Or maybe the artists themselves just genuinely care about improving and perfecting their art? It's not like everyone (or even the majority) was chosen just based on their looks.

The only SM group I follow close enough to know the members' backgrounds is EXO, and it's very evident with them. Everyone in the vocal line had some kind of musical background before joining SM, all three of them were scouted because of their singing. And if you look and Chen's and Baekhyun's interviews, it's obvious that they are genuinely passionate about music. They both talk about how they want to continue as singers for a long time, and both mentioned vocal practice they were getting on their own, outside of SM. The company doesn't have to motivate them with fame and money, they already have internal motivation. Same with Kai and dancing, he received ballet training since he was a child, and wanted to do ballet for a living before his family sent him to an audition.