Brooks has a fine discussion of the topic in The Mythical Man-Month. He makes a good case for having a traditional manager as assistant to the lead developer, with responsibility for budget tending, office politics, gossip, lies, damn lies, and other business activities that no developer wants to indulge in. The assistant's main job is to keep the developer happy.
Management isn't just there to keep the developers happy,
although IMNSHO that's one of a manager's primary
responsibilities. Management is also there to make sure
that the developers are solving the right problems, and
that they're using their time properly. It's not terribly
useful for a development team to solve a really cool
problem in general when only a specific instance is
relevant to the company. Developers can get into a "forest
for the trees" situation -- too close to the problem to
really be able to tell what the company needs.
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