So I've got that you don't mind where or what your devs are doing so long as the tasks get completed, which is awesome, and that you can't do long vacations with no warning, which is reasonable.
What's your stance on long vacations with warning? One month's notice? Two?
I mentioned this in another response, but I believe this issue really has more to do with who you hire, how well you pay them, how you treat them, etc. It's more about the execution of philosophy, not the composition of and adherence to policy.
To be real candid we've not run into a situation yet where a developer was going off the grid for a bit over a week at a time. The devs we hire are really really talented and they go into withdrawal if they don't open an IDE for a couple of days. They're compulsive coders...I mean, I pay them to do what they do, but most of their motivation is internal. The common thread is that they all have a passion for development, and that shines through.
My belief is that hiring decisions are the most important ones I make, so I want to know the people I'm hiring and I want them to know me. This is going to sound cheesy and it's not one-size-fits-all, but it all comes down to cultivating relationships.
So I talk to devs via email that I've met on HN. Or on twitter. Or at <insert language here> user groups. Or via other devs. I'm interested in what they're working on...not just because I might want to hire them, but because development is interesting, right? That's why we all read HN. :) And developers rarely get to talk to people that "get" what they're doing outside of their work colleagues.
It's a great way to learn about new things. It's a great way to get questions answered when you bump up against an issue. It's a great way to help other devs when they hit a wall that you've maybe hit before. And it also a fantastic way to find guys you think might want to work with you and vice versa.
I know that sounds really kumbaya, and it probably doesn't scale or whatever. But I'm not trying to be a huge enterprise software company that has revenues in the gazillions. I'm just trying to be a small shop that does really amazing work and is a place where really good geeks love to work.
I'm ok with having a distributed team; in an ideal world we'd be able to get together physically more than we do. But if there's an amazing talent in Seattle or someplace else really far from where I live I'm not going to let geographic separation keep me from working with that person.
But...I definitely don't have it all figured out for sure...half the time I feel like that xckd strip where the guy freaks out as he's signing his mortgage loan because he still thinks about how cool it would be to be Batman.
What's your stance on long vacations with warning? One month's notice? Two?