The Great PE Hiring Debate: Industry Savvy vs. Functional Mastery

In private equity, placing the right leader is everything. But one question consistently challenges investors and operating partners alike:

Should we prioritize industry experience or functional expertise?

Whether you’re hiring a CEO, CFO, or other C-suite executive in a lower middle market, middle market, or upper middle market portfolio company, this trade-off is critical and it’s situational.

The below is a clear framework to help make the right call, avoid leadership misfires, and align talent with investment thesis.

What Matters More: Industry Experience or Functional Expertise?

Company Size	What to Prioritize	Why It Matters
Lower Middle Market(<$50M)	Functional expertise	Lean teams need builders who can implement best practices and drive operational change.
Middle Market ($50M–$250M)	Balanced profile	Leaders must scale systems and teams and navigate industry nuances.
Upper Middle / Large Cap($250M+)	Deep industry expertise	Strategic complexity, brand risk, and scale demand domain fluency and sector-specific judgment.

When Functional Expertise Matters Most

Hire for functional depth (finance, operations, GTM, transformation) when:

• You're in the early stage of a value creation plan (e.g. cost control, EBITDA lift)

• The portfolio company lacks strong systems or second-layer leadership

• The sector is low complexity or adjacent to others the leader has worked in

• You're seeking discipline around KPIs, cadence, and dashboards

Example: A $25M B2B services business with no forecasting or scalable ops doesn't need an industry lifer, it needs a world-class operator who knows how to build.

When Industry Experience Is Essential

Prioritize domain expertise when:

• The industry is highly regulated or compliance-heavy (e.g. healthcare, insurance)

• You need someone with deep relationships, like payers, suppliers, or channel partners

• The thesis involves M&A roll-ups or complex integration across a vertical

• The sales cycle or buyer journey is sector-specific

Example: A platform in specialty pharma needs a CEO who understands FDA cycles, payer dynamics, and product development timelines.

What About Both?

Sometimes you can (and must) find a hybrid:

• A functional expert who’s operated in the industry for a decade,

• Or a sector veteran who’s built and exited portfolio companies before.

These are rare, but high-impact.

How to Solve the Trade-Off

Option 1: Hire Functional Expert, Add Industry Bench

Pair an elite CFO or COO with:

• A sector-specific advisor

• Or a Chairperson who brings market fluency

Option 2: Hire Industry Insider, Backfill Execution

If your CEO knows the market cold but lacks scaling experience:

• Add a strong COO, Controller, or integration lead

  
  

Common Mistakes to Avoid

Market Tier	Frequent Misstep
Lower Middle Market	Over-indexing on “industry fit” instead of execution capability
Middle Market	Hiring a resume, not a builder
Big Cap / Platform	Undervaluing sector nuance in fast-changing industries

What This Means for Private Equity Talent Strategy

A misaligned CEO or CFO can stall your investment by 12–24 months. Every leadership hire must match not just the company stage, but also the deal thesis.

That’s why we advise clients to start with one simple question:

“Are we solving for expertise, market insight, or both and what can we support around this hire?”

How We Can Help

At Kirkland West, we specialize in executive search and leadership assessment for private equity-backed companies across all stages. Our team works directly with deal teams and operating partners to:

• Align leadership profiles with your value creation thesis

• Assess candidates beyond pedigree, focusing on scalability, adaptability, and role fit

• Build leadership teams that blend functional excellence with industry fluency

Whether you're hiring your first C-suite executive or upgrading leadership for a platform ready to scale, we’ll help you get it right. Contact Kirkland West