Today, Janet Taylor (formerly of FCBD and now an ATS free-agent, as it were) posted a blog about why she currently favors the audition process when assembling a tribal bellydance troupe. It's a thoughtful perspective, and clearly a very personal one based in specific past experiences--give it a read. I particularly resonate with her assertion that the audition as a form of mutual discussion compared to other methods. Food for thought.
As someone who used an audition model for years, and now has an invitation-only model (what you call "always auditioning" model), I can tell you both methods invite the exact same problems to varying degrees. In inFusion Tribal, for years we chose to audition members. Our intent was to widen the pool of potential candidates, and for me personally I felt it valuable to give students the learning experience of auditioning. I am pleased to say that many who didn't get into the troupe came back after thanking us for the experience, grateful for the growth opportunity. Late we moved to an apprenticeship model and invitation-only model, which had its own pros and cons by comparison. What I have learned from different methods of growing a troupe over my 17 years teaching and directing this dance is this: No matter how transparent you believe you are being, people inside and outside of the process will bring their own interpretations of the results; and those who are hurt or offended by not making the cut will still make assumptions about your motivations, and may gossip and perpetuate a negative dialogue--to which you as a teacher or director may not be privy and thus are unable to address--regardless. It's par for the course any time you set up a goal post and not everyone is able to pass it.
For me, the major problem with the audition model for our purposes is it implies that demonstrated skill is the only criteria for entry, when I think we can all agree that there are a myriad of factors more subtle and difficult to define or codify--including personality traits--which play into the ideal troupe member. Now if you set up a skills-based-forward audition process, and someone nails it technically, but they create problematic friction or are otherwise difficult to work with, what are you left with? You are stuck having to explain why someone so talented wasn't invited, and no matter how you word it, the answer they tend to hear is "you don't like me". You literally have to be ready to tell someone to their face, "You have all the skills we're looking for, but we don't think it's a good fit..." or move the goal post on an individual basis and answer all the questions that follow.
Believe you-me, I wish that bellydance classes and troupes had a bit more of the professional standards of the Western dance styles and theater I steeped in growing up, a boon which would allow entering a troupe to be much more heavily-weighted in skill/ability alone because other factors would be a more foregone conclusion. The major difference here is that most people don't come to bellydance as malleable young women and men. Those dancers grow up in, and have their attitudes and expectations shaped by, that culture of long-established class and rehearsal etiquette, auditioning, developing a thick skin, the nuances of professionalism, etc. Instead, we are primarily a community built from adult learners, many of whom have never developed those skills or otherwise learned what it means to audition and be part of a functionally professional working group of artists. Add this to the fact that we are also performing a dance which relies on a deep trust and physical and emotional connection in order to be successful. We are left trying to not only bring them along in their dance skills, but also their interpersonal skills/ability to work in groups, and both are harder to influence/improve as the initiate is older.
Some "get it" right away and are fundamentally better candidates for working in a troupe based on their attitude and professionalism than someone who might be a better dancer but lacks those traits. You can audition the latter group, admit them to the troupe, and hope they come around; but if they don't...it's a lot harder to kick someone OUT of a troupe than it is to thoroughly vet them and filter out the problem-personalities before they get in. It makes auditioning very tricky...
Ultimately, a lot of what Janet addresses in her blog regarding gossip and mistrust has as much to do with overall class culture as it does the troupe member process. Teachers can't avoid gossip and hurt feelings at times in our student population, but we can mitigate it on a daily basis through our leadership in general, as a teacher, mentor, and director. Nobody is gonna get it right 100% of the time, and no system is going to end-run around the ultimate heartbreak of those who won't "get in", unfortunately. The best we can do is foster an environment of trust, honesty, and openness. We need to be welcoming of ambition, and be ready to address student questions as they reach for their individual goals as best we can.