My interpretation based on experience is that the underqualified individuals will often be more prone to volunteering, participation in clubs and committees, and politicking. The overqualified individuals also do this, but will likely be required to do "the real job" more often, leaving a less qualified individual more free to do those things.

Community involvement is a significant factor on both enlisted and officer performance reports. Gotta fill that section in no matter what, and if your section is poor it drags your overall score down.

However, promotion testing is purely knowledge and skill based. A good test taker can overcome the weight of lower performance report scores.

Just my opinion, though.