It's pretty difficult to lose tenure (that's the point), but publication volume and quality are pretty much the metric for hiring and promoting faculty. Just like standardized testing at the undergraduate admissions level, it's pretty much inevitable that some people will attempt to game the metric instead of what it's supposed to reflect.
I think that hiring faculty will tend to be primarily about publications. But promoting faculty will also depend on pulling in grants - perhaps even more so.
Grants and publications become a virtuous circle. Getting grants gives you time and resources (and prestige) to get publications. Getting publications is the gateway to getting grants (before you have grants), and getting more grants (once you have grants). E.g. the measure of a grant-getter's success (at utilizing a grant) is generally the number and "quality" of publications the grant generates.
I agree, but you're leaving out the money part. Schools get a cut of all grants. From the school's perspective, the grant itself is valuable. So when it comes time to evaluate tenure and other promotions, they will look at both.
I would say the metric, at least in fields with a lot of money, is actually the amount of funding you bring in. Of course, publication record has a big influence on that, too.
