As demand for consulting improves, consulting leaders are becoming increasingly worried they won’t have as many consultants as they’ll need to meet future demand. And they have every reason to be concerned.

Partners are sharing with me that they’re already finding it harder to recruit consultants and are asking “Is it just me, or are other firms facing the same challenge?”

There is indeed a real staff problem emerging. And, for the foreseeable future, the profession’s talent shortage is likely to get worse.

First, there’s a basic supply/demand issue: For the third year in a row, the vast majority of business schools reported a drop in applications in 2011. According to the Graduate Management Admission Council, two-thirds of the approximately 200 programs that responded to its survey reported a decline in admissions. The average program saw about a 10 percent drop in 2011 vs. 2010.

And the demand for MBAs is surging. Many of the big strategy and accounting/consulting firm giants are recruiting their largest classes ever. Investment banks, private equity firms, federal and state governments, and general industry are also back on campus, hiring in significant numbers.

Hiring industry veterans is also a challenge because there are shortages of talent across many sectors. APQC’s most recent Work Force Capabilities survey found that 80 percent of participating employers are finding it difficult (48 percent very difficult) to secure workers with scientific skills, and 65 percent are finding it difficult (45 percent very difficult) to secure workers with engineering skills.

APQC identifies five macro trends that are exacerbating the shortage of scientific, technical, engineering, and mathematical (or STEM) workers.

1. faster growth in the number of STEM jobs compared to STEM workers,
2. too few STEM workers with the necessary residency and citizenship qualifications,
3. a mismatch between STEM professionals’ capabilities and employer hiring requirements,
4. underrepresentation of minorities in STEM professions, and
5. the retirement of the large, Baby Boomer STEM-professional cohort.

As a result, those industries most-dependent on STEM workers (pharmaceutical, biotech, oil & gas, energy, aerospace, etc.) will have to ramp up their recruiting efforts. In some cases, this may mean recruiting experienced hires out of consulting firms. And it also means that it’ll be difficult to recruit talent out of these industries. 

Second, consulting firms became less attractive places to work: Firms lost the trust of many of their employees during the most recent downturn by cutting back in training, career development, and other internal investments in exchange for short-term profits. This is not only leading consultants to want to flee their current firms, but is driving a desire to leave the profession altogether. In other words, these conditions aren’t setting up a redistribution of talent among firms, but a one-way stream of talent out of the profession.

Third, there’s a history problem:  The 2001-2004 downturn created a talent gap. During those years, there was little to no MBA hiring, layoffs occurred disproportionately at the bottom of the pyramid, and when the economy began to recover in the middle of 2004, the biggest spike in voluntary attrition occurred at the bottom of the pyramid. Fast-forward 8 to 12 years and those that weren’t hired or left the profession then would now be at least at the pre-partner level, creating a talent void at the top of the pyramid. Any additional spike in turnover this time would exacerbate what’s already a very vulnerable leverage model. This existing shortage will exacerbate firms’ need to raid from each other and from any vulnerable employers of industry veterans.

If there is an upside to the talent shortage it is that this new “war for talent” will create a new wave of consulting demand. HR consultants will be needed to help companies recruit and retain more effectively. And other management and IT consultants will see a bevy of opportunities to help companies do more with fewer employees. Of course, consultants will only be able to maximize this new demand if they can overcome these market challenges.