Skills Gap Analysis: All You Need To Know [FREE Template]
As companies experience a rapidly growing need to re-and upskill their people, the skills gap analysis is an increasingly relevant tool. A recent Wiley survey noted a significant uptick in the percentage of HR professionals and hiring managers who say they’re facing a skills gap. It rose from 55% to 69% in the past year.
In this article, we will explain what a skills gap analysis is and why it’s a useful tool, and share a three-step approach to conducting a skills gap analysis. You can also download a free skills gap analysis template in Excel!
Content
What is a skills gap analysis?
Skills gap examples
Why is a skills gap analysis important?
How to conduct a skills gap analysis
Skills gap analysis examples
Skills gap analysis template
FAQ
What is a skills gap analysis?
A skills gap analysis is a tool used to assess the difference (or gap) between a workforce’s current capabilities and what is required to meet the current or future demands of the business strategy. It identifies the skills that employees need but don’t yet have to carry out their job or perform certain tasks effectively (Antonucci, Ovidio, 2012).
Organizations can experience gaps in both hard and soft skills. Examples of in-demand hard skills include analytics, digital communication, and project management. According to the report by the Association for Talent Development, soft skills that are in short supply are critical thinking and problem-solving, managerial and supervisory skills, and communication and interpersonal skills.
With no end in sight to the fast-paced change of technology and the evolving business landscape, organizations without adequate skill sets will struggle to keep up. When a workforce isn’t equipped to handle new responsibilities, innovation declines, employees underperform or leave, and customer expectations can’t be met.
HR, along with team leaders and possibly external consultants, conduct a skills gap analysis to find out which specific skills and knowledge are lacking among the employees. This is typically done in preparation for upcoming changes, such as new projects, strategy shifts, and technology updates.
With this information at hand, HR can address the skills gap through upskilling, reskilling, L&D investments, succession planning and other methods that we will discuss later in this article.
Skills gap examples
Organizations that decide to tackle a skills gap issue can find ways to solve the problem. Here’s a look at a few examples of how companies identified skills gaps and took action to close them:
NASA
The U.S. government’s space research and exploration agency, the National Aeronautics and Space Administration (NASA), relies on data scientists for its operations. Since these professionals are in high demand, they looked internally at what the current workforce had to offer. Employees across the organization had data capabilities, but the wide range of talent had not all been categorized.
NASA was able to build a talent-mapping database that identifies the data skills required for various projects. It helps match employees with the right skill sets to projects requiring those competencies.
Verizon
Communications technology company Verizon has a goal of preparing 500,000 individuals for future roles by 2030. It developed a tech apprenticeship program called Verizon Thrive. The 12-month earn-and-learn program trains high-potential individuals in the important skills Verizon tech roles require.
After completing the apprenticeship, 95% of the first group of apprentices accepted full-time employment offers from Verizon.
Chipotle
Fast casual restaurant chain Chipotle faces the food service industry’s common struggles of high turnover and a lack of employees with management skills. In 2019, it started offering employees a debt-free college degree program that pays 100% of tuition costs upfront.
Chipotle’s employment retention rate is 3.5 times higher among crew members who are enrolled in the program. In addition, employees who take advantage of the benefit are 7.5 times more likely to be promoted to management roles.
AI-driven healthcare startup
Miriam Groom, CEO of Mindful Career and Leader Human Capital at KPMG, shared an example of a skills gap at an AI-driven healthcare startup. While their engineers were adept at developing cutting-edge algorithms, there was a gap in understanding healthcare nuances and patient-centric design,” said Groom.
“This revelation led the company to initiate a cross-functional TechMed collaboration program. Engineers were paired with medical professionals for immersive experiences, leading to a fusion of tech brilliance with empathetic, patient-first solutions. Not only did their product efficacy improve, but the company also reported an uptick in employee satisfaction due to this multidisciplinary learning.”
Why is a skills gap analysis important?
The Future of Jobs Report, the World Economic Forum states that 44% of employees’ essential skills and knowledge will be disrupted over the next five years due to continued automation and AI technologies.
For organizations across all industries, this means that certain jobs will disappear while others’ core tasks and responsibilities will change. This is where job redesign becomes relevant for rearranging these tasks and responsibilities to align them with the changing reality of work.
Before you start redesigning jobs, you need to know what skills and knowledge are currently missing in your workforce. You need to ask yourself, which of those skills are essential for your organization’s performance?
This brings us to why conducting an employee skills gap analysis is important. Here are several reasons:
1. It gives you insights into your entire workforce
You’ll be able to identify which employees have the most desired skills and knowledge of particular aspects of the business, as well as the employees with significant skill gaps.
As such, you can better target employee training and development efforts on those skills that require the most attention. This will lead to the optimal use of resources to improve the overall performance of the team. According to McKinsey research, matching training and development programs with skill needs can decrease costs by 50%.
2. It boosts individual learning and development
A skills gap analysis helps individual employees find out what improvements they’ll have to make to acquire or improve the skills and competencies needed to perform well now and in a future role. In the PwC’s Global Workforce Hopes and Fears Survey, 53% of employees stated that their job requires specialist training.
It will also highlight which employees are making the strongest contribution and deserve raises or promotions. This can also have a positive impact on your employees’ productivity.
3. It helps your strategic workforce planning
Strategic workforce planning is, among other things, about making sure you’ve got the right number of people with the right skills in the right place. It’s difficult to start planning for the future if you don’t know exactly where you currently stand from a skills perspective.
A skills gap analysis shows you which key positions lack core competencies. From there, you can set goals and define benchmarks for getting the workforce where it needs to be.
4. It can improve your recruitment efforts
You have to know what you are looking for in order to find it. It’s much easier to recruit strong candidates if you can identify the ones whose skills best match those needed to function effectively in a particular role.
You can also develop new talent acquisition strategies that will target and attract the types of people you need.
5. It creates a competitive advantage
If you combine all of the above, you’ll be able to create a competitive advantage and stay ahead of your competition. You’ll know the strengths and weaknesses of your workforce. That way, you can better plan for learning and development and recruitment to optimize your organization’s performance.
“Skills gap analysis in the modern age isn’t just about identifying missing competencies but also about creating an organizational culture of continuous learning, adaptation, and collaboration.”
Miriam Groom, CEO of Mindful Career and Leader Human Capital at KPMG
How to conduct a skills gap analysis
When it comes to conducting a skills gap analysis, the three steps are loosely based on the organizational development process. Here’s a breakdown:
Step 1: Scope and diagnostics
The first step of an employee skills gap analysis is to define its scope and identify the needed skills.
You can conduct a skills gap analysis on an individual, team, or organizational level. For example:
- Individual – When the duties of a certain position are changing, or an employee is falling below performance standards.
- Team – When a project expects employees to complete a different set of tasks or use new technology.
- Organizational – When the company is not achieving business goals or a strategy shift requires expanded capabilities.
You can start by asking and answering certain questions, such as:
- What is the mission?
- What are the business goals?
- Which hard and soft skills do we value as an organization?
- What critical skills are needed to be able to perform the mission and meet the business goals?
The criterion for determining whether or not a skill is critical or non-critical is as follows. If an employee lacks a certain skill but still completes a task satisfactorily, the skill is non-critical. On the other hand, if an employee completes a specific task but with an unsatisfactory outcome, the missing skill is critical.
When deciding what your organization and industry will need in the future, consider questions such as:
- What jobs within your organization/industry are likely to be affected by automation?
- What skills are currently on the rise in your industry?
- What kind of jobs will your company need to add or expand on?
Watch a summary of how to perform a skills gap analysis in our Learning Bite below:
Step 2: Data collection and analysis
The second step involves collecting and analyzing data. The goal of this phase is to assess what tasks are being done now, rate how important these tasks are, and inquire about the skills required to do the work properly.
Data collection and analysis activities can include:
Developing job profiles and identifying critical skills needed for each job role:
- Review current position descriptions for future needs.
- Consider the impact of any upcoming regulatory or other changes as well as future work trends.
- Develop a list of competencies that most clearly and accurately describe what is needed to do the work.
Conducting an inventory of your employees’ current skills using:
- Position descriptions
- Job class specifications
- Performance evaluations
- Competency assessments
- Interviews/focus group meetings with supervisors, managers, and employees
Identifying your employees’ competencies and skill levels:
- Put information gathered from competency assessments into a single, searchable database.
- Log all employees and their existing competencies into the database.
- Cross-reference with identified necessary critical skills for now and the future.
HR technology can help you with several parts of this. A talent management system, for instance, can serve as a searchable database that gathers all the information from your employees’ performance evaluations and competency assessments.
Kinga Golebiowska, People & Culture Partner at HR Hints, lists three common challenges HR professionals need to address when conducting a skills gap analysis:
- Being surrounded by technology that often forces us to change how we work, allowing us to benefit from automation, we might tend to focus solely on technical skills when performing skills gap analysis. This way, we may overlook critical inter- and intrapersonal skills like communication, adaptability, and leadership, which are often essential for success.
- Failing to consider future industry trends and advancements can result in a short-term solution that becomes obsolete quickly.
- Employees may resist changes if they are not adequately prepared or involved in the process. Effective change management is essential to addressing this challenge.
Step 3: Designing interventions
This stage is about creating effective interventions. Once you’ve found out where the skill gaps are in your organization, you can form a strategy to best bridge them.
Different organizations will face different skill gaps. However, according to the World Economic Forum report mentioned above, the demand for cognitive skills is gaining the most momentum. Creative thinking and analytical thinking are in close competition as the most significant, while technology literacy comes in third place among the fastest-growing core skills.
Data from a McKinsey survey shows the business areas with the greatest potential for skill gaps is data analytics:
Business areas with greatest need to address potential skills gaps % of respondents reporting that Data analytics 43 IT, mobile, and/or web design and management 26 Executive management 25 HR and talent management 23 Sales and marketing operations 22
Skills gap analysis interventions
Depending on the skills you’re missing and your current workforce’s capabilities, there are several types of interventions you can put in place. Let’s explore the options:
Training and development of existing employees
A skills gap analysis helps you better understand the training needs of your employees. The analysis results may lead to expanding your learning and development programs. Targeted training will equip your employees with the newly required or missing skills.
Job redesign
Questions about the company’s mission, business goals, and the skills necessary to achieve those goals now and in the future can help you determine if you need to rearrange the tasks and responsibilities of certain jobs. This is what we refer to as job redesign, which might involve upskilling and reskilling employees.
Recruiting people with critical skills
The results of your skills gap analysis are likely to change the selection criteria in your hiring process. Even if you’re able to reskill or upskill your current employees, at some point, you will have to recruit new people for open positions.
Hiring someone who already has the critical skills will save you time training them. They will also become operational and productive sooner. If you can’t find people fast enough, you can tap into the contingent workforce and hire freelancers or contractors to temporarily fill a skills gap.
In the Wiley Closing the Skills Gap survey, organizations reported how they would handle their skill discrepancies as follows:
- Upskilling/reskilling employees (65%)
- Recruiting for needed skills (48%)
- Hiring contingent workers (41%)
Most organizations use a combination of interventions to close their skills gaps.
“Oftentimes there are gaps in areas that seem important to address, but if this doesn’t align with organizational needs, it may not be an appropriate use of resources and may not get appropriate support.
Also, once the analysis is done and a solution is created, failing to get buy-in from the senior leadership is a sure way to not get the resources and support needed.”
Chris Wong, Executive Coach and Consultant at Leadership Potential
It’s essential to conduct a skills gap analysis on a regular basis to stay on top of the skills gaps in your organization.
“A general guideline is to conduct a comprehensive review every 12-24 months. However, in fast-evolving industries, it might be necessary to assess skills gaps more frequently. What is most important is that it should not be a one-off exercise but should be done periodically,” notes Kinga Golebiowska, People & Culture Partner at HR Hints.
Regular reviews enable you to uncover the gaps before they significantly impact your business, continuously reducing the risk of underperformance and loss of competitiveness.
Skills gap analysis examples
It’s important to have a standardized format for conducting a skills gap analysis. A well-structured process will produce the correct and most helpful information. Let’s have a look at two types of skills gap analysis.
Simple skills gap analysis example
You can create a simple skills gap analysis template on a spreadsheet that compares current skill levels to desired skill levels. It would contain the following fields:
- Employee name
- Skill to measure (these should be as specific as possible and relevant to a position either currently or in the future)
- Skill level rating (point system)
- Desired skill level (point system)
Be sure that everyone who is assessing employees’ skill levels has consistent criteria and understands how to apply them to their ratings.
You can customize a simple skills gap analysis spreadsheet for different teams or purposes, such as by department or for soft skills or hard skills.
An individual skills gap analysis could look like this:
Quantitative skills gap analysis example
Antonucci and Ovidio proposed a quantitative approach to skills gap analysis, which measures the gap of each competency for every examined subject.
The algorithm they designed only takes into account the negative gap situation of an employee’s competencies being lower than the ones needed. They’re also distinguishing between a skill gap of often-used competencies and a gap of competencies that are rarely used.
The starting point of this analysis is mapping the skills needed for each working profile. The benchmark for each required competence can be determined either with a top-down (from managers to employees) or a bottom-up (from employees to managers) process.
The advantages of benchmarking this way are:
- The procedure doesn’t change if the top-down or bottom-up approach is used.
- You get quantitative estimations of the skills gap, taking into account the importance and frequency of use.
- It enables a flexible, semiautomatic process for planning training courses.
This results in the following skill gap indicator:
In this formula, the indicator G of the gap in the j-th skill is calculated. The other variables in the formula stand for:
- N – indicates the score of necessity assigned to the i-th interviewee for the j-th skill
- P – indicates the score attributed to the level of the skill possessed by the employee.
- F indicates the frequency of the use of the skill by the same employee.
- c – is a constant to cut the effect of low or negative gaps (i.e., zero or one)
- F indicates the frequency of the use that, in the ideal benchmark of the company, represents the threshold above which the skills shortage represents a problem that is to be solved (while taking into account the costs of training).
- K permits to take into account only positive gaps (when a certain, relatively frequently used skill isn’t sufficiently possessed).
There are 3 aspects to consider with the quantitative approach:
- Data collection – Businesses can collect the relevant data using paper-based assessments and supporting interviews or through skill management software. Especially when you’re conducting a skill gap analysis among a large number of employees, the latter becomes the more obvious option.
- Types of assessments to obtain the required information – Self-assessment surveys or 360-degree assessments can gather the necessary skills, the frequency of use of certain skills, and the store of skills specific to each role. Feedback tools such as 15Five and Reflektive collect and analyze feedback from and about your employees.
- Scoring – The skill assessments are expressed on a scale of 1 to 5, with 1 being the lowest and 5 being the highest level. For each level, every interviewee gives a score to the level of skills actually possessed and the skill level they consider necessary. The same scoring method is used to indicate how intensely a skill is being used in the company.
Once you’ve gathered all the relevant data, you’ll be able to examine the deviations between the level of skills possessed and necessary by individual employees as well as the frequency with which they are used in the company. This will then allow you to take action, resulting in one or more of the skills gap interventions we described above.
Skills gap analysis template
Using a skills gap analysis template helps you consistently and systematically identify and address discrepancies between current employee competencies and those required for optimal performance.
The template provides a structured framework, making it easier for organizations to assess skill deficiencies and prioritize areas for development on a team and individual level.
Below is the team skills gap analysis template:
On a final note
At a time when companies are increasingly looking to prepare their people for the future, it’s important to know what skills and competencies your workforce currently possesses and what else is needed. Failing to close skill gaps can mean that your organization will miss out on opportunities to innovate and lose its competitive edge.
A thoroughly conducted skills gap analysis is an essential tool for helping you understand what your employees are capable of and how you can build a workforce that will accomplish even more.
At the Academy to Innovate HR (AIHR), we help HR professionals who are committed to life-long learning build their skill set with relevant and in-demand skills to avoid facing a skill gap of their own.
FAQ
A skills gap analysis is a tool used to assess the difference (or gap) between the current state of employees’ competencies and what is necessary to achieve business goals. For HR, the skills gap analysis is a way to find out which skills and knowledge are lacking among the employees in the organization.
A skills gap analysis gives you insights into the skills of your entire workforce, boosts individual learning and development, helps with strategic workforce planning, improves recruitment efforts, and creates a competitive advantage.
Put simply, you start by identifying the needed skills based on the organization’s mission and business objectives. Then you collect data and analyze your employees’ current knowledge and skills. Finally, you devise a strategy for filling the skills gaps you’ve detected.
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