Last month, a CEO called us with a problem that’s becoming all too common. His company had just spent close to $50,000 on comprehensive personality assessments for their leadership team, and the results were… well, let’s just say they weren’t getting the transformation they’d hoped for.

“We know more about everyone’s communication style and work preferences than ever before,” he said, “but our performance issues haven’t changed. If anything, people are more aware of their limitations but no more capable of overcoming them.”

This conversation stuck with us because it highlights a fundamental misunderstanding that’s costing organizations millions of dollars each year. We’ve become so focused on understanding how people prefer to work that we’ve forgotten to assess what they can actually accomplish.

Don’t get us wrong—personality assessments have their place. Understanding whether someone is naturally introverted or extroverted can inform how you structure meetings or design workspaces. Knowing if someone prefers detailed planning versus spontaneous problem-solving can help with project management approaches.

But here’s what personality tests can’t tell you: whether someone can actually lead a team through a crisis, negotiate a complex deal, or analyze data to make strategic decisions. These are competency questions, not preference questions.

The distinction matters more than most people realize. Preferences are about comfort zones and natural inclinations. Competencies are about proven capabilities and measurable skills. You can prefer collaborative work styles but lack the actual skills to facilitate effective collaboration. You can be naturally detail-oriented but struggle with quality control processes under pressure.

What’s particularly problematic is how organizations often use personality insights as proxies for capability assessments. They’ll promote someone to a leadership role because they score high on assertiveness measures, without evaluating whether they can actually develop others, make tough decisions, or navigate organizational politics effectively.

The research on personality-performance correlations tells a more nuanced story than many assessment vendors would have you believe. While certain personality traits do correlate with job performance in specific contexts, the effect sizes are often modest and highly dependent on situational factors.

Meanwhile, competency-based assessments consistently show stronger correlations with actual job performance across various roles and industries. When you measure what someone can demonstrably do rather than how they prefer to do it, you get more predictive insights about their future success.

This isn’t to suggest that personality is irrelevant—far from it. The most effective approach appears to combine both perspectives: understanding capabilities (what someone can do) alongside preferences (how they like to do it). This dual lens provides a more complete picture for talent decisions.

The challenge is that many organizations treat personality assessments as the complete solution rather than one piece of a larger puzzle. They invest heavily in understanding team dynamics and communication styles while neglecting to assess whether their people have the specific competencies required for success in their roles.

What’s needed is a more sophisticated approach to talent assessment—one that acknowledges the value of personality insights while prioritizing competency evaluation. This means asking different questions during the selection process and focusing development efforts on building actual capabilities rather than just increasing self-awareness.

The companies that figure this out will have a significant advantage in the coming years. They’ll make better hiring decisions, develop their people more effectively, and build teams based on what individuals can actually contribute rather than how they prefer to contribute.

For that CEO mentioned earlier, we ended up supplementing their personality data with competency assessments. Last month, he reported that the combination gave them the actionable insights they’d been missing. Sometimes the solution isn’t choosing between two approaches—it’s integrating them intelligently, and, that’s exactly what we do at ProfilAS.

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