Management by Baseball takes on the topic of cronyism (hiring your friends and family) in Cronyism From Tropicana Field To Harvard Yard :
The Wharton/Harvard MBA-run company I worked for didn't fail because Wharton and Harvard are bad business schools. It failed first because the graduates they hired they hired because they were cronies of each other and because no one was hiring on merit; they were, as my friend Alexis Laris says, "not exactly the best and brightest". It failed also, though, (and this is critical) because there was a monoculture of thinking and because when bad decisions are made in a crony environment, the monocultured peers find it harder to see what's wrong (they tend to approach problem solving with the same tools and biases and cultural presumptions), and as the "us" in an "us versus them" crony view of the world, they are less likely, even if they see the flaw, to call a fellow-crony on his mistake.
This is related to the weak connections idea -- that we learn more from the people on the fringes of our network than those in the thick of it. If I work with people who are all "like me," then how could we collectively see our way out of problems that have us cornered. This is particularly problematic for groups that are convinced they are the best and brightest. (I am not totally immune to this behavior. I also happen to be a graduate of Penn, where Wharton is based.)