Begging For Bosses

DOUG KELLAM HAD HEARD ALL the stories. So when he was laid off from his job as a marketing manager at a beverage com- pany in January, Kellam saw only worn shoe leather in his future. He expected a yearlong, painful trek through the corporate offices of Downsized America. What Kellam didn't reckon on was just how hot this economy is - and how much fast-growing businesses have come to regret their slashing tactics of the past decade. Within a few weeks he felt like a sweepstakes win- ner as headhunters phoned, dangling million-dollar stock-option packages. ""I was expecting to be pounding the pavement, calling and asking for favors, digging and digging and digging,'' says Kellam, 38, who signed on in April - at a higher salary - as vice president of marketing at First Alert Inc., the Aurora, Ill., smoke-detector company. ""I was back in the perfect job - a better job - within three months.''

Remember all those sad tales about America's cast-off white-collar workers, the jetsam of the Nasty '90s? Well, here's an update: it's a new world out there. Of course, not everyone is getting million- dollar offers these days - especially not the older, middle-management and clerical drones whose jobs have been eliminated in great swaths across the nation. But companies suddenly starving for managerial and professional skills are in a bidding frenzy for the services of talented execs like Kellam, and many already-hired executives no longer need to watch their backs.

Instead, they're watching their bank accounts. After growing at pretty much the same rate as everyone else's paychecks, compensation for executives, managers and administrators has started surging (though it's still nowhere near those chart-topping CEO levels). Man- agement pay grew faster than overall pay by nearly a full percentage point in the last three quarters. For the first three months of '97 it leapt at a 5.3 percent annualized rate, nearly triple the rate for blue-collar workers and two points higher than inflation. In June, managerial and professional unemployment slid to a seven-year low of 2 percent, even though overall joblessness edged up to 5 percent. ""The pool of available people hasn't caught up with the explosion in demand,'' says compensation adviser Charles Cummings.

This corporate hiring fever may be one of the few danger signs in a business climate that many economists are calling virtually inflation free. It's likely to be especially troubling to Federal Reserve chairman Alan Greenspan, who in the past has cited employee insecurity as one reason inflation - which often starts with wage demands - remains so dormant. Today avidly courted managers have a lot less reason to be timid when raise time comes around. And their pay adds up: it accounts for 18 percent of total corporate compensation costs, compared with about 25 percent for blue-collar workers.

So don't be too surprised if some of this froth begins to show up in inflation data. Last week the Fed declined to raise interest rates, thanks in part to signs of slowing growth. And so far companies have been able to absorb most salary increases with efficiency gains. After all, many of those newly hired managers run departments that have been slashed to a third of their old size. Still, it will be hard for most companies to boost efficiency much more while salary leverage continues to move from corporations to the managers they're hiring. It's happening across many industries, especially for upper-level department heads and experts in marketing, customer service and product development. ""You need to get superstars in the kind of global economy we're in,'' says Mitchell Fromstein, chairman of Manpower Inc.

Some even see a broader transformation to a sort of a ""star economy.'' Industries like investment banking and software are coming to resemble sports and entertainment, two fields in which companies are notoriously unable to restrain the salary demands of top names. Many execs now ""view themselves as free agents,'' says Robert Reilly Jr. of DHR International, a Chicago executive-search firm, and salary negotiations often sound like the work of Jerry Maguire. ""Signing bonuses, which a year ago were atypical, are now the norm,'' Reilly says.

Call it the revenge of the downsized. When it comes to corporate loyalty, managers today are giving as good as they got a few years ago. ""The employment contract between companies and management is forever changed,'' says Michael Useem, a business prof at the University of Pennsylvania's Wharton School. It's no longer a stigma, for instance, to have a resume full of employer names; quite the contrary. ""If you haven't had a complement of different experiences, you may not have the right blend of skills,'' Useem says. ""And seven years ago it was an act of disloyalty to take a call from a headhunter. In 1997 it's an act of craziness not to.'' Jerry Taylor, manager of Executive Recruiters in Seattle, says companies are paying the price of realizing too late how important it was to cultivate management talent. Today firms are paying a premium to hire back many of the outsourced and downsized. ""A guy making $65,000 last year is now making $80,000,'' he says.

Desperate: Headhunters are getting their phone calls returned as never before, especially in hot regions like northern California. One Bay Area recruiter, Bob Weis, was driving across San Francisco's Bay Bridge in his Mercedes, whose license plate reads CFOS2GO, when a car pulled alongside and honked. The other driver leaned out and shouted, ""I need a CFO!'' Turned out he was desperate for a finance chief at his start-up high-tech firm.

The demand is even luring some execs back from retirement. Joseph Venturini, the former general manager of label maker Avery Dennison's Latin American operation, figured his career was pretty much over when he took early retirement late last year at 62. ""I anticipated some rough times,'' he says. But when word got out, Venturini was besieged by headhunters looking for internationally savvy execs. Now the San Diego resident is close to a deal that would put him back in his old $200,000-plus salary range. His instant desirability, he says, ""was a big surprise.''

No wonder the same companies that once breezily counseled employees not to expect lifetime jobs are rushing to snap on ""golden handcuffs'' - compensation deals that, by taking years to vest, force key people to stay. The number of employee stock-option plans, for instance, grew by only 1,000 between 1990 and 1997 - but 600 of the new plans came in the last 14 months alone.

All this is good news for employees. But should inflation hawks be worried? ""How serious this is depends on your guess on productivity improvements that are occurring,'' says a source familiar with Greenspan's thinking. ""But in any case, it is a concern.'' What is certain is that Fed officials will be hearing more about the trend in the future. At a recent meeting of Minneapolis Fed officials and CEOs, says Fed economist Ed Lotterman, ""wage and salary pressures and the difficulty in finding employees were about the only things we talked about.'' In the months ahead, they may be some of the main things Alan Greenspan is thinking about.

Manager's pay has surged since last year, leaving the rest of us behind.