Memo to Nonprofit HR Officers from Washington: Watch Your Back

While it is generally true that the titles of reports emanating from Washington are as intriguing as old dishwater, there are exceptions. With an introduction by then Treasury Secretary Paul O’Neill, the National Academy of Public Administration’s report on human resources in the Federal Government is titled “A Work Experience Second to None.” The Part I sub-title is “Winning the War for Talent.”

War? Hmmm.

The Federal Government has a problem. Well, actually, it has a litany of problems. But one problem is that it is aging. The hiring freezes over the last two decades, combined with the general marketing challenges inherent in selling professional opportunities in bureaucratic cubicles on the Potomac, have now created a looming human resources vacuum. By 2006, depending on the agency, between a third and half of the nearly 1.8 million employees of Federal executive agencies will become eligible to retire.

The exodus from the Federal government will be difficult to staunch, although changing retirement options may slow the process. But even if delayed a few years, the cut in personnel will be equally difficult to restore. Labor force dynamics provide the statistical barrier. Projections indicate that, if the economy grows by 2%, given the numbers of younger workers aged 24-45, the labor market overall will see a 30% shortfall in available workers in that age group. The entire market will compete for those workers. And, with its Partnership for Public Service initiative, the Federal government has declared its intention to be in that market, and to be in it forcefully.

Furthermore, the retiring Federal workers will not all be brain surgeons and fighter pilots. The General Accounting Office estimates that 30% of the government’s program managers will retire by 2006, compared to 13% of its aerospace engineers. That means the government is in the market for the generalist.

But, why should nonprofit human resources managers chew their pencils over the personnel woes of the Federal government? Why does the Federal government’s declared intention to look for and attract the best talent give pause?

Because the pool of people it seeks to fish in is the pool of people nonprofits attract. While it can be argued that an increased demand for investment bankers or systems engineers does not necessarily increase competition for the kinds of people attracted to nonprofit careers, it is certainly true that increased demand for young generalists would. The motivations are similar. The services and issues are similar. The pay scales are similar. The benefits are similar. Indeed, with the pace of retirement, the upward mobility in government may be greater. So, the entry of an aggressive Federal government in the human resources market may not worry Bear Stearns, but it should worry the nonprofit.

Of course, if a handful of jobs were at stake, there would be less need to worry. How many jobs are we talking about?

If we take the anticipated 2007 retirement rates of 2001 Federal employees in five of the largest Federal agency employers the government will need to replace nearly 375,000 workers. How many is that? That total is more than the entire nonprofit workforce of the State of Texas, more than twice the nonprofit employment of the State of Connecticut, and 73% more than the nonprofit workforce in the Federal government’s geographic cousin, the State of Maryland.

In fact, the competitive impact is probably even more intense than these general ratios would indicate. The state numbers include, in fact, people like brain surgeons via nonprofit hospitals and universities. In many states, this is a huge portion of the nonprofit workforce. In Maryland, health care is 49% of total nonprofit employment. Which means that Federal demand is over three times the nonprofit workforce of Maryland. Clearly, the government’s need (or ability) to suction up large numbers of young generalists will make it a major player in the human resources marketplace.

Which leaves nonprofits with two clear human resources tasks: develop aggressive marketing plans, and mandate that “employee retention” be the screen saver on every manager’s computer.

Sources:

State employment data from Johns Hopkins University Center for Civil Society Studies of the Institute for Policy Studies.

“A Work Experience Second to None: Impelling the Best to Serve. Part I: Winning the War for Talent.” Human Resources Management Panel, National Academy of Public Administration, 2001.

Federal Civilian Workforce Statistics, U.S. Office of Personnel Management, 2002.

“Federal Employee Retirements: Expected Increase Over the Next 5 Years Illustrates Need for Workforce Planning,” Report to the Chairman, Subcommittee on Civil Service and Agency Organization, Committee on Government Reform, House of Representatives. United States General Accounting Office, April 2001.

Office of Personnel Management, Partnership for Public Service, Washington, D.C.

Department of Defense, Department of Agriculture, Department of Energy, Department of Transportation, and Department of Health and Human Services