“I hate KPIs!” chimed a leading strategy execution consultant.

For a moment, I thought he was going to argue, in the same way that second-rate managers do, saying that when key performance indicators (KPIs) are imposed, they are unfair and unattainable. KPIs can raise a fear of accountability in managers and result in distaste.

His comment was reminiscent of an impassioned, near protest, discussion with a group of directors who pleaded that their company do away with its performance management system.

They challenged: “Our KPIs are impossible, they are cascaded to us without any discussion. And frankly they don’t even relate to our job.”

I was shocked when they asked, “We are rewarded for Ebitda [earnings before interest, taxes, depreciation, and amortisation], yet what do our jobs have to do with it?” (For the record, every job contributes, positively or negatively, towards Ebitda.)

They, too, hate KPIs!

But this consultant was not speaking of unfairness or lack of accountability. He noted: “KPIs are only part of the picture.”

When we reduce a strategy down to bite-size measurable details, leaders and employees lose sight of the strategy, the goal, the vision and only focus on the number, even taking it out of context.

Given this explanation, I agree the KPI game can be dangerous.

After all, a KPI is merely an evaluation of success of a particular activity, it should not be the goal. Success is defined in terms of making progress toward strategic goals.

The KPI debate assumes that the right ones are in place to begin with; in reality too many leaders do not know how to set effective and sufficient indicators such that the whole system becomes a flawed basis for the business.

Managing only by a KPI is a dangerous leadership approach; actually managing by any formal agreement is dangerous.

As he was sharing his opinion with me, my mind drifted across town to another conversation where the CEO was asking how to pull his team out of the “SLA fight”, which is when leaders manage by adherence to the strictest terms of the ‘service level agreement’ (SLA).

And when they have met their obligation, they declare victory — much in the same way employees argue for a perfect rating by meeting the minimum KPI.

What was bugging that CEO, and rightfully so, was the fact that SLA compliance is not their vision, but it has become their reality. Months ago, the entire leadership team shaped their vision to become the preferred service provider in their industry.

And now they are stuck in an SLA fight with the client saying, “We have done our part, we meet the terms of the agreement.”

Meeting the minimum requirements isn’t enough to declare victory, nor to become the preferred provider, but it is enough to create a fight.

Too often what is measured becomes the goal because companies reward what they measure, even though it isn’t the goal. When you manage by the SLA, you are not leading.

There is a sad term to describe a person who relies on his or her position, structure or agreements for the basis of leadership. It is “Lino” — leader in name only.

If you rely on your formal position or a formal agreement to give you authority, you are not really leading.

Most people argue that SLAs are good, and they can be, but when the SLA is the basis for leadership, it creates a transactional relationship — I did my part, now you do yours.

SLAs need to be kept in perspective; they are an agreement that is designed to lead to an outcome, not satisfaction of a checklist.

What would happen if a basketball coach only measured and focused on rebounds, assists, steals, and individual scores? He could get lucky and win a game, but he just as easily could do well in the individual areas and lose the game.

This holds true in business, which is why the famed strategy consultant commented, “I hate KPIs!” and the SLA fight is all too common.

Actually, leading by the terms of an agreement — KPI, SLA, even contracts — is not leadership. When leaders rely on formal agreements or positions for their authority to lead — contractual leadership — not only does their effectiveness deteriorate, so do the relationships.

Real leadership comes from influence.

— The writer is a leadership adviser and author of ‘10 Tips for Leading in the Middle East’ and other writings. Follow him on Twitter: @tommyweir.