The importance of exams

As an instructor, the most difficult task I find is explaining the importance of exams to students. To begin with, I don't believe it is possible to assess someone's potential to perform any challenging task in real life through a 2 to 3-hour-long exam. Then, what is the purpose of exams? I think the only thing that can be evaluated in an exam is someone's ability and willingness to follow instructions.
 
Nevertheless, I want my students to be leaders and innovators, which requires a lot more skills that cannot be assessed in exams. It is particularly difficult to evaluate critical thinking in an exam, especially when the class size is large. Moreover, students often feel anguished when the assessment is subjective.
 
All I can say to students is: "The grade does not necessarily reflect your true potential." The correlation between CPI and success in life is quite weak. The attached image shows plots of GPA versus salary. Interestingly, the correlation weakens over time (Zou et al., PLOS One, 2022).
 
I believe it is possible to acquire skills with strong motivation. The time required may vary depending on someone's background. Should we assess the motivation level of students? Besides the impossibility of such a task, it is also not entirely fair, as motivation is "partly" the responsibility of the instructor and the system.
 
So, as a student, focus on learning. Grades should be of secondary importance to you.