November 13, 2023

How to Conduct a Skills Gap Analysis

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Key takeaways

  • A skills gap analysis is a process to identify discrepancies between the skills of your current workforce and the skills your business needs.
  • To conduct a skills gap analysis, you must determine the scope and stakeholders, choose a rating system, identify your required skills, assess your employees, and analyze the results.
  • Performance, skill, and learning management systems can automate skills gap analyses so you can fill talent deficiencies faster.

How to conduct a skills gap analysis in 6 steps

A skills gap analysis reveals talent deficiencies in your company that lead to stagnation, lack of innovation, and burnout. Based on the analysis results, you can take appropriate steps, such as upskilling, reskilling, or recruiting, to remain competitive and adapt to the changing state of work.

The steps below outline the skills analysis process so you can optimize your organization’s talent needs. And if you’re curious about software that can automate the process for you, browse our Performance Management Software Guide for a full list of options.

1. Determine the skills gap scope and stakeholders

First, clearly define what you are trying to accomplish with a skills gap analysis. “You can’t determine the key skills until you understand the company goals and values,” explains Fred Winchar, CEO and co-founder of Max Cash.

The scope of your skills gap analysis can take one of two forms:

  • Individual: Identifying required skills per employee and comparing them to their actual skill levels for professional development.
  • Group: Identifying desired skill sets at a macro level, whether by team, department, location, or division, to prepare for large-scale company objectives.

Choosing your skills gap analysis scope will also help you narrow down the appropriate stakeholders. For example, department-level analysis may need input from department heads, managers, and learning and development (L&D) teams. Department leaders can pinpoint the necessary skills for success while the L&D teams craft the appropriate training.

Meanwhile, an individual skills gap analysis may only involve the employee and their manager, with possible assistance from your HR department. Here, employees and managers can work together to identify the employee’s strengths, weaknesses, and create personalized employee development plans.

What can skill gap analyses help you accomplish?

Effective skills gap analyses can help you proactively address changing workplace norms in your industry and support continued innovation. For example, you can use a skills gap analysis to:

  • Expand into new markets. Each market is unique, and a skills gap analysis can pinpoint where you need to grow your talent to meet the demands of your new customer base.
  • Identify talent for specific projects. Upcoming projects demanding complex talent needs could use a skills gap analysis to pinpoint the best players with the skills to ensure success.
  • Prepare for the future. Based on the trends in your industry, you can mark the skills your workforce needs to remain competitive, compare them to your current talent, and start training or hiring appropriately.

2. Choose a rating system

Skills gaps are typically quantitative — not qualitative — scores. Because quantitative measures are easier to translate into data visualization tools like heatmaps, nine-box matrices, and spider charts, you can quickly draw insights on your employees’ competencies.

There are several rating systems you can use, but the best ones are consistent and reduce the risk of rater bias. Below are a few examples:

  • Key performance indicators (KPIs): These are quantifiable ways to measure progress toward an objective over time, such as onboarding three new clients by the end of the quarter.
  • Skills assessment: These include pre-employment or post-training tests to measure competency in various hard or soft skills.
  • Certifications: These are industry or educational certificates that validate your skills, such as a PHR or SPHR for human resources.
  • Performance reviews: Any quantitative rating system used during performance reviews, 360-degree feedback, or self-evaluations, such as BARs.
  • Custom: These are numerical rating scales based on your criteria, such as a 1–5 scale, with one meaning poor in a skill and five meaning excellent in a skill.

Depending on the skill, the rating scale you choose may be different. However, using the same rating scale for the skill creates consistency and allows you to view skill progression over time.

Learning management tools offer rating systems or allow you to customize your own. Avilar, for example, uses a 1–5 rating system to measure skills, but you can change the scale to fit your requirements.

Avilar displays a list of skills assessment criteria with a 5-point rating scale: Limited, Basic, Intermediate, Advanced, and Expert.
Avilar measures skills on a five-point, limited-to-expert scale, which both managers and their direct reports complete. Source: Avilar

3. Identify required skills and levels

Have your L&D teams collaborate with managers or department heads to determine critical competencies for each role.

Pro tip:

Critical skills are those an employee must have to satisfactorily complete their role or task. Non-critical skills, on the other hand, aren’t necessary to satisfy the job’s minimum expectations, but they may help the employee be more productive or efficient.

In addition, consider what skills your workforce currently needs plus what skills will benefit the company in five to ten years. Include job descriptions, performance reviews, industry trends, regulatory changes, company values, or cross-departmental focus groups in your research.

Alternatively, you can use some of the questions below to brainstorm:

  • What goals will your company achieve in the next 10 years?
  • What do your competitors do well that you want to emulate?
  • What skills could help employees perform their jobs more efficiently?
  • What current or future job roles do we need to fill?
  • Are there any industry innovations or technologies our workforce should become familiar with?
  • Are there any job roles that will become obsolete because of automation?

Collect the critical competencies and mark their desired level and importance for your team in a spreadsheet. At the beginning, it can be a simple spreadsheet like this example:

Example spreadsheet setup listing out the skill, purpose, desired level, current level, and priority for team analysis.
Source: TechnologyAdvice

4. Assess employees’ current skills

There are many tools that can help you rate and gather your employees’ current skill levels; examples include performance management software, learning and skills management software, surveying tools, and interviews.

Performance management software

Performance management software can track employee progress toward individual, team, or company goals. It also provides a historical look at employee performance from self-evaluations, performance reviews, 360-degree feedback cycles, and one-on-one manager sessions.

PerformYard, for instance, allows you to customize questions and rating frameworks to build competency tracking into your performance review cycles.

PerformYard displays a dashboard of peer review ratings, comments, and response totals.
PerformYard’s platform allows managers and peers to rate employee performance for a less biased approach to assessing skill competency. Source: PerformYard

Learning management and skills assessment software

Learning management software (LMS) helps you create, distribute, and track employee training and development courses. Skills assessment software, meanwhile, is focused on evaluating whether and to what extent employees can perform a particular skill, often through graded standardized tests or projects.

ProProfs, for example, allows you to develop assessments based on more than 100,000 pre-made questions. You can then compare your employees’ scores against minimum scoring requirements for fairer evaluations of your workforce’s abilities.

Check out how to make quizzes using ProProfs below:

Skills management software

Skills management platforms typically come pre-built with rating scales, competency libraries, and role levels. They also facilitate skills assessments through job descriptions, surveys, and training courses.

HRSG, for example, provides a library of over 350 competencies in technical and behavioral areas for over 1,000 job titles. You can use its library to send competency profile surveys and quickly gather employee skill ratings.

HRSG displays a dialogue box for an employee's competency survey library.
HRSG sends competency profiling surveys to employees to select the skills that apply to them, facilitating a consistently updated skills map for your company. Source: HRSG

Surveying tools

If your company already has an employee engagement or communication platform that includes surveys, you can leverage these tools for collecting and measuring your employees’ skill levels. SurveySparrow, for instance, offers a module dedicated to gathering 360-degree feedback on employee skills through in-depth questionnaires sent to appropriate stakeholders.

SurveySparrow displays a dashboard of team-wide average competency scores.
SurveySparrow sends surveys to evaluate an employee’s skills from multiple stakeholders then aggregates data competency scores at a macro level. Source: SurveySparrow

Interviews

One-on-one interviews with employees can open up a dialogue about which skills they feel confident in compared to the ones they need more training and support. Together with their manager, they can reveal the skills they need every day and the skills they hope to develop.

You can manually set up these meetings using your calendar platform of choice. Alternatively, one-on-one meeting software, like Officevibe, allows you to create agenda items for a more productive discussion and even keeps track of your conversations.

Officevibe displays an agenda for a weekly one-on-one meeting between an employee named Betty and her manager, Julie.
Officevibe uses agendas to add structure and clarity to one-on-one meetings. Source: Officevibe

After you gather your employees’ skills and ratings, enter them into your skills gap spreadsheet. Here, you will calculate the difference between desired and current skill levels to reveal your gaps.

Screenshot of Example Skills Gap
Example spreadsheet showing the skill gaps for two skills on a team: phone etiquette and VoIP knowledge. Source: TechnologyAdvice

5. Analyze the data and plan next steps

Order your data by priority to see if there are any gaps in your essential skills. You can also map the data into useful graphs, like spider charts, to make sense of your findings faster than by sorting or filtering the spreadsheet.

Depending on what the data uncovers, you can train or hire to fill in the gaps, acting first on the gaps associated with the most critical skills. Whatever you decide, you must also communicate with and involve all relevant stakeholders.

Based on the scope of your skills gap analysis, you can begin upskilling or reskilling your existing talent in a few ways:

  • Craft performance improvement plans (PIPs) or professional development plans (PDPs) to address employees’ weaknesses and help them grow in their career paths.
  • Plan training workshops and refresher courses.
  • Create eLearning modules and assign them to relevant departments or employees.
  • Offer mentoring or coaching programs.
  • Help the employee participate in certification courses and attend industry events with financial and logistical support.

If you are spending too much time on training initiatives that decrease productivity, you may need to revise your recruitment strategies and start hiring for these skills instead. Your skills gap analysis makes it easier to find and assess applicants in the skills areas you lack.

6. Repeat as needed

Now that you have performed your first skills gap analysis, you also have version one of your company’s or team’s skills inventory. Your skills inventory will act as a repository of your employees’ skills, experiences, and education. Having this available is a great way to make strategic decisions on company initiatives like succession planning or project skill mapping.

A consistent skills gap analysis cadence, such as every six or 12 months, ensures your skills inventory stays current when employees start, transfer, or leave the company. It can also help you capture additional information, such as education or new skills relevant to your industry so that your company adapts to the changing future of work.

Free skills gap analysis template

Download our free skills gap analysis spreadsheet to manually track your company’s skills.

Skills gap analysis FAQ

A skills gap analysis calculates the difference between the skills your company needs and the skills it currently has. 

According to the World Economic Forum’s 2023 Future of Jobs Report, employers estimate that 44% of workers’ skills will be disrupted in the next five years. As a result, a skills gap analysis can help your company maintain agility in a shifting skill market. For instance, it can help:

  • Informs strategic human resources management initiatives, including promotions and raises.
  • Helps with the employee’s professional development goals.
  • Prepares an organization for future workforce trends.
  • Identifies qualified candidates faster during recruitment.

Hard skills gap examples:

  • A software company looking to create a new iOS app needs developers who are fluent in the Swift programming language.
  • A recent college graduate must complete a QuickBooks certification course before applying for an open payroll administrator role.

Soft skills gap examples:

  • A retail company with global expansion plans must understand the culture and customs of each country where they will open a new store.
  • A seasoned social media strategist must improve their leadership and collaboration skills as part of their development plan.

Start upskilling your workforce to close skill gaps

Analyzing your company’s skills gaps is only the first step; once you have a clear direction, your next priority is determining how to fill it. Considering 2022 data from SHRM indicates the average cost-per-hire is around $4,000, you could save money by upskilling or reskilling your current talent instead of hiring someone new.

Sakhavat Ismayilov, founder of Planly, explains how performing a skills gap analysis helped his organization develop a training program tailored to the specific needs of their employees. After hosting the training through online and in-person courses, Ismayilov noticed significant improvements in employee performance, business productivity, customer retention, and conversion rates.

“Thanks to the skills gap analysis, the number of active users and monthly subscriptions for Planly [rose] by 38.7% within the next eight months,” says Ismayilov. To him, the skills gap analysis allowed his company to continue to innovate and deliver a quality product.

Even a small company can use an LMS to create consistency across the organization, prevent knowledge loss when employees leave, and train employees to fill necessary skill gaps quickly.

Ready to find an LMS that can help you analyze your business’s skills gaps? Watch our video overview of our favorite solutions to get started, then dig into the details in our Learning Management System Software Guide.


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