Do leaders need sector experience?

It is always a concern for the organizations to select competent candidate with the sector experience or not.   Definitely to meet with sector experienced candidates is preference of both HR and business. Such a placement will shorten induction period and enable the organization to move business as usual earlier. But on the other hand,  different sector experience might add value to the organization. Experience from another domain will enrich employee's contribution to the organization.

Leadership is the main leverage for the growth of an organization. Gandossy and Guarnieri state that "Many CEO cite the lack of qualified leadership talent as the most significant constraint on growth" [1]. Thus selecting candidates who demonstrate leadership with the different domain knowledge might be the most contributor for the growth.

Gautam Mukunda from Harvard Business School support this idea with his study [2]. He also adds another challenge to the idea with his study.

Mukunda categorize leaders into two groups.
1) Filtered Leaders or Insiders.
2) Unfiltered Leaders or Outsiders.

In the study Mukunda discovered that the outsiders were the most effective. Choosing an insider will do the job well but won't perform any different from any other top candidate with the sector experience. Outsiders perform the very best without lots of sector experience. The best leaders - Steve Jobs, Abraham Lincoln were outsiders or unfiltered leaders. Their ability to think differently and not stick to a certain way of doing things, made them so effective.

The challenge is, "outsiders are high risk but high reward".
Insiders can be effective in stable situation. But they can't adapt to extreme situation or sudden change where outsiders feel free to adapt. Insiders will usually make the same decisions in extreme situation. Their leadership doesn't have impact. Outsiders will think differently and take the risk.

Out of this study, it is clear that one can either choose a leader who is potential to win big or lose big, or choose the one that insider with standard outcome.




References:
1- Gandossy and Guarnieri, Can you measure leadership, 2008
2- Gautam Mukunda, Great leaders don't need experience, 2012