Skills Gap Analysis: How to Conduct One to Improve Business Outcomes

In a business world dominated by labor cuts and economic uncertainty, leaders are being asked to accomplish more with fewer available hands. A skills gap analysis is an invaluable tool to ensure your workforce is properly equipped to tackle your strategic objectives.

Yet conducting a skills gap assessment is easier said than done. Without the right methodology, it’s tough to pinpoint exactly where your teams are lacking. Do it right though, and the results are game-changing. According to McKinsey, companies that bridge the skills gap see up to 50% greater engagement — and 40% greater productivity.

Below, you’ll learn how to conduct a skills gap analysis and assemble a workforce that can execute even the loftiest goals.

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What Is a Skills Gap Analysis?

A skills gap analysis is a means of identifying the difference between the current skills of your workforce and the ideal skills needed for success. By knowing where your teams are strong and where they’re lacking, you can upskill your existing talent or make strategic hires to bridge the gap.

This analysis has many pseudonyms — talent gap analysis, job gap analysis, competency gap rubric, and competency gap analysis, to name a few — but the purpose is identical. Conducting an analysis is critical for addressing (and even preventing) misalignment between your team and your goals.

How to Perform a Skills Gap Analysis

Written communication 5 4 3 5 3 4 4
Verbal communication 5 4 5 4 4 5 5
Problem solving 3 2 3 4 2 3 3
Sales 4 5 5 5 4 5 5
Product knowledge 5 5 5 3 4 5 5
Negotiation 4 4 3 5 5 3 4
Prospecting 2 3 3 5 3 2 3

A skills gap analysis can go awry quickly without proper planning and execution. But with the right methodology, you’ll skip the hassles and get to the data, fast. 

Here’s how to perform an effective skills gap analysis in seven steps:

1. Gather the Right Stakeholders

Accurately assessing your workforce starts with surveying the right people. Assemble a team of stakeholders with intimate knowledge of your business and its teams. You’ll ideally want representation from all departments to ensure a comprehensive analysis. The last thing you want is to leave an entire function or team unaccounted for.

2. Identify Your Workforce’s Current Skill Set

Work with your stakeholders to identify the most prominent skills showcased by their teams. Here’s how:

  1. Use a combination of surveys, assessments, performance reviews, and behavioral interviews to gather data on your team’s current skill set.
  2. Next, create a heat map to see where there’s overlap between teams. The more time you spend in this discovery stage, the clearer the baseline.

For example, you might survey your employees about their comfort level in increasing their proficiency in a few key skills. You could then conduct a problem-solving assessment, math skills test, or Microsoft Word assessment to get a baseline.

3. Determine Your Ideal Skill Set

As you’re talking with stakeholders, have them shift their thinking from present to future state. Ask them: What are your team’s long-term goals? What collective skills are critical for success? Draft a list of goals and skills, then ask them to rank those items in order of importance.

Pro Tip: If you feel stuck, there are plenty of places to find inspiration. Review your company’s mission statement and cultural values. Or, pull up a job description online and ask the relevant stakeholder to explain what resonates and why.

4. Measure the Gap Between Current and Ideal Skills

Compare the baseline of your workforce with your ideal state. Create a skills rubric where each item maps back to a skill or goal identified by a stakeholder. For each skill, score your workforce’s current performance from one to five. Once completed, have all stakeholders review the rubric to ensure alignment.

For example, if you’re conducting a skills gap analysis of your finance team, your rubric might be a simple spreadsheet with columns for “business acumen,” “accounting skills,” “communication,” and “critical thinking.” If your CFO determines that critical thinking is at two stars when it should be five, that identifies a skills gap that needs fixing.

Leadership Team 3 5 5 2
Admin Team 1 2 5 2
Sales Team 4 3 5 2

5. Create a Plan to Close the Gap

With your skills gap assessment complete, find ways to close the gap. If the skills gap is isolated to a particular team, give that team resources to upskill themselves — or allow them to hire talent with the relevant skills. If the employee gap analysis is more widespread, consider launching a company-wide training gaps analysis (or recruitment gap analysis).

For example, if you assessed your sales team and found they lacked the skills for success, you can fix the issue by launching a week-long training about the art of selling. You can also hire outside talent that mirrors the skills you seek.

6. Put That Plan Into Action

A skills gap analysis is useless unless you put it to use. Encourage team leads to share the results of the analysis with their reports. Transparency helps build trust. Explain to your employees why there’s a skills gap, and how they fit into the mix. By articulating what actions are critical to future success, you can hold your team accountable to that vision.

For instance, you could schedule a team meeting or workshop to explain why your sales team is lacking in certain skills. Spin the news into a positive, and share that employees can improve those skills in an upcoming sales training session. 

7. Analyze the Results Over Time

Action without follow-through won’t yield the results you seek. Schedule future meetings with your stakeholder team to update your analysis regularly. If you’re trending in the right direction, reinforce what’s working well. If you’re stagnant, consider rotating in some new stakeholders and updating your talent gap analysis tools.

For example, you may hire new talent to bolster your sales team. Then when you return to your analysis in three months, you might find these employees will need a different set of interpersonal skills to support your changing target market. You can address that new gap during your next team meeting.

Skills Gap Analysis Example

Let’s say senior leadership tasks you with launching a mobile application for your brand. You may run a skills gap analysis, only to find your current team lacks certain competencies needed for success, such as coding to build the app, visual design to make it pretty, and unique marketing skills to sell it.

Product design 5 2 1 1 5 5
Critical thinking 3 4 5 3 4 4
Java Coding 1 0 1 0 2 1
Adobe Illustrator 3 1 0 2 1 2
Content Marketing 0 0 1 0 0 3
Sales 2 2 5 5 2 3
Teamwork 5 5 4 5 5 4

Thankfully, running a gap analysis gives you the tools to course correct. In this case, you may bring the results back to leadership and ask them to provide resources to hire additional engineers, designers, and marketers. If that isn’t feasible, you can also upskill and promote internal talent.

Why Is a Skills Gap Analysis Useful?

Why Is a Skills Gap Analysis Useful?

A skills gap analysis shines a spotlight on your organization’s biggest skills deficits. A well-executed gap analysis helps you anticipate and avoid skill deficiencies so you can develop the talent you need to reach your organizational goals.

For instance, a gap analysis might reveal that your employees lack critical leadership skills. To grow your organization and ensure a strong succession plan, you’ll want to bridge that gap by hiring seasoned leaders or upskilling talent internally.

Here are the five biggest reasons to perform a skills gap analysis:

Identifies Critical Hiring Needs

When your current and ideal workforces are misaligned, it’s hard to spot the problem before it’s too late. Botch a product launch, and it’s easy to say “We have the wrong people!” as you sift through the wreckage. With a skills gap analysis, you can pinpoint critical hiring areas before you crash and burn.

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Enables Learning and Development

A skills gap analysis doubles as a powerful L&D tool. Use the results to launch a career gap analysis with your employees. Explain that you’re looking to fill certain skill gaps, and position those gaps as opportunities for people to upskill themselves and accelerate their careers. 

Lets You Outpace Competitors

“Quiet quitting” made headlines in 2022, as employees contributed the bare minimum to retain their jobs. According to Gartner, this phenomenon is widening the skills gap. It’s also creating opportunities for employers to “quiet hire” those same people and steal their skills from the competition.

For example, if a marketer feels disengaged at their job, they may agree to do some freelance work for you. In other words, they’ll divert effort and brainpower from their full-time employer to your company.

By conducting a skills gap analysis, you give yourself a fighting chance to retain top talent, while also phasing out low performers who don’t pass muster. The more proactive you are with your analysis, the easier it is to find the talent you need in a crowded labor market.

Helps You Plan for the Future

Skills gap analyses are vital for succession planning. You might conduct a leadership gaps analysis to see how your organization’s current roster of leaders compares to what you need. If you lack replacements for outgoing talent, bridge the gap with a leadership development program.

For instance, say a CFO is nearing retirement age. They may want their Controller to step into the role. But — a competency gap analysis might reveal that the Controller lacks the right set of leadership skills. You can ask the CFO to choose another successor, or you can upskill the existing Controller to prepare them for the challenge.

Improves the Odds of Business Success

When your workforce skills are aligned with your talent needs, you put your organization in the best possible position to execute its goals. By investing in a skills gap analysis, you de-risk your biggest ventures, anticipate potential roadblocks, and give yourself ample runway to manage change.

Basic Elements of a Gap Analysis

3 Basic Elements of a Gap Analysis

A skills gap analysis consists of three core components:

  1. The current state: Assessing where your employees’ talents currently lie.
  2. The ideal state: Defining where those talents should be to accomplish your goals.
  3. The gap: Determining what steps the company needs to take to close the gap.

An effective gap analysis requires completing each of the above components, typically in order.

Examples of Skill Gaps

Skill gaps affect companies of all industries and sizes. Here are four examples of potential skill gaps you may look to resolve:

1. You Have an Aging Leadership Population

You’ve been in business for decades. At your most recent earnings meeting, a shareholder raised a salient point: All your senior leaders, from your CFO to your EVP of Marketing, are nearing retirement age.

A skills gap analysis helps you identify high-potential leaders at lower rungs of the organizational ladder. The end result: You craft a succession plan that appeases your shareholders, while ensuring the business is in good hands for decades to come.

2. You’re at Risk of a Cybersecurity Breach

Your IT team is a lean, mean bunch. For years, you’ve relied on them to onboard new employees, answer any tech questions, and protect the company from bad actors. The company is now growing at a far faster pace, and you worry it’s creating new cybersecurity risks.

A talent gap analysis confirms your suspicions: Your IT team simply doesn’t have the bandwidth or the skill set to scale with your organization. By conducting the analysis, you flag a critical risk and get approval to hire new talent for your IT team.

3. You’re Leading a Cross-Functional Initiative

You’ve been asked to spin up a project team as part of a larger company initiative. Your goal: Launch a new product and migrate your existing clients to the new experience without any friction or complaints. Easier said than done.

A skills gap analysis tells you what capabilities you’ll need for the initiative — from engineering the product to marketing it and fielding customer questions. Equipped with these insights, you assemble a project team that has the right tools to succeed.

4. You’re Seeing an Influx of Customer Complaints

You recently reviewed your company’s objectives and key results. All metrics looked healthy, save for one area: Your average customer satisfaction rating declined 30% this quarter. There were no recent product launches or initiatives that could have caused this — so what did?

A competency gap analysis reveals that your customer service team recently lost several top performers, creating a massive gap of “learned” knowledge for newer members. After identifying the issue, you invest in training to upskill the team and restore customer confidence in your products.

Key Takeaway

A skills gap analysis is invaluable for aligning your workforce’s current and ideal abilities. With the right methodology, you’ll pinpoint glaring talent needs, make strategic hires, and upskill employees to fill key needs. The better your analysis, the more you optimize your business for success.

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