Most often, the phrase "brain drain" refers to the mass exodus of a nation's smartest and most talented people to countries that can offer them better opportunities. But there's a new definition today, one that is expected to change the nature of business as we know it in as few as three years.

By 2008, "the first big wave of Baby Boomers will begin to retire, resulting in a huge gap in the overall workforce," said Ainer Aijala, vice chairman of Deloitte Consulting and global service area leader of the firm's human capital practice.

Aijala is co-author, along with Deloitte's global managing director of human resources, James Wall, of a new report titled, "It's 2008: Do You Know Where Your Talent Is?"

The report described three factors that will contribute to a massive shortage of skilled professionals in all types of business in the next decade and beyond. The first is the impending retirement of the colossal Baby Boom generation, which is scheduled to begin in 2008. The report pointed out that, in the automotive industry, for example, as many as 40 percent of managers will be eligible to retire within the next five years. Government employers are expected to lose more than one-third of their workforce to retirement by 2010. Health care and energy are also expected to be among the industries that are hit hardest.

The second factor expected to have a significant impact is a general decline in certain skills. The information technology sector will be particularly vulnerable, as the number of U.S. college students pursuing disciplines in engineering and the sciences continues to wane. According to the Deloitte report, there are approximately 2 million jobs in this sector that are held by retiring or soon-to-retire Baby Boomers, and colleges are expected to produce enough graduates to fill a mere 198,000 of the positions.

The third major factor expected to contribute to a measurable drain in the next decade is the general decline in education standards.

According to data provided by the U.S. Department of Education and summarized in a report provided by the Manhattan Institute for Policy Research, only 70 percent of today's high school students graduate, and only one-third of those students graduate with the bare minimum qualifications necessary to apply to a four-year college.

Taking knowledge with them

The Delphi Group, an organization devoted to helping companies maximize their effectiveness by implementing procedures to capture and share the skills and knowledge of their workforce, estimated that about 70 percent of a company's knowledge exists only in the minds of its employees.

Facing the onslaught of workers about to retire en masse, employers must find ways to capture this knowledge, and make it available to those who remain at the company.

Denver-based CPA firm Ehrhardt Keefe Steiner & Hottman is addressing that issue both within the firm and with its clients. "We've developed a process called business transition planning," said partner David Steiner. "We get with our clients that have people in that Baby Boom generation, making sure they are instituting a formal process to transfer the business either to the next generation of the family, within the company or, in some cases, with an outright sale."

"Within our firm, we have a constant sharing between new leaders and older leaders," he continued. "We make sure all leadership positions in the firm are held by people under 55 years of age, so older, experienced partners are working under younger partners."

"There's more to it than just grooming people to become successors and leaders," explained Bill Shockey, chief operating officer at Indianapolis-based CPA firm Blue & Co. "We have a fairly young partner group, so we have time, but we're trying to do things that will lay the groundwork so that when the retirement point gets here, it's an easy transition.

The problem is going to occur where you have a partner with a unique practice."

Shockey sees more of a brain drain problem occurring within smaller firms, where there aren't as many people to pick up when the older generation leaves. "You've got to figure out ways to pass the baton."

Filling the gap

While the future looks grim, there are solutions.

Aijala stated that companies rely too heavily on the end points of maintaining a dedicated and qualified employee base - recruitment and retention. He pointed out that the average U.S. company "spends 50 times more recruiting a $100,000 person than they do in training that person every year."

"Research shows that the critical factors holding people to an organization are making sure they are developed right, deployed right, and used in a way that takes advantage of their learning," he said. "And a really important factor is staying connected." Aijala described research done by MIT and others that found that 70 percent of what people learn on the job is actually learned at the coffee machine. "Informal networks are at least as important as the things we do formally."

Going forward, companies would need to focus on satisfying current employees and encouraging smooth transitions to a new generation of sought-after workers. "To fix the problem, companies probably have to begin working on it now," said Mike Fucci, principal and U.S. leader of Deloitte Consulting's Human Capital practice.

"There's going to be a huge gap," speculated Aijala. "If you're not good at it, you're going to be at the end of the line when talent makes a decision on where to go."

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access