No metric is free from this problem, but grades have a much more severe case of it than competing metrics (citations, standardized tests, competitions), and we

No metric is free from this problem, but grades have a much more severe case of it than competing metrics (citations, standardized tests, competitions), and we should treat them accordingly. Even if all metrics are bad, we should try to favor the ones that are less bad. Elite admissions all claim to control for grade inflation/deflation, but since they don't divulge details they almost certainly do a poor job of it. I'm not at all sure it's possible to do good job of it, but some of the obvious easy "fixes" (e.g. using percentiles) would at least alleviate the problem you describe.