Ricardo Semler has an unorthodox approach to managing: Let the inmates run the asylum. Allow your employees to work whenever they want, wherever they want, and they'll reward you with increased productivity, greater profitability, and longer-term loyalty, argues the Brazilian businessman in his new book The Seven-Day Weekend (Portfolio). Semler, CEO of Sao Paulo-based holding company Semco, whose ventures include industrial equipment and environmental consulting, boasts his strategy is responsible for increasing annual revenue from $35 million to $212 million in the last six years with virtually no turnover among his 3,000 employees. Over the phone from Sffio Paulo, Semler explains why a seemingly impractical policy doesn't have to be.

Okay, so how do you run a business if no one's around? We negotiate with our employees for a final result and let them figure out how they'll achieve the desired result. So let's say I need you to sell 512 widgets. We agree that that is a realistic expectation. Now it's up to you. Maybe you do paperwork on a rainy Sunday and golf or pick up your kids from school on Tuesday--as long as you sell the 512 widgets and our customers are happy, why do I care?

How hard is it for managers and workers to adapt to this approach? There's a learning curve. For the workers, it takes a while to learn the operational self-discipline. For managers, there is anxiety at first, but slowly it gets better, especially when they see the productivity results. Employees who only survive in a beehive, hidden behind the fa?ade of activity around them, aren't helping your bottom line. This reveals who those employees are.

Following your plan, do people work less or more? Our employees don't put in fewer hours, but there's also no indication they are overworked. It's important that I be clear that I'm not talking about abolishing work; I'm talking about making it more productive. It's a very entrepreneurial approach actually. It gives everyone a feeling of self-determination.

Do you have greater balance in your life as a result? I've halved my work hours to about 30 a week. I spend 80% of my time doing what I want, rather than what people want me to do. I take piano lessons, play squash, do yoga every day. And I almost never feel guilty for lack of time for my little boy, wife, and friends.