Public sector

The federal government's brain power is shrinking

July 22, 2011: 11:21 AM ET

The Department of Defense and other federal agencies are facing funding cuts while a significant percentage of their workforce nears retirement age. And several signs suggest that they are unprepared for what's waiting in the wings.

By Shelley DuBois, writer-reporter

FORTUNE -- The federal government -- our nation's largest employer -- is about to suffer a serious brain drain. And the Department of Defense, the biggest employer within the federal government, is not sitting pretty.

Besides the 1.4 million active duty men and women employed by the Department of Defense, the agency also has a civilian workforce of over 700,000. One-third of those 700,000 employees will be eligible for retirement in 2015, as will 90% of civilian senior executives. Among these civilian employees are engineers, language specialists, and intelligence personnel.

The DOD is hardly the only government agency facing this issue. In fact, the Government Accountability Office (GAO) flagged human capital management, or the ability to hire and keep good people, as a government-wide "high-risk" issue in 2001.

Today, this issue is particularly pressing across many agencies. About 35% of the employees at the Department of the Treasury will be eligible to retire by 2012. So will 40% of workers at the Department of Energy and 46% of people working for the Department of Transportation.

The good news is that many of these departments will have to slim down anyway, and this retirement cliff could offer an opportunity for agencies to become more efficient. The bad news is that it's often difficult for these agencies to do the kind of self-examination it takes to develop an ideal shrinking strategy. The Department of Defense is no exception.

On July 14, the GAO testified before Congress on the DOD's looming retirement issues, and pointed out an alarming mismatch between the positions that the DOD says it needs and the ones it's will be able to fund. The DOD requested to hire more than 400 new executives by 2015. Meanwhile, the administration's 2012 budget for the DOD calls for eliminating 200 senior civil servant positions.

"I don't know how they came up with the numbers," says Brenda Ferrell, director of defense capabilities and management for the GAO, and that's the problem: the DOD didn't have much data to support the request because it's just starting to learn how to perform the proper analyses. Before 2001, it never had to do this kind of analysis. Unfortunately for the department, it's going to have to learn fast.

"The sense of urgency is here now because they may have to make some very tough decisions about where they're going to put their resources," Ferrel says. More

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