Luring back the Best

By James Bagnall
Ottawa Citizen – Tuesday, March 18, 1997

Carlos Fox, a senior executive with California-based Sun Microsystems Inc., was chatting with an Ottawa-based colleague about a year ago and mentioned he might like to return to Canada to raise his young family.

In the superheated atmosphere of a booming technology industry, this chance remark proved to be a valuable bit of intelligence for McInnis & Associates Ltd., an Ottawa-based executive-recruiting firm.

An associate at McInnis happened to know Mr. Fox’s colleague. McInnis also represents Ottawa-based JetForm Corp., one of this region’s hottest software firms.

There followed an intensive, and ultimately successful, campaign to entice Mr. Fox back to Canada.

Today, eight months after signing on, the 44-year-old Mr. Fox is busy building an international sales network designed to take JetForm beyond $100 million in annual sales.

Nor is he the only newcomer at JetForm. More recently, the electronic-forms software company hired Ian Fraser, a Canadian who ran Novell Inc.’s European sales operation until December. Mr. Fraser directs JetForm’s U.S. sales arm.

“We’re adding to the talent pool here,” says JetForm chief executive John Kelly. “We’re not robbing Peter to pay Paul.”

In fact, Mr. Fox and Mr. Fraser are part of a small but widening circle of Canadian high-technology executives who have sought their fortune in the U.S. or Britain but want to come home.

“They move for a lot of different reasons, but most of them have to do with lifestyle,” says David Perry, president of Perry-Martel International Inc., an Ottawa-based executive-search firm.

“They miss Canada; they want to raise their children here. Or their kids are about to enter university.”

Whatever the motivation, an infusion of outside executive talent is considered vital to the Ottawa area. Although many of this region’s technology giants have done an exceptional job developing home-grown management talent, it’s never enough.

“The real shortage in this industry is not engineering talent, it’s executives who understand how to manage complexity,” says Jean-Pierre Soublière, the chief operating officer of Montreal’s Alis Technologies Inc. and former executive at Ottawa’s SHL Systemhouse Inc.

Along with their management skills, outsiders also bring experience many Canadian software firms find useful as they expand their sales effort south of the border.

An international background is certainly a common selling point on the résumés of a few of the more high-profile executives who have moved into the region.

Ian Ferguson, the new president and chief operating officer of Ottawa-based Milkyway Networks Corp., spent 21 years with Boston-based Digital Equipment Corp., most recently at the head office.

Eighteen months ago, Mike Laginski vacated a senior-level job at Boston-based Lotus Corp. in favour of the No. 2 position at Ottawa-based Fulcrum Technologies Inc. Shortly after, he enticed a Lotus colleague, Peter Klante, to join him at Fulcrum as vice-president of marketing.

Mr. Martel says he has repatriated about two dozen senior-level Canadian managers from the U.S. since 1994.

Despite the recent success of such firms as JetForm and Fulcrum, persuading foreign-based executives — former Canadians or not –.to move to Canada is a tough proposition. And for good reason. Consider just a few of the powerful influences operating against a move back to Canada:

  • Time Warp: Executives who have risen to senior levels in U.S. technology companies have typically been away from Canada for at least five years. During this period, the technology sector in Ottawa-Hull has probably doubled in size, to 50,000 employees, and has given rise to more than a handful of firms with global range.Trouble is, most U.S.-based executives aren’t aware of the changes and therefore aren’t usually prepared to consider a career here. “Considering that Boston is just a one-hour flight from Ottawa, I’m amazed at the lack of knowledge about Canada,” said Fulcrum’s Mr. Laginski.
  • Technology pull: Like it or not, most of the really exciting technology companies, along with the dominant players — from Microsoft Corp. to Intel Corp. — are based in the U.S. Naturally, those with ambition want to try their luck there first. This is especially true for entrepreneurs. An Ottawa-based financier who specializes in raising money for technology companies says: “The U.S. venture-capital industry is at least a generation ahead of Canada’s.”
  • Taxes. There seems little question that Canada-based executives face a bigger income-tax bite than their U.S. counterparts. While Mr. Fox and Mr. Laginski report that top marginal income-tax rates in California and Massachusetts are surprisingly close to those in Canada, they did take more money home in the U.S. because Canadians reach the top tax brackets sooner. Tax treatment of capital gains — applicable during the exercise of stock options — is more generous from the perspective of U.S. executives. And interest paid on U.S. mortgages is deductible.
  • Executive shortages: Any company planning to make offers to U.S.-based managers must also consider the likelihood that their targets’ employers will fight back with counteroffers. Executive talent is also in short supply in the U.S., and technology firms there are quite prepared to spend a little to keep their current managers happy.

Even so, JetForm, Fulcrum, Milkyway and other Ottawa-area companies have found a way around these obstacles. In so doing, they are showing the way for others.

In most cases, they start by exploiting a yearning for Canada. But patriotism on its own is almost never enough. It has to be combined with a significant career opportunity such as the chance to move from a senior executive position to actually running the show.

Certainly this was the case for Mr. Ferguson, the new head of Milkyway. In Boston, he reported to Digital Equipment’s vice-president in charge of Internet products. Mr. Ferguson was so eager to return to Canada, he took the initiative of contacting a Toronto-based executive-recruiting company. The recruiter passed Mr. Ferguson’s name on to Milkyway.

Today, the 47-year old Loyola College grad is responsible for managing Milkyway’s transition to a profitable, standalone software company.

Mr. Laginski’s move to Fulcrum was also motivated by the prospect of taking over the top job. Fulcrum has stumbled recently, reporting a significant fourth-quarter loss. But Mr. Laginski says he has no regrets so far. This is partly because Fulcrum still has a reasonable shot at maintaining its lead in the fast-growing market in electronic text-retrieval software.

In fact, nothing intrigues technology executives quite as much as the opportunity of joining a midsize company on its way up. This is what lies at the heart of JetForm’s sales pitch to prospective employees.

Consider the situation late last year from the point of view of Mr. Fraser.

The former general manager of Novell Inc.’s Canadian operations, Mr. Fraser had jumped at an opportunity to run Novell’s European operations a few years earlier.

But by late 1996, having moved his wife and four sons to Britain, the career shift looked less than idyllic. Utah-based computer software giant Novell was downsizing, and Fraser learned he would be one of the casualties.

So Mr. Fraser began a transatlantic hunt for a job that would allow him to “put down roots.” He wasn’t unduly concerned. He was a seasoned executive with plenty of contacts.

In fact, he had excellent job prospects in California, Chicago, Toronto and other North American locales. Nevertheless, Mr. Fraser opted for a senior position at JetForm. It would be nice to report that Mr. Fraser was originally attracted to JetForm by its international reputation, but that’s not quite how it worked.

A third-party recruiter — McInnes & Associates of Ottawa — caught wind of Mr. Fraser’s job search through a mutual colleague based in Boston. But once the JetForm opportunity was pointed out to him, Mr. Fraser seized it.

“When you’re looking at what to do next, you look for fields that are going to grow, then you look for the company in that field that’s going to dominate it,” says Mr. Fraser.

In particular, Mr. Fraser was impressed by JetForm’s recent acquisition of Delrina assets. “Delrina tipped the balance for me.”

From his privileged position in California’s Silicon Valley, Mr. Fox went through a similar learning curve. When he was approached by JetForm last year, he needed persuading. “My initial reaction was, ‘It’s too soon.’ ” But the more he examined JetForm, the more he liked what he found.

It was a headquarters operation — the last thing he wanted was to return home to work for a branch office of a U.S. firm. JetForm is also a clear leader in the electronic-forms business.

“They were doing exciting things.” Mr. Fox said. “I also liked the stage they were at. It wasn’t a start-up, and it was already a public company. Some executives like being part of an initial public offering, but I also know that going public means 80-hour weeks.”

Coincidentally, Phil Weaver, another senior JetForm executive, had worked with Mr. Fox a decade earlier at the Canadian subsidiary of Hewlett-Packard Co.

JetForm’s boss, Mr. Kelly, closed the deal by offering a financial package that would leave Mr. Fox no worse off financially than if he had stayed in California.

“When you’re growing like we are, you can exercise a little creativity who relocate to Canada accept a smaller salary. But when stock options and performance bonuses are added, the net result is often a wash.

Mr. Fox clearly relishes his new job. His extra-Californian lifestyle? Let’s just say by Ottawa standards, it’s very good. Mr. Fox, his wife and three-year-old twin daughters traded a two-bedroom townhouse in Sunnyvale, California, for the pleasures of a small estate about 30 minutes from Ottawa.

There’s still a trace of wistfulness in Mr. Fox for things Californian — its smoke-free culture, its imaginative vegetarian cuisine and, of course, the soft spring breezes that blow in off San Francisco Bay. One irritant is the fact Mr. Fox’s former colleagues in California still consider him “a little crazy” for making the move.

But Mr. Fox thinks they’re missing the point. “This decision was not driven by money,” he said in a recent telephone interview from Britain. “It was a chance to bring the family back into Canada at no real cost. And it was a great career opportunity.”

The underlying lesson is this: If the Ottawa region expects to attract outside executives with the right stuff, it will require a lot more firms such as JetForm to serve as a magnet.

As the experience of JetForm and Milkyway shows, it also requires some luck in spotting the right individuals at the right time. Finally, the region needs to tell its story. Its most prominent new executives were all surprised by the amount of activity they found here, which suggests this region’s technology sector is still a big secret in places