Joel Splosky has a neat essay called Hitting The High Notes, explaining why he treats his programmers like stars.
Zed Shaw has an inspired rant called Fortune Favors Big Turds, explaining why he thinks Joel is full of it.
Zed kind of has a bad attitude, but you should read both these things, and then you should keep in mind that while Joel is trying to hit the high notes, with his company's proprietary software, Zed is actually hitting them with his open source project Mongrel.
The argument of Hitting The High Notes is that a great programmer won't just outperform an average one, a great programmer will do things an average one will never even think of. This is a popular idea. One of the great examples, ironically, is Mongrel's extraordinary security. Mongrel outperforms most web servers, including Apache, for security, and the irony here is that Zed didn't even care about security when he was building Mongrel. The security is just a side effect of a good design decision. Zed decided the quickest way to build Mongrel would be to use Ragel to conform exactly to the HTTP spec, and when he did this, he bypassed a huge number of security problems most servers have, which are simply due to inconsistent HTTP parsers. I heard him on a podcast explaining how a security consultant asked him what he had done to make Mongrel so secure, and technically the answer was nothing. He just wrote good code. (And knew what a state machine was.)
I don't have a conclusion for this, and I held off posting it for a long time, but I think it's really interesting, so maybe if anyone reads this, they can reach their own conclusions. I will say this, the contrast here definitely has me very sincerely doubting Joel's hiring process. If you hired Leonardo da Vinci to do anything, you'd probably have him underperforming. I think people who can hit the high notes do best when they decide for themselves what to sing.
The other thing, I guess, is that there's a real underpants gnome quality to Joel's business plan, which is, hire the best programmers, give them the best working conditions, this will automatically lead to the best software, and that will automatically lead to profit. The first problem is that sometimes the best software comes whistling out of left field. The second problem is that sometimes inferior software wins in the marketplace. I think Joel's theory is a great theory if you want to build a great place to work, but as a business plan, it's hit and miss at best.