Thinking about how WTDSIK's ranking system is based not on physical power but on how you have benefited your community. All the high ranking demons are ranked highly because they have performed acts of community service and have helped improve the Netherworld in some capacity. Yes physical power is rewarded, but there's also explicitly non-violent ways to climb ranks- contributions to culture (music festival), building communities etc.
Idk, demons are explicitly stated to be hierarchical, and value power, while the Ranking system equates power with becoming an active participant in improving people's lives.
Children seem to be entirely unranked- you gain your rank once you enter school as a teen, and given demons seem to age differently to humans given their longer lifespans, there seems to be a bit of wiggle room as to when you can choose to enroll- some as young as Chima, others closer to 18-ish. Enrollment seems to be based on when you are 'ready'- that is able to go through the entrance exam. You move from child (a 'treasure' to be protected) into a ranked demon, ready to participate in society.
Ranks 1-5 seem to be fairly squishy and flexible- teachers are given free reign to scale you up or down as they please within the microcosm of the school. Good grades, music performance, hunting ability, extracurricular activities all affect your grade and can let you rank up or down. Babyls and other schools serve as these microcosms, setting young demons up to actively embrace participating in society. New ideas (eg keroris beast kingdom) and cooperation (gaap and agares' castle) are rewarded.
Really, ranks are fully contingent on actively participating in society. Demons like Beem, who was unmotivated and disillusioned, and Kiriwo, who kept to himself, had their ranks stall despite their seniority.
On the flip side, this raises the question, how do demons who cannot participate within this society/set-up fare? The Many-Ears are either unable to, or just tend not to go to schools like Babyls, meaning they do not get to participate in this ranking system. They are displaced, living in their own individual tribes apart from the rest of demon society. Despite their many specialised skills, they are placed into positions of subordinacy, used exclusively as servants by other demons. We KNOW ranks are not exclusively based on physical strength!!!!! Within the system, there is no reason Many-Ears could not be rewarded for intelligence, cultural enrichment, new discoveries etc. The issue is, the system exclusively rewards participation in society. It fails to account for Many-Ears, who are marginalised, live outside this society and when they do enter it, enter it as servants, whos achievements will always be credited to another.
Tldr the ranking system actively channels demon's energies and ambitions into working to benefit their community, but equally this means demons who can't provide sweeping benefits to others r gonna be constrained to a lower ranking. Or smth idk. Rambling. I don't have a real point.