Calgary corporate headhunters who place executives with technology companies say business is booming despite the recent tech stock crash.

“The high-tech sector, for us, is the fastest-growing sector in our business,” said Irene Pfeiffer of Russell Reynolds. “We can’t keep up with it.”

Executive search companies recruit senior management personnel, such as chief executive, technology and information officers, for corporate clients who often pay them on retainers.

Five years ago, tech companies barely registered on Russell Reynolds’ bottom line. Now, said Pfeiffer, they account for 50 per cent of the business.

Dave Olecko, Business Edge
Irene Pfeiffer says employee candidates are looking very closely at company management.

“Five years ago, (tech companies) didn’t necessarily need our service,” said Pfeiffer. “Today, a lot of them do, and it’s primarily because there’s a skill shortage and they look to us to sometimes do the impossible.”

Investors have become wary of tech companies, especially dot-coms, that were started and managed by people with strong technical skills but little business experience. Stock prices have nosedived, while many other companies are re-thinking their plans to go public, because many tech startups produced huge initial returns but have yet to prove they can show profits on a consistent basis.

But Pfeiffer said demand for executive search services will remain high. “In Canada today, we have an aging demographic challenge,” said Pfeiffer.

“Many of the workers are getting older, so we have a large group of people going out of the talent pool to begin with.

“In the new economy, there have not been opportunities for people to train in most of those technical positions and so we’re looking at other industries to find the kind of talent that we need,” said Pfeiffer.

She said executive search companies must be more global and look for people who might have skills that can be transferred from another industry.

“So our job is not only to find the candidate,” said Pfeiffer, “it’s to challenge management in their thinking about what exactly do they need in the candidate.”

So far, said Pfeiffer, Calgary tech companies have been lucky because former Calgary energy and manufacturing company executives, who are now making career changes after those industries slumped, are buying time for tech companies that are still struggling to design their business models.

But don’t classify tech companies separately.

“We have to remember that what we consider the new economy today will be THE economy five years from now,” said Pfeiffer.

“It won’t be separate. It won’t be distinct. It’ll be the way we run our business. E-commerce will not be a new phenomenon. It will be the way business is conducted. So it becomes part of the norm.”

Karen Coe of Coe and Company International Inc. said former energy and manufacturing company executives, “who are very experienced and have been to some of these movies before,” will likely prove to be tech company saviours.

Advanced communication technology companies comprise 60 per cent of her clients.

If anything, said Coe, the tech market slowdown has forced companies to see the importance of managers who can make the right strategic decisions, generate capital and form partnerships earlier than expected.

“What we find occurring is that candidates are looking very carefully at the management in these companies,” said Coe.

“Before, they looked at: ‘What does the market say about your value?’ ”

As a result, a major trust issue has emerged. If executives with struggling tech companies believe in their management team, they’ll weather the storm rather than jump ship for an extra $10,000 a year somewhere else.

However, if they believe that the management team, not the market, is to blame for the company’s failures, they’ll leave.

“Are we more cautious? No,” said Coe. “Have our processes changed? Yes.”

Predicting that mergers and acquisitions will become more common as companies sort out their problems, Coe said her company is now working more closely with clients to make sure they’re developing the right strategies while picking the right people.

“In some cases, companies may not even know the backgrounds of some of the talent they have,” said Coe.

“They look at the balance sheet. Human capital is just as important.”

Companies that have a diverse management group will get through the tough times, said Coe.

But companies that don’t have that diversity won’t be able to outlast the cash crunch.

Diversity includes such incentives for top executives as base salary plus stock options and other perks. John McKay, managing director of Korn Ferry International, said candidates who once took lower salaries in return for potentially lucrative stock options are now seeking firmer financial commitments.

“I’m finding that candidates now are negotiating more on the base salary than they were,” said Cathy Simpson, president of Simpson and Associates.

“They’re not prepared to take the hit there that they were. They’re becoming Jerry Maguires again in terms of ‘Show me the money!’ ”

McKay said companies who have already started marketing and distributing their products and services will ride out the storm. The ones that haven’t will be in trouble.

He predicted companies which have their marketing and distribution systems in place will “take advantage” of others still in the formative stages and lure their top executives away.

McKay said he compares good companies to good sports franchises. Like teams that already have a solid general manager, coach and scouts in place, tech companies that have a solid foundation and know what their goals are will always be able to attract managerial talent.

But Simpson said headhunters must find the rare breed of executive who is strong technically and a people person who can deal effectively with customers.

“It’s like trying to turn Bill Gates into a game-show host,” quipped Simpson, adding her company has chosen to take on fewer assignments to help place executives more quickly.

By and large, said Pfeiffer, very conservative people aren’t attracted to the new economy because it’s too fast and hasn’t been around long enough.

But, she suggested, no matter how solid or shaky a company is, players in the new economy will always be able to find executives who are entrepreneurial and willing to take risks.

“The opportunity that is presented to people and their ability to contribute far outweigh anything else,” said Pfeiffer.