If you trust and empower your software and other high-technology professionals to manage themselves, they will do extraordinary work. However, it cannot be blind trust. You must ensure that they know how to manage their own work, and you must monitor their work to ensure that they do it properly. The proper monitoring attitude is not to be distrustful, but instead, to show interest in their work.
By using simplistic extrinsic motivators to goad performance, managers excuse themselves from harder matters such as investment, direct personal motivation, thoughtful team-formation, staff retention, and ongoing analysis and redesign of work procedures.
Data collected on individual performance has to be used only to benefit that individual as an exercise in self-assessment. Only sanitized averages should be made available to the boss.
You Gotta Own It:
...if you do want great software, you have to let the developers own what they're building. The developers are inevitably the ones who have the most control over the success or failure of the project. Creating an environment where your developers have no emotional attachment to the project they're working on is a recipe for mediocre software-- and job disillusionment.
It's heady and a little frightening to know that the boss has put part of his or her reputation into the subordinates' hands. It brings out the best in everyone.