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What does 'qualified' truly mean?

The Obama administration is announcing its leadership team, which raises the general question of who gets top jobs in our society and what are the qualifications needed to succeed in them. The disputes over Leon Panetta's nomination as CIA director and Caroline Kennedy's possible appointment to the Senate raise the further question of the importance of experience.

The traditional view in the business world has been that the competencies needed to run the great corporations are so scarce that only people who have basically done those jobs already can do them (and anyone who has such skills should therefore be worth a fortune).

In the world of government, on the other hand, the list of possible candidates for top jobs seems endless, and whether the candidate has done something similar doesn't seem to matter. Is it important that Panetta has no direct experience with the intelligence field, or that Kennedy has never held elective office?

Predicting who will succeed in any given job is tricky. What we do know is that the best predictor of whether someone will be effective is whether they have already been successful doing something similar - and the more similar, the better.

That piece of wisdom sounds so obvious that it hardly seems worth mentioning. But the implications that flow from it are not so simple. It is rarely the case that candidates have done the exact job before, and figuring out what aspects of prior experience are relevant is hard.

In World War II, for example, the best predictor of who would become a successful pilot was whether a trainee had, as a child, ever built a model airplane that flew. Building a model plane in those days was quite a trick (think balsa wood, glue and paper), and getting it to fly required some real knowledge of aerodynamics, as well as perseverance and motivation. Still, it's not a criterion that was obvious.

There is a skill to management, of course, that one best learns through experience. And that skill translates across situations. Someone who knows how to select staff, set priorities and hold people accountable for them, and manage conflicts will have a big step up in any leadership position he or she holds.

The much harder question is the importance of specific experience in an industry or government agency. In the business world, the practice of succession planning was based on the assumption that we knew precisely what top jobs demanded, and we could methodically expose candidates to the required experiences and tasks to see who could best handle them. It goes without saying that internal candidates with lots of experience were always preferred.

In recent years, however, that approach has come apart. The mandate for top jobs is now often to change the business, to run things differently. Hence the preference for hiring outsiders who bring a different set of experiences. Consider who the ideal candidates might be to run a U.S. auto company today. Someone who has no experience with that industry will have a steep learning curve before understanding many of the unique issues of car design, marketing and manufacturing - as was the case with two of the current Big Three chief executives. On the other hand, someone who's steeped in the knowledge of the contemporary U.S. auto industry may have a harder time imagining how it could operate differently. Internal candidates clearly have the most knowledge about the organization, but they may also find it the most difficult to move in a different direction - in part because of ties to people and to prior decisions, and in part because it is harder to see things differently.

We can also learn a lot about the priorities of companies from how they value those different criteria: Ford chose an outsider not only from the company but from the industry, Alan Mulally from Boeing, placing a greater priority on change. Chrysler did the same, choosing Robert Nardelli from General Electric via Home Depot. General Motors chose Rick Wagoner, an insider, placing the priority on knowledge of that very complex company.

And that takes us to the political world. What is especially tricky about top jobs in government is that what constitutes "success" changes with each administration. A very successful head of an agency like the Labor Department in a Republican administration would hardly be palatable in a Democratic administration because the two administrations want that agency to be so different.

Symbolism also matters more in politics than in business: If change in the direction of government is important, it may be necessary to bring in new people, even if the old ones were competent and effective. Consider the flak the Obama team has taken from bringing in former Clinton administration advisers. Even though they are generally acknowledged as being highly competent, bringing them back does not look like change.

Kennedy's candidacy for Senate represents the positive side of symbolism. While she would be a more effective senator if she had the experience of prior elective office, the fact that she's an outsider without experience in the hardball of contemporary politics has its own appeal in an era where change is a priority.

What can we conclude from all this? First, a leader of a large organization needs to have management skills, and it is almost impossible to get them without the experience of running something. While it's necessary to delegate many tasks, basic management functions - such as setting priorities and ensuring performance - cannot be delegated unless the leader wants simply to be a figurehead.

Second, the more you like the way things are going, the more valuable experience in that context is; the more you want to change things, the less important it is. The nomination of Panetta as an intelligence outsider is a clear signal that the Obama administration wants the CIA to change direction.

Third - and this is the hard one - candidates who can run existing organizations in a different way are very scarce, so we have to make trade-offs across types of experience. My research found that even in Fortune 100 companies, the executives holding top jobs now have fewer years of experience, held fewer prior jobs and are more likely to be outsiders than was the case a generation ago.

If you want to hire an executive from GE or Goldman-Sachs to be CEO of your company, you'll have to take one with fewer years of experience as compared to internal candidates. And if you want a director who can change the CIA in fundamental ways while avoiding political firestorms and internal dissension, you nominate someone with terrific experience in running government operations - a former White House chief of staff and congressman, widely respected as an honest broker and a steady hand - but without intelligence experience.