When I started Alien Skin Software I was focused on not being like big companies with their oppressive management. That sounds nice, but I took it too far. Without any management you can have people wander off, either not working hard or working on tasks that don’t help the team. A little management is a good thing.
Now everyone has a manager who they meet with once a week. The manager doesn’t give many orders. He is there to advise and point out when the employee is losing sight of the goal. In my experience, productive people like to have someone to discuss their challenges with. Sometimes your coworkers are too busy to give thoughtful advice, but a good manager will make time to thoroughly understand your problems and help you work out tough decisions.
A useful aspect of the weekly meetings is that the employee and manager get frequent feedback on how they are doing. Everyone should notice if a problem is developing. Of course this assumes that there is good communication. That is mostly the responsibility of the manager, in asking tough questions and creating an environment in which the employee can be critical or ask for help without getting in trouble.
If a manager only gives feedback once a problem is huge or at a yearly performance review then the employee is often surprised. Then it may be too late to bring the two viewpoints back together.
Our management style guarantees that everyone has at least one person who understands what they are working on and is available to advise. Key to making it work is that a manager’s other duties can’t take up all of their time. If you throw management responsibilities onto someone who is already 100% busy with another job then you are setting everyone up for failure.