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How to conduct a skills gap analysis: A 5 step guide

A skills gap analysis can help an organization prepare for change and become well-equipped to thrive in the future.
Skills Gap Analysis
Credit: Elena Poritskaya; Анна Демидова, Riko Best, 4Max / Adobe Stock

A recent report on the future of jobs provided empirical evidence of the widespread concern employers have about the need to upskill their workforce. The study found that in the next five years, 40% of the core skills of workers who remain in their current roles will change, and half of all employees will need reskilling

A skills gap analysis can provide the basis for deciding how to address these challenges. It’s an important tool for strategic workforce planning. 

What is a skills gap analysis?

First, it’s important to understand the difference between a skills gap analysis and a training needs assessment. The primary distinction lies in their purpose and scope.

Both a skills gap analysis and a training needs assessment are techniques for exploring the gap between the current knowledge of individuals, teams, or organizations and the knowledge that is needed. 

A training needs assessment compares the knowledge or skill requirements for a particular role to those of current incumbents with the aim of determining whether there are any gaps between “what is” and “what should be,” and whether training is the optimum way to close them. 

A skills gap analysis is an important tool for strategic workforce planning. 

A skills gap analysis, on the other hand, is more forward-looking, aimed at determining the gap between current skills and skills that will be needed to meet future organizational goals. With a skills gap analysis, the options for closing any gaps may include acquisition of new talent, redeployment or upskilling of current employees, succession planning, job redesign, and other L&D interventions. 

In short, a training needs assessment is about organizations getting better at doing what they already do, while a skills gap analysis is about preparing the organization to adapt to anticipated change and become well-equipped to thrive in the future. 

Consequently, the scope of a skills gap analysis is typically broader, often addressing the needs of an entire organization, particularly when major changes are brewing that could necessitate rethinking what the organization does and how it does it.

How to conduct a skills gap analysis

There is much to be gained from a skills gap analysis to justify the resources required to conduct one. The major advantages organizations can gain include:

  • Better strategic workforce planning 
  • Increased work efficiency and effectiveness
  • Greater support for implementing a proactive talent acquisition strategy
  • Enhanced competitive advantage over other organizations 
  • Quicker and stronger response to industry trends

Employees can also benefit greatly from the skills gap analysis process. For example, a skills gaps analysis can result in more targeted opportunities for professional growth and career advancement. Being offered such opportunities makes employees feel valued. It also enhances their sense of belonging and could increase retention. 

Here are five steps to get started. 

Step 1: Preparation and planning

First, decide who will be involved in the skills gap analysis. Be sure to include key stakeholders — organizational leaders, HR staff, business managers, and those who are likely to champion change. The project leader should focus on developing a mindset that supports skills gap analysis without preconceived ideas of what the solution should be. This begins with transparency about the process and its goals.

If skills gap analysis is new to an organization, it should be preceded by internal discussions about the skills that are needed to carry out the organization’s work, not on the requirements of particular positions. That kind of thinking can constrain decision-making about the best way to close gaps. 

Other key considerations in the planning stage include establishing a project timeline and determining how skills measurement data will be collected and analyzed. 

Step 2: Identify skills needed

The objective of step two is clarity as to what skills the organization needs to retain, develop, or acquire in the near future. Looking forward five to ten years, create an inventory of the skills the organization is likely to need. 

Competency models and skills taxonomies can be a good starting point, as are reports from organizations like the World Economic Forum and McKinsey & Company. There are several software packages for skills identification and management (reviewed here) which may be of help as well. 

Looking forward 5-10 years, create an inventory of the skills the organization is likely to need. 

The project lead can also ask the executive team about any major initiatives or projects that are in the planning stages. Then, consult with frontline managers and talent acquisition staff to obtain their opinions regarding the skills that will be necessary. 

Finally, map the list of necessary skills against organizational objectives to make sure the list is complete. It can be helpful at this point to rank the list of skills by importance and by the level of skill required (basic, intermediate, or high).

Step 3: Measure existing skills

In step three, determine the extent to which the needed skills already exist within the organization. Begin with data that can be acquired easily from performance reviews, 360-degree feedback, or resumes submitted by employees, for example. 

Additional data can be collected through a combination of self-assessments, surveys, interviews, focus groups, KPI analyses for teams and individuals, and so on. Be sure to have managers review and confirm their team’s self-ratings.

Step 4: Identify the gaps

Once all data has been gathered, compare the results of steps two and three to identify all of the needed skills that are not adequately represented in the inventory of current skills. One best practice is to create a skills spreadsheet for each team and each individual. List the skills needed for success and for each skill, identify its importance, the required performance level, and the actual current performance level, all on a five-point scale. 

A team skill rated “high” in importance and “high” in required performance level, but “low” in actual performance would represent a skill gap for the team as a whole. A similar disparity between required performance and actual performance of an important skill for an individual team member indicates a gap in that individual’s skills.

The outcome of step four is a comprehensive, prioritized list of the skills necessary to support team and individual success that are lacking throughout the organization. Communicate these findings to all stakeholders and ask for feedback before acting on the results.

Step 5: Close skills gaps 

Step five may involve multiple projects and continue over an extended period of time. There are several primary ways to address a skills gap that has been uncovered:

  • Acquire the necessary skills through targeted recruiting and hiring
  • Redistribute skills through structural changes and/or redeployment of certain employees
  • Cultivate the necessary skills through L&D initiatives

L&D initiatives might include creating professional development plans for individuals and offering courses, conferences, or certifications. L&D staff may also participate in the hiring process by administering skill assessments or taking part in panel interviews, for instance.

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When is the right time to conduct a skills gap analysis?

A skills gap analysis may be in order whenever an organization is facing the prospect of substantive changes that can impact the work it does or how it does it. That can include changes in the economy, competitive environment, consumer demand, technology, and so on. 

A skills gap analysis may be appropriate when an organization fails to achieve its business objectives, or when a team is having trouble meeting its goals. It can also be a good idea to analyze skills gaps during an acquisition.

Consider a large-scale skills gap analysis to support adaptation to the changes brought about by new technology.

Additionally, taking the time to address skill gaps prior to implementing new systems helps ensure the organization gets the most out of its technology investment. Early in what many are calling the Fourth Industrial Revolution, the time is ripe for organizations to consider conducting a large-scale skills gap analysis to support adaptation to the changes brought about by developments in technology, especially artificial intelligence.  

As far as frequency, some organizations conduct skills gap analyses on a regular basis, such as every two or three years. Letting more than a few years go by without any concerted effort to identify skills gaps is probably going too long. 

Final note

L&D teams that have never conducted a skills gap analysis before can get their feet wet by tackling a small project with well-defined boundaries, such as analyzing the skill gaps of a specific department. 

The experience acquired through an initial, small-scale analysis can lay the foundation for similar efforts at the business unit level or for the entire organization. Considering the magnitude of the changes organizations will face in the years to come, there’s no better time to get started than now.

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