The real reason that the great experiment called America turned out as well as it did can be summed up in a single word: competition. Competition for customers, competition for talent, competition for jobs, competition for political office.

When individuals, businesses, products, and services compete on their merits, it brings out the best in people. That works as well in practice as it does in theory, except for one word: merits. Since merits are highly subjective, there’s actually no such thing as a perfect meritocracy.

It reminds me of first year physics class where all the mechanics equations assume a frictionless system. But we don’t live in a frictionless world. Surfaces are not perfectly smooth. Besides, if you dig a little deeper into the inner workings of matter, you find all sorts of second-order effects that can wreak havoc on those simplified equations.

It’s the same thing with people. It’s hard enough to make logical judgments based on limited data and imperfect metrics, but people have so much more going on under the hood than that. We actually hire, promote, and elect people based in part on intangibles, most notably our feelings or instincts.

Like it or not, we all play favorites to some extent. If we didn’t, we wouldn’t be human. After all, there’s a lot to be said for trusting your gut when it comes to decisions about people.

So, when a senior executive told me that one of his company’s biggest issues is nepotism and asked for advice on how to limit the crony factor and create a more competitive meritocracy, I had to give it some serious thought. The answer is not as simple you would think.    

Leadership gurus and management experts are always spouting off about the importance of building company culture but, if we’re honest with ourselves, we all know what that really means. Company culture is code for getting employees to behave the way we do and to replicate that model.

In other words, we tend to build our companies in our own image. You’ve got to admit; you can’t get any more subjective than that.

The truth is, the higher we climb up the corporate ladder, the more tempting it is to make people decisions based on what our gut tells us. Oftentimes, that means consolidating our power base in a closely nit inner circle of trusted individuals who tend to see eye to eye. I’ve seen that happen time and again and, in every case, it’s failed.

The problem is the assumption that your gut will steer you in the right direction, but that’s not how it works. For better or worse, your instincts will generally steer you to safety because they’re all about survival and that means sticking with like-minded people you’re comfortable with.

You may think it’s your gut telling you to take risks when, in reality, it’s your rational mind overruling your gut by telling you how important it is to bring those with unique perspectives that challenge the status quo into the equation.  

As it is with most issues in the world of business and management, cronyism is anything but black and white. We tend to think that leaders know a priori that they’re playing favorites with those who aren’t deserving, when, in reality, they’re trusting their gut that tells them to play it safe.

And, as we all know, that can lead to groupthink, lack of accountability, poor performance, and ultimately, disaster. 

That’s not to say that you should completely discount your gut. When those hairs stand up on the back of your neck or you suddenly feel like checking your wallet right after somebody that creeps you out has left your office, there’s a good chance your instincts are trying to tell you something.

On the flip side, some innovative thinkers are brilliant, but their style is so divisive and disruptive that they create more problems than they’re worth. You’re probably aware of it when you meet those people but you overrule your gut because you know the importance of different points of view that push the envelope.

The trick is to know yourself well enough to consider both instincts and logic in making the right decision that meets the needs of your organization and the dynamics of your management team. And remember that creating a culture that promotes meritocracy is much more of a balancing act than it seems.

Steve Tobak is a management consultant, executive coach, columnist, and former senior executive. He runs Silicon Valley-based Invisor Consulting where he advises executives and business leaders on anything and everything. Contact Tobak.

Follow him on Facebook, Twitter, or LinkedIn.