Sector experience is the weakest test for a director hire

This week I spent half an hour with the managing director of a division at one of the big building materials groups. He runs a P&L inside a global business, with the group disciplines that come with that, and he has bought businesses and sold them. What stopped me was not the record. It was how plainly he described the limits of how our industry hires.

"I know people look for industry experience," he said, "but there's a lot of similar crossovers." He was talking about contractors and housebuilders, and the habit of filling a regional managing director seat with someone who has already sat in one. The work in front of that person is running a business: strategy, margin, people, supply chain. The product changes. The job does not.

He was just as plain about where he is useful. If you want someone steady to keep things ticking over for five years, he said, that is not him. Where there is a problem, where the team needs rebuilding, where something is not working, or is working and needs taking to the next level, that is the job he does. He finds private equity backed businesses interesting for the same reason. They are not in for the long term; they invest to move the needle. His read on the businesses that have grown fast is that they have the financial backing and now need structure, process and the right leaders to professionalise them. "They need the people."

Here is what I think is really going on. Contractors promote in a straight line. Senior project manager to project director, project director to operations director, operations director to the board. It produces people who know how to build, and I would not want it any other way on site. It rarely produces people who have run a business where a small change in one plant has an astronomical effect on the number at the bottom. The materials side lives on those margins. A main contractor pricing risk in single digits could use that discipline more than it uses another twenty years of site experience.

The supply side also knows something contractors would pay to learn: what a contractor's decisions do to the people who supply it. Every programme now depends on a supply chain that is thinner and more stretched than it was ten years ago. A leader who has sat on the other side of that relationship understands what a late payment, a changed spec or a slipped programme actually costs, because they have carried it.

Look at the size of what is coming. A two billion pound hospital programme is a business in itself. It does not need a leader who has built a hospital. It needs someone who has run a two billion pound business, built the team, got it to the finish and moved on to the next one. Most boards will still write "main contractor experience essential" at the top of the brief.

I have said on this site that going external for a director role is not automatically the stronger move. This does not change that. It sharpens it. If you are going outside, the contractor next door is the least external move available. You get the same training, the same instincts and the same blind spots, with a different letterhead.

So, two things. If you sit on a board, the next time a brief says sector experience is essential, ask what that line is doing. Usually it is there to make the shortlist feel safe, not to make the business better. Write down the three problems the role has to solve and test every candidate against those instead. If you lead on the supply side, understand that your record will not be read correctly in a contractor's language. Translate it. Acquisitions, divestments, group governance, a P&L run through a downturn. Those are the things a board recognises once someone says them plainly.

The industry says it is short of leaders. It is short of leaders it is prepared to recognise.