What is Skills Gap Analysis: A Complete Guide

A skills gap analysis is a crucial exercise for every company as they strive to reach business objectives, maintain a skilled workforce and hire the best-fit candidates.

Here’s our comprehensive guide to conducting a skills gap analysis and using the insights to take action.

A skills gap analysis is an essential tool that organizations use to identify the disparity between the skills their workforce currently possesses and the skills needed to achieve business objectives. Conducting a skills gap analysis provides tangible data that HR can use to develop targeted training programs, inform hiring strategies, and take other actions to bridge skills gaps.

In this comprehensive guide, we will explain what a skills gap analysis is, why it matters, and provide a step-by-step approach to conducting one.

What is a Skills Gap Analysis?

A skills gap analysis evaluates the current capabilities of the workforce and determines what skills employees need but do not yet have to carry out their roles effectively. The goal is to pinpoint the precise skills gaps that exist so that organizations can bridge them through reskilling, upskilling, hiring, or other methods.

Skills gaps can occur at an individual team, or organizational level. For example

Individual – When an employee lacks certain skills to succeed in their role,
Team – When a team needs new technical or soft skills for an upcoming project,
Organizational – When the broader organization does not possess critical capabilities needed to achieve business goals.

The skills gap analysis process involves 3 key steps:

Identifying the most critical skills needed for organizational success.
Assessing the current skill levels of the workforce.
Determining the gaps between current vs. required skills.

HR typically oversees skills gap analyses, often partnering with managers. However, an external consultant can lend an objective eye.

Why Are Skills Gap Analyses Important?

With today’s rapidly evolving workplace, skills gaps are extremely common. Jobs and required skill sets are changing faster than ever.

If unaddressed, skills gaps lead to a range of problems, including:

Employees feeling overwhelmed and unsatisfied in their roles.
Teams unable to complete projects successfully.
Organizations failing to meet goals and innovate.
High employee turnover due to lack of development opportunities.

For these reasons, conducting periodic skills gap analyses is critical. Key benefits include:

Gain Visibility into Workforce Capabilities

A skills gap analysis shines a light on current workforce capabilities. You gain insight into proficiency levels across both technical and soft skills.

This allows you to leverage your top talent effectively and pinpoint areas needing improvement.

Inform Targeted Learning and Development

With granular data on skill gaps in hand, you can develop focused training initiatives. Programs can be tailored to develop the specific skills employees need to excel in their roles.

Targeted learning is proven to have a 250% higher ROI than broad-based training.

Boost Employee Engagement and Retention

Employees crave development opportunities. In one survey, 93% of employees said they would stay at a company longer if it invested in their careers.

Providing training to close skills gaps shows employees that you’re committed to their growth. This directly bolsters retention.

Enable Data-Driven Workforce Planning

A skills gap analysis provides data to inform strategic workforce planning. With visibility into the capabilities your organization currently lacks, you can define hiring goals to fill these gaps.

You can also use the data to anticipate future skills that may be needed based on company strategy.

Drive Organizational Success

Most importantly, identifying and closing skills gaps helps ensure your workforce has the requisite expertise to drive business results.

Employees who lack needed skills are unlikely to perform well in their roles. A skills gap analysis paves the way for your organization to accomplish its objectives.

How to Conduct a Skills Gap Analysis

Now let’s explore the step-by-step process for conducting a skills gap analysis:

Step 1: Define Goals and Scope

First, define the goals and scope for your analysis by asking:

What is the purpose? Are you assessing capabilities for an upcoming project or strategic plan? Looking to improve role-specific skills?
What is the scope? Will you analyze skills at an org-, team-, or individual-level? Certain roles or the entire company?
Who will be involved? HR, managers, and employees themselves should provide input.
What skills will you assess? Both technical and soft skills. Prioritize based on importance.

Step 2: Identify Required Skills

Next, pinpoint the specific skills and proficiency levels required. Ways to identify critical skills include:

Review job descriptions to compile core skills for each role.
Analyze past performance reviews to detect recurring skills gaps.
Discuss with managers to get their perspectives. Managers often have direct visibility into the capabilities their teams need.
Survey employees on skills they feel are important but need improvement.

Make sure to focus on both hard technical skills like SQL and Python as well as soft skills such as communication, collaboration, and critical thinking.

Step 3: Assess Employee Skill Levels

With required skills defined, you need to evaluate proficiency levels across your workforce. There are several techniques for assessing skills:

Testing: Administer skills-based tests to objectively gauge abilities.
Surveys: Conduct employee self-assessments of skill levels.
Interviews/Focus Groups: Discuss skills with employees directly.
Performance Reviews: Collect ratings and feedback managers have provided.
Skills Database: Maintain a centralized database of employee skills, certifications, and experience.

Ideally, use a combination of quantitative and qualitative methods for a comprehensive analysis. Maintain standardized scales when assessing skills, such as “Novice, Proficient, Advanced, Expert”.

Step 4: Identify Skills Gaps

Finally, identify precise skills gaps by comparing required vs. current skills.

For each employee, pinpoint what skills they lack, or are weak in, to excel in their role. Aggregate gaps at the team- and organizational-level too.

Focus on prioritizing the most critical skill gaps to address – ones that have the greatest impact on performance. You likely won’t be able to tackle every gap at once.

Step 5: Address Skills Gaps

With clear insights into skills gaps across the workforce, you can now develop initiatives to bridge them. Common approaches include:

Training Programs: Offer internal or external training to build skills. Target programs to address prioritized gaps.
Coaching/Mentorship: Pair junior employees with experts to share knowledge.
Hiring: Recruit employees with required skills not feasible to develop internally.
Job Rotation: Move employees into new roles to expand skills.

Be sure to track and measure progress closing gaps over time. Conduct periodic reassessments to identify new gaps that emerge.

Tips for an Effective Skills Gap Analysis

Follow these tips to ensure you conduct a high-quality skills gap analysis:

Involve managers in identifying critical skills – they often know their team’s capabilities best.
Use multiple techniques like testing and interviews to assess skills accurately.
Focus on both technical and soft skills – both impact individual and organizational performance.
Maintain standardized rating scales when evaluating proficiency levels.
Prioritize the 2-3 biggest skills gaps to address at once.
Align training programs directly to prioritized gaps.
Re-evaluate skills annually to detect new gaps.

A skills gap analysis provides data-driven insights into current workforce capabilities versus the skills required for organizational success. Conducting periodic gap analyses allows you to develop targeted training initiatives, evolve hiring practices, and take other steps to ensure your people have the expertise needed to drive results. With a more skilled workforce, your organization is better equipped to achieve strategic objectives in today’s dynamic environment.

what is skills gap analysis

Step 5: Take Action

Now that you’ve identified and analysed your skills gaps, there are two main options to fill those gaps: train existing staff or hire new people.

Remember: different skills might require a different approach. There’s no one-size-fits-all here. A 2020 McKinsey survey showed which business areas are likely to have the greatest need to fill skill gaps, and each one will require different tactics depending on the company.

According to Deloitte, 84% of companies agree that “continual reinvention of the workforce through lifelong learning is important or very important to their development strategies.” However, only 16% expect their organisation to significantly increase investment in reskilling over the next three years.

For the skills gaps where training existing staff is the best option, companies need to be ready to make the investment and commit to their upskilling and reskilling initiatives. Along with formal training programs, you could offer other resources such as:

Mentorship programs
Subscriptions or online courses
Tickets to events or conferences
Subsidised certifications

If the skills gaps are too large to fix with training (or if the timeline is too brief), you can hire new employees to add the needed skills and knowledge to your teams.

Whether you recruit right away to address a skills gap or just alter your job descriptions and hiring process to ensure future hires have the necessary skills, you will have to hire eventually.

With that in mind, consider how you will ensure new hires have the necessary skills: for instance, through skills assessments, required certifications or new interview questions.

Tip: If you can’t find the right person for the job or don’t need a FTE, you can always tap into the contingent workforce and hire a freelancer or short-term contractor with the right skills and experience.

How Do I Create a Skills Gap Analysis Template?

The best way to create a template is to use a skills gap analysis you create in Excel (see above) and create a blank version that can be filled in each time a new analysis is beginning.

3 Steps to Performing a Skills Gap Analysis

FAQ

What is a skills gap example?

When we talk about “skills gaps,” we mean areas where a person lacks the knowledge or competencies to perform critical tasks. Common employee skills gaps include hard skills (like technical know-how) and soft skills (like active listening).

What is the meaning of gap analysis?

A gap analysis is a method of assessing the performance of a business unit to determine whether business requirements or objectives are being met and, if not, what steps should be taken to meet them. A gap analysis may also be referred to as a needs analysis, needs assessment or need-gap analysis.

What does skill gap mean?

Skills gap refers to the disparity between the skills an employer expects their employees to have and the actual skills employees possess. This mismatch makes it challenging for employers to fill open positions.

Why is skills analysis important?

However, frequent skills gap analysis has an impact on the long-term performance of the business. It allows the company to streamline employees’ work efforts and increase quality. The business becomes equipped with the skills required for the future and will be more competitive in the long term.

What is the skill gap theory?

A skills gap refers to the mismatch between the skills and qualifications that job seekers possess and the skills and qualifications that employers require for a particular job or role.

What is the skills gap strategy?

Skills gap analysis: The benefits Other benefits of conducting a skills gap analysis include: Better insight into employees’ strengths and weaknesses, allowing learning and development initiatives to be more strategic, targeted to individuals and to the needs of the business as a whole.

How do I create a skills gap analysis for employee development?

Here are six steps you can take to create and use a skills gap analysis for employee development: 1. Identify company values and goals One way to develop a list of key skills is by reflecting on the company’s mission statement, growth goals or brand values.

What is a quantitative skills gap analysis?

Quantitative skills gap analyses can be valuable as data collection tools for an organization. If every department in a company uses the same quantitative skills gap analysis form to review employees, the leadership team can use an HR or talent management software system to find trends in the data.

Who is responsible for identifying skills gaps?

It depends on what kind of skills you want to measure, and which groups of employees you want to evaluate. If you want to evaluate individual performance, then managers are responsible for identifying skills gaps. For team-level skills, it’s usually heads of departments who’ll run a skills gap analysis.