While he's been on vacation, Joel Spolsky has been airing a set of pre-recorded posts on three management methods which he calls Command and Control management, Econ 101 management, and the Identity Method of management, not to be confused with managing identities.
Joel saved the method he recommends, identity management, for last, spending the first few days shooting holes in Command and Control and Econ 101 as management methods. There's nothing here that you haven't read somewhere before, but Joel has a great way of writing and he's speaking about what's worked for him--that's always good.
At iMall, we tried very hard to practice the identity method. We called it "building a culture." Joel's spot on with this one: to practice the identity method, to build culture, you have to spend time together in places besides meetings. We catered a lot of meals. Once a month of so, we had a big BBQ that we called "dead cow." We had an annual hike up Timpanogos. We still have an annual golfing event. These activities were very popular and provided a place for people to bond.
One thing that Joel didn't mention that I think is important: nomenclature. Cultures have their own way of looking at things and their own way of talking about things. I'm not just talking about technical nomenclature either--we made up words and sayings for everything.
We succumbed at times to the temptation to practice Econ 101 management. While I believe there's a place for economic incentive, we found that throwing money or options at developers didn't really make them work harder or better. You're better off making people financially well off (to the extent you can) and then leaving the subject alone.
For the identity method to work, employees have to be comfortable arguing with the boss and the boss has to be comfortable with that. As Joel says, if you give people information and then discuss the ramifications of actions with them, the group will typically come to a good decision.
That's why I think blogging is a good addition to the identity method. Building culture requires sharing information, but not just dry facts. More than simply sharing information, the identity method requires transparency in most areas. Blogs are a great way to lay the ground work for that. They're not sufficient, however--you still need to build relationships and have face-to-face discussions.
I say "most areas" in the preceding paragraph, because there are places where a good manager protects the team. A good manager buffers uncertainty and ambiguity. Nothing is more cruel than complete honesty, particularly when it's ill timed.
Joel describes the Command and Control method as "military" and while that's certainly the popular perception, it wasn't my experience. I spent 14 years in the Navy and had very few Command and Control encounters. Certainly the overall organization is very hierarchical, but the inter-unit interactions tend to be more identity method. The petty officers and chiefs knew a lot more about any given situation than I did and they were willing to share that with me and tell me where I was mistaken.
Moving from iMall to the State of Utah was a lesson in cultural disconnects for me, although I didn't really realize what was happening at the time. Governments are Command and Control organizations and smart people who've worked in them their whole lives are generally cynical and distrustful. I didn't get them and they didn't get me. It made for some unhappy times.
Command and Control organizations even have rules that keep you from building culture. Things like rules against buying employees food, except in prescribed situations, come to mind. The identity method requires the organization to trust management in ways that large organizations aren't comfortable with.
I'm in complete agreement with Joel on the efficacy of the identity method, especially for managing developers and other smart people. Not only does it work, but it's a lot more fun. The funnest period of my working life was the time we were building iMall and most of that is because of the people who were involved and the relationships we built.