(FORTUNE Magazine) – Every boss does it.

An employee who pulls all-nighters to finish a crucial project on time gets a couple of days off as acknowledgement. The salesperson who goes that extra mile for a client receives a bottle of Veuve Clicquot and dinner for two at a swanky restaurant. The indispensably reliable mom with an ailing child gets to work half-days one week.

Of course, the boss isn't officially authorized to bestow such largesse. Doesn't matter. Not every worker who merits it gets special treatment. Doesn't matter. Many organizations expressly forbid managers to dispense such favors and rewards. Doesn't matter. Practically every boss who commands respect, loyalty, and results will bend--or break--the formal rules to provide informal compensation. Is this discriminatory and unfair? Of course. It happens anyway.

Every economy of size has both formal and informal markets. America, Italy, Brazil, and China have huge underground economies in which incomes don't quite get reported and barter surreptitiously replaces currency for transactions. These informal economies are a global phenomenon; they sometimes appear as rivals--and sometimes as complements--to their formal counterparts. Many countries spend billions trying to stamp out or tax their gray-market underbellies. For them, "gray" is nothing but a euphemism for illegal. Other states practice a live-and-let-live philosophy as long as the gray-market trading doesn't interfere too much with formal exchange. They recognize that informal markets can create helpful efficiencies that might elude more formal economic planning.

In that sense, organizations are like nations. A General Electric, a Unilever, a Hyundai--each has shadow economies living within the formal structures of the firm. Even smaller firms cast their shadows. Managers are constantly torn between honoring rigid rules for recognition and reward and engaging in gray-market compensation--a day off here, a not-quite-authorized home DSL connection there. Nothing actually illegal, mind you, but all decisions that reside squarely in the gray zone of standard organizational practice.

The gray zone becomes a danger zone when times get tough. What kind of reaction does a company expect from a creative, hardworking employee when his heretofore flexible manager tells him, "Sorry, my hands are tied"? When promotions are delayed, raises put off indefinitely? A company that decides now's the time to discipline a manager for giving her project team Monday off after they've worked every day until 10 P.M. the preceding week deserves the kind of employees it can actually keep.

At times like this the thin line between loyalty and cronyism drops to the width of a razor. Sure, reward your most productive workers; but remember that now's when the unproductive will scream that your beneficence is little more than favoritism.

The problem is fundamentally unsolvable. Organizations that formalize their compensation structures in the name of equity and consistency effectively disempower their managers. Conversely, firms that grant managers wide discretion in employee compensation often end up riddled with banana republics and wide income disparities in comparable job categories throughout the organization. It's a mess. It's a source of tremendous resentment. But it's also a remarkable opportunity.

A few organizations have begun to look for ways to co-opt, embrace, or formalize their informal economies to get the best of both worlds. One global telecommunications firm recently created a rewards bank on its intranet. Managers are given a "points budget" and encouraged to give worthy employees just-in-time compensation for their performance. Employees can redeem these points for time off, cash, and assorted goods. The ostensible goal is to reduce the bureaucratic time lag between good works performed and HR's recognition of them.

The indirect effect, however, is to give managers a more formal way to do what had been done informally. Instead of a day off or a dinner, employees can use accumulated points at their discretion. This gives both managers and workers more choice, while giving the larger organization a way to keep an eye on discretionary compensation. Of course, if the organization is chintzy with its "pointsenomics," the incentive for off-the-books compensation will still exist. The firm also has to worry about points inflation if managers pump too many points into this alternative-compensation economy.

Nevertheless, such market-driven tactics represent a healthy alternative to both heavy-handed attempts to audit and crush informal rewards and cheerful ignorance of their existence. The motto is "discretion with discretion." When managers exercise the discretion to reward their employees, discretion becomes the cost-effective part of valor.

MICHAEL SCHRAGE is co-director of the MIT Media Lab's e-market initiative and author of Serious Play. Reach him at michael_schrage@fortunemail.com.