in the training there, what I mean is not so much that tests were considered unimportant but that everyone was treated equally without regard to rank when training. If someone, perhaps with experience in other martial arts, came in with no formal aikido rank or experience yet could perform at the same level as a mid- or even senior-level yudansha, he would be accorded the same level of respect on the mat. The issue of the difference in their ranks would not be nearly as important as that of their relative skill levels as martial artists.
On the continuum of possible training environments, my experience is that the best ones are those with no ranking system at all. However, of the ones with ranking systems, which includes almost all aikido dojos, there is a very significant difference between the ones that put political status, in the guise of rank, above all else and those do not allow their ranking system to trump the actual martial ability. From what I have seen, the former group is larger than the latter, and I believe the structure of aikido today is leading the art increasingly in that direction.