Prime Minister Jean Chrétien claims there’s no such thing as a brain drain of Canadians to the United States. For every highly qualified person who leaves this country, he says, somebody else arrives to take his or her place.
He may be right, although it’s not necessarily the sort of thing you’d expect a proud Canadian politician to brag about. Across the country, in almost every industry, crossborder corporate recruiting is on the rise. Companies that in the past looked exclusively within the country for people to fill senior positions are now hot on the trail of American talent, even though it can cost a small fortune to import an experienced U.S. executive.
Why are Canadian firms combing the United States for senior managers? Tom Kierans, president of the Toronto-based C. D. Howe Institute and one of this country’s most respected corporate directors, thinks it’s because Canadian executives, by and large, are too complacent compared with their U.S. counterparts.
“The Americans have a core of executive expertise in their companies that is way the hell better than ours,” says Kierans, who is a director of eight Canadian companies and chairman of two—PetroCanada and Moore Corp.
A year ago, Kierans and his fellow Moore directors recruited a Chicago printing executive, Ed Tyler, as CEO of the Toronto-based business forms giant. The decision drew fire from some quarters, but Kierans says the company needed a leader who understood the realities of global competition. “In the early 1980s, all sorts of big U.S. companies like Chrysler and Kodak were being crucified by the Japanese, so they had to re-engineer themselves in every sense of the word. In 10 years, the Americans completely cleaned up their act. Meanwhile, we in Canada were benefiting from strong commodity prices and positive terms of trade. Every time we ran into a problem, we devalued our dollar so we could continue exporting to the United States. So our businesses never went through the brutality of reorganizing and re-engineering that U.S. companies did.”
Someone else who is familiar with the trend to cross-border recruiting is Tom Long, a senior adviser to Ontario Premier Mike Harris (he chaired Harris’s recent re-election campaign) and a partner in the Toronto office of Egon Zehnder International Inc., one of the world’s largest executive search firms.
Long, 41, a lawyer and former president of the Progressive Conservative Party of Ontario, joined Egon Zehnder in 1990, a few months after the Swiss firm set up shop in Canada. Back then, he says, Canadian companies rarely looked outside the country to fill executive positions. Now, it’s the other way around. Most clients simply want the best person for the job, regardless of nationality.
“In the past five or six years, I’ve seen a sea change in this business,” Long says. “It used to be considered quite a luxury to look outside of Canada, but now it’s almost the exception where companies say they cannot afford to go beyond our borders. Even if you’re going to end up hiring a Canadian, due diligence would require you to see what’s out there.”
At last count, at least two dozen major Canadian companies had American chief executives, including Air Canada, Canadian Tire, BCT.Telus Communications and MacMillan Bloedel, which is in the process of being acquired by U.S. forest giant Weyerhaeuser. Although the trend is most obvious at the CEO level, Long says a growing number of firms are also looking beyond Canada to fill less senior positions— jobs such as chief information officer or division vice-president. “Often it’s done with a sense of regret, because people do feel mildly guilty about not necessarily looking for a Canadian. But the truth is that the experience executives get outside Canada can be a critical competitive edge.”
For homegrown executives, the news isn’t all bad. In certain industries, including mining, financial services and consumer packaged goods, Canadian-bred managers “are quite a good exportable resource,” Long says. “They’re attractive to Europeans and Australians because they’re perceived as having a North American business education, which is highly prized internationally, and yet our guys tend to be less expensive than the Americans.”
A lot less, in some cases—a fact that Canadian companies soon discover when they go shopping for talent in the United States. After factoring in exchange rates, tax differentials and the generally higher level of executive pay south of the border, the rule of thumb is that it costs roughly twice as much to import an American executive as it does to hire a local. Those competitive edges don’t come cheap.
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