The vast majority of advertisements for physics faculty openings, at any level of seniority, will solicit applications from qualified scientists a) whose research interests fall within a broad, but well-defined area of inquiry (e.g., condensed matter, high energy, atomic physics and so on), and b) whose activity be based on either experimental or theoretical work. Indeed, often times not only will the advertisement mention an area, it will also indicate specific sub-fields, possibly placing some emphasis even on types of problems in which the candidate sought should be working, and/or investigative techniques in which (s)he should be versed. Such a practice is actually quite common across all scientific disciplines.
Conversely, seldom will a position be advertised as open, i.e., one in which applications are welcome from physicists working on any subject, with no stated preference for either theorists or experimentalists.
Narrowing the search by both field and type of training, is widely accepted to be a sensible criterion for conducting a search. A department will usually plan its own hires mainly with the aim of establishing or maintaining a presence in specific sub-fields; based on this premise, proposed searches will be approved by the administration. On the surface it would just seem to make sense, and there are good reasons for doing it this way. But it is not without drawbacks, which are not, in my view, fully appreciated by many; indeed, sometimes I wonder whether hiring by area may not do more harm than good, in the long run.
What are the good reasons for deciding at the outset whether the next hire should be a theorist or an experimentalist, and in what area of research they should be sought ? I can think of a few, but I am sure others can help me find more.
1) At any given time, a department will need to consolidate its presence and expertise in some field deemed current and intellectually lively, as assessed by the worldwide number of researchers, articles published in high impact journals, conferences, availability of funding from government agencies and/or the private sector, overall popularity across the discipline (and even among scientists outside physics) and of course its scientific advances, i.e., what ultimately capture the imagination and the interest of students.
It is also reasonable that, once a department has come to the decision (in whichever way that happens) that a given research area be pursued, a minimum size group of faculty  be built and maintained, in order to facilitate exchange of ideas, organization of activities such as seminars and extended visits from scientists from other institutions, and in general to provide a richer, more stimulating and diverse environment for students.
2) An open search can be rather unwieldy, as well as fairly problematic, as one has to sort out and compare applications (easily several hundred thereof) that are not easily comparable. How would anyone go about assessing the relative value of, say, an experimentalist in condensed matter versus, e.g., a string theorist ? In the end the decision would more than likely be based on research areas anyway. Typically, applications are initially broadly classified in terms of applicant research interests, and in the end a selection is made not based on the “absolute quality of the applicant” (practically impossible to assess objectively), but rather on the perceived departmental needs vis-a-vis its expansion plan, in turn invariably formulated in terms of research areas.
3) Making a hire in a specific sub-field, requiring substantial institutional investment is terms of infrastructure, space, start-up and so on, may simply not be practical, or possible at any given time. This justifies narrowing the focus of the search toward those fields and activities for which the university and the department can put together attractive offers and packages for potential new faculty.
All of the above seems fairly reasonable. But then, what are the “downsides” ? Fundamentally, the problem has to do with human nature, coupled with the intrinsically static character of academia, where change takes place slowly (very slowly).
The point is: the research areas in which departments will hire, are typically not so much the “right” ones, as the ones that already exist within the department. And where do these areas come from ? How are they chosen in the first place ?
I do not have data, but my impression from countless conversations with colleagues at various institutions is that in the vast majority of cases, existing departmental concentrations do not reflect any “strategic” choice, but only historical circumstances, often accidental.
For example, let us consider the following scenario: at a given time in history, a faculty of a second-tier department rises to national prominence due to his/her own scientific accomplishments in some research field, at the time widely regarded as important. The administration decides to make a one-time investment, building around this person  a group which will put the department “on the map”, as one of the leading departments in that field of research. A number of other faculty in that same field are hired, laboratories are built, equipment is purchased and a significant presence is established, from which both the department and the institution benefit. This is, of course, a good thing.
Nothing lasts forever though, especially in the sciences. Time goes by, and the scientific enterprise moves on. Research areas that were considered “hot” until yesterday (including that in which the institution invested to begin with) are today’s “ho-hums”. They become obsolete, and no longer attract the best students and researchers. Concurrently, new areas flourish.
The one faculty who originated the entire thing, as well as those hired initially, retire. At that point, it would be a good idea for the department to reassess that area, and consider instead creating a new concentration, in some other field.
Instead, the department keeps hiring in that area, feeling that the initial investment should be protected — after all, that is what put them “on the map” to begin with, laboratories are there, and then there is the “tradition”… . Of course, because the field itself is no longer “hot”, replacement faculty are not of the same level of their predecessors, and the group slides into mediocrity .
Because of the limited resources of the institution, maintaining such a group (regarded as an asset by the department, but really a liability) comes at the expense of other possible investments. Hence, the whole department declines due to its immobility, its inability of going beyond a mentality inherited from previous generations, “locked” into a perverse mechanism that feeds on itself .
Now, this was just an example; there are other reasons that could lead to a department growing disproportionately in a given sub-field, some of them much more dubious than those of this example. But the end result is the same.
The question becomes then: How to get out of this loop ? Broadening the scope of searches, going beyond “research areas”, is in some cases necessary.
 How small is the “minimum” size ? It depends on many factors, such as the overall size of the department, the financial effort needed to sustain experimental research in that particular area, the diversity of the field itself, and so on. It is very difficult to come up with a hard number, but in general I think it is fair to say that a group including less than at least four faculty (two experimentalists and two theorists) lacks “critical mass”, in just about any area of physics.
 The presence in the faculty of a nationally prominent scientist typically makes it easier to recruit promising young faculty, many eager to work side-by-side with a “superstar”.
 “Tradition” here means that the members of that group are a majority, or a sizable minority of all department faculty, and therefore enjoy a position of influence and can put their own imprint on long-term departmental plans. And often times, a research group will fight to keep such influence within the department, as it will typically mean that its member enjoy a some “perks”. The larger it is numerically, the more influential a group is, and therefore its members will fight to replace each faculty that departs for whichever reason (retirement, competitive offer from another institution, untimely death etc.).
 This happens also through a mechanism of self-defense on the part of its faculty, which resent the scarce attention paid to them by the greater community, and withdraw from it. Inside the department, any attempt of starting a debate on the wisdom of maintaining an effort in that area is met with the hostility of the faculty in that group, who (to some extent justifiably) see it as an implicit, negative assessment of their scholarly contribution.
 One often hears that faculty should be hired based on their predicted effectiveness at “collaborating” with prospective colleagues. This is actually a terrible idea. It promotes “cloning” of faculty, and the departmental fractionalization into small, narrowly focused and fairly closed research sub-groups, which do not interact profitably (or, at all) among themselves. Such a department quickly becomes an unattractive place for students and postdocs, most of whom, as a matter of simple statistics, are not interested in those narrow specialties, whichever they are. My impression is that most students, while obviously wanting to specialize in their own field of interest, prefer being at a place where they can also learn different things and be exposed to a variety of subjects, in the course of their education.