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RichardKennaway comments on Military Rationalities and Irrationalities - Less Wrong
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I first heard of the second one as "the Dilbert Principal": in any organisation, incompetent individuals are systematically promoted to the position where they can do the least damage: management. Funny (darkly funny if you've come across it personally), but I'm not sure ow true it really is.
Or "Percussive Sublimation" as Peter and Hull called it. Also colloquially called being kicked upstairs, which apparently goes back to 1684. (Warning: TVTropes link. Interestingly, although it has the usual list of media examples at the end, the content is all about real life. Is TVTropes extending into LifeTropes?)
And there are earlier echos:
One of my goals with this thread is to figure out how to avoid such nepotist bureaucratic nightmares, which have historically dominated the long-term outlook of empires from China to Rome to, increasingly, the US.
The traditional solution is periodic revolutions.
I'm not sure you're focusing on the right problem.
The Roman Empire's biggest problem wasn't nepotism, it was that the office of Emperor had no clear rules for succession. This tended to result in civil wars between the most powerful generals whenever it came to be vacant.