Hey rak I am also new to this but I presume you are onto the right idea. What I believe you are actually supposed to do is match a player's rating/age to their appropriate starting level
MikeT- do you assign every single 1st-year player to rookie, regardless of whether they are an 18 yr old round 3-5 pick who begins at 45 overall or whether you have 22 year old 1st-round-pick who begins as a 60 overall?
Although my HBD experience is limited, I have spent very much time studying the development model not only for players within my own club but throughout the successful organizations, and a consistent pattern I notice is that under-developed finished products correlate with instances where their owners started them at the wrong (too low) levels. Owners tend to simply dump all first-year players into Rookie ball. It's probably due to the semantics of the word "rookie". If the league were labelled "pre-A" or "half-season ball" then owners might assign players to (higher) levels individually. High-performing college players (especially older ones 21/22 who are 60+ overall in 1st year) do not belong at rookie level, because that level is technically a downgrade from the level of competition they were at previously. Also, I have noticed that this under-development trend especially associates with pitching moreso than hitting.
On my own club, I made my assignments for my holder prospects and my first draft based on rating. My 1st pick, 19 yr old 58 overall OF I placed at high-A and overlapped into AA. He was over-levelled based on age but appropriately-levelled based on ability, (he raked like crazy in high-A and performed admirably at AA for a youngster relative to the level). For his 2nd season (age 20, rating 63) I plan on overlapping AA and AAA. For third season the plan is to overlap AAA and maybe ML if he's ready and I'll just have to expect him to finish his development up to his potential at the ML level (potential 85). His ability justifies being younger-than-normal for each level.
I'm sure the coaching algorithms factor into it. Two teams in my league hoarde most of the pitching prospects esp the IFAs, but they generally under-develop them because they dump 65 overall pitchers in low-A. Potential 88s only reach 80 / 81 instead of 85 / 86. Not only that, the owners are wasting the statistical production on non-ML. I understand that there is an incentive to hold the arb clocks but I presume that the players' developments would be better-served closer to the majors (AA/AAA) than moving up one level at a time.
Judging by my observations of the player pool in my world, there seems to be no reason to subject every prospect to every level if it's unnecessary (based on abnormally high starting ability). There are extremely rare, exceptional instances where it seemed like a prospect could have just played in the ML right away as a 19 or 20 but the clubs put them into low-A/high-A and progressed them through the levels one at a time despite them having minor league OPSs of 1.400 or WHIPs of 0.79 in low-minor ball. Seems odd to me that owners do that
Sorry if the response is a bit wrong but most threads I read seem to mirror the MikeT rigid 1-2-3-4 format when exceptions should definitely apply (ie to the best prospects which is really the only guys it matters for anyways)