We hire people for skills, but skills decay over time, and the skills needed to remain competitive are constantly evolving.
Currently, there's a significant gap between in-demand skills and employees with those abilities, especially in industries such as manufacturing, IT, and healthcare.
Running a skills gap analysis is among the most efficient methods to identify and address these problems.
What is a Skills Gap Analysis?
A skills gap analysis is a method organizations use to track and measure the gap between the abilities and competencies they require and those their workforce currently possesses.
HR departments and leaders evaluate current employees' skill sets to gauge their work performance and determine whether they have the necessary capabilities and knowledge to reach strategic goals and keep up with emerging trends.
A skills gap analysis is an excellent way for employers to:
- Understand their workforce's potential.
- Identify gaps that could hinder business longevity in the long run.
- Discover tools and insights to implement proper recruitment strategies.
- Create learning and development programs.
- Offer upskilling opportunities.
It's recommended to conduct a skills gap analysis every three to six months, or when your strategy changes, because important skills are developing and transforming increasingly fast.
How to Conduct a Skills Gap Analysis
1. Decide Your Plan and Scope
The foundations of an effective skills gap analysis depend on thorough planning, making this a crucial stage.
You must first decide who will oversee this process, when you will conduct it, who you'll include in the evaluation, and how it will unfold. Start by identifying who the analysis should encompass and who will roll it out.
The two most common levels a skills gap analysis assesses are:
- Individual level—you can pinpoint the skills and abilities each job role requires and how they compare to a worker's current skills inventory.
- Company or team level—you can also determine whether your team or a company as a whole has the necessary capabilities and knowledge to complete a project, or if you must turn to external recruitment.
Senior team leaders are more suitable for individual assessments, while HR or external consultants are better for team evaluations.
Choosing an outside professional helps maintain objectivity and ensures hiring managers, team leaders, and HRs can work on their tasks.
What form of a skills gap will you perform?
The next step is to decide on the form of the skills gap analysis. Options include:
- Performance reviews
- Employee interviews
- Skills management platforms
- Pre-employment tests.
- 360-degree feedback
- Behavioral assessments
- Job knowledge evaluations.
Running skills tests after employee interviews can help you determine in what career growth opportunities to invest.
2. Identify Critical Skills
Here you should consider two crucial questions:
- What skills does your company currently perceive as valuable?
- What abilities do workers need to continue to perform their jobs well?
Many employers foster the macro and micro-skills approach.
The former represents the unique way a person operates and includes abilities such as critical thinking, problem-solving and leadership.
The latter are rather technical skills and have a pre-defined learning formula (e.g., code testing).
Hard skills evolve with new technology and industry trends and, therefore, require continuous monitoring.
Soft skills are always revered and necessary, regardless of the sector or company.
Your skills gap analysis can focus separately on these two types of skills. Aim to identify what macro skills your company should start fostering over the following five years and what micro skills would benefit your business now.
Encourage your employees to share their affinities and what skills they would like to improve or obtain. Involving your workers in the process also shows them you care about their career progress and development.
3. Assess Current Workforce Skills to Identify the Gaps
This step will help you understand whether you should hire new workers or whether training is enough to help your staff obtain the missing capabilities.
Skills assessments are typically the easiest and most effective method to do this.
Create assessments tailored to your company and industry needs, such as job simulations.
You can also use psychometric tests to analyze soft skill levels, such as emotional intelligence. Combine these insights with employee feedback and performance reviews to clearly understand your workforce's limits, potential, and opportunities.
4. Act on the Data to Close the Gaps
The results of your skills gaps analysis will guide your next steps.
This is where you can leverage your learning and development team to help you decide the most efficient and cost-effective method(s) of upskilling your current workforce.
Train for Skills Gaps
You've identified the skills your people are lacking and which ones are most important for the business, now it's time to train them so you start seeing improvement.
Here are some tips help drive the success of your training efforts.
Develop Targeted Training Programs
- Customized Training Plans: Create training programs tailored to the specific needs identified in the skills assessment. These can range from technical skills to soft skills like leadership and communication.
- Leverage Various Training Methods: Incorporate a mix of training methods such as workshops, e-learning modules, webinars and mentorship programs to cater to different learning styles.
Foster a Culture of Continuous Learning
- Encourage Self-Directed Learning: Empower employees to take charge of their own development by providing access to learning resources and time for self-study.
- Promote Knowledge Sharing: Create opportunities for employees to share their skills and knowledge, enhancing peer-to-peer learning.
Collaborate with Managers and Leaders
- Engage Leadership: Involve managers and leaders in the training process, as they are key in identifying skills gaps and supporting employee development.
- Set Clear Expectations: Ensure that managers understand their role in mentoring and supporting their team members through the training process.
Measure and Adapt Training Efforts
- Track Progress and Impact: Regularly review the effectiveness of training programs, assessing how they are closing skills gaps and contributing to business goals.
- Stay Agile and Flexible: Be prepared to adapt training programs as company needs evolve and new skills gaps emerge.
Invest in Professional Development
- External Training and Education: Consider supporting further education or professional development courses that can bring in new certifications, skills and perspectives.
Hiring for Skills Gaps
For the gaps you can't train, you'll need to take an approach to hiring that supports you strategic workforce planning efforts.
Here are some tips to help you get the most from your recruitment efforts:
Refine Job Descriptions and Requirements
- Specific Skill Sets: Craft job descriptions that clearly outline the specific skills and competencies needed to fill the identified gaps.
- Balance Between Must-Have and Nice-to-Have Skills: Prioritize essential skills while remaining open to candidates who can grow into the role.
Utilize Targeted Recruitment Strategies
- Focused Sourcing: Target specific industries, roles or educational programs where potential candidates with the desired skills are likely to be found.
- Leverage Social Media and Professional Networks: Use platforms like LinkedIn to reach out to candidates who possess niche skills.
Implement Skills-Based Assessments in the Hiring Process
- Assessment Tools: Incorporate practical assessments, case studies or simulations to evaluate candidates' skills effectively.
- Behavioral Interviews: Use behavioral interview techniques to understand how candidates have applied their skills in past situations.
Partner with Educational Institutions and Professional Associations
- Build Relationships: Forge connections with universities, trade schools and professional associations to access a pool of fresh talent.
- Internship and Apprenticeship Programs: Establish programs such as apprenticeships allows students or recent graduates to bring new skills and perspectives to your organization.
Embrace Diversity in Hiring
- Broaden Talent Pools: Diversify your recruitment efforts to include varied demographic and professional backgrounds, bringing a range of skills and experiences.
- Global Talent Acquisition: Consider looking beyond local talent pools to international candidates who can fill specialized roles.
Why Conduct a Skills Gap Analysis?
Skills requirements change fast in nearly every industry globally. This is the principal reason companies must keep track of their workforce's skills inventory.
The World Economic Forum (WEF) found that 1.1 billion jobs are liable to be radically transformed by technology in the next decade, which means many employers will have to address drastic skills gaps in the coming years.
Upskilling and reskilling should be regular practices. An increasing number of people will have to adapt their competencies or adopt new ones during this decade.
The most common reasons to conduct a skills gap analysis are:
- Experiencing a significant decline in business performance and failing to meet financial goals.
- Introducing a new software, tech platform or process.
- Forecasting a market disruption (e.g., automation) that could hinder business performance.
- Wanting to track the loss or addition of abilities and competencies due to workforce movement.
- Pivoting or updating the business model or strategy and requiring data on the workforce's skills inventory.
Benefits of Skills Gap Analysis
Here are the key advantages companies get from conducting a skills gap analysis.
- It allows you to tap into your workforce's skill sets—a skills gap analysis will help you understand how many employees possess the in-demand abilities and knowledge necessary to meet strategic goals and objectives. It will also guide you on what capabilities are missing in your company and what resources and steps could help you close the gap.
- It enhances employees’ learning and development journey—other than giving insights into your workforce’s missing skills, a skills gap analysis lets employees know what capacities they must acquire to stay efficient and be more productive. That will also prepare them for potential future roles and projects.
- It reinforces strategic workforce planning—among other things, strategic workforce planning ensures you hire the correct number of people with adequate skills and competencies. But that is hardly possible without data on what abilities and knowledge these people should have.
- It can boost your hiring efforts—knowing what skills and abilities your future employees should have comes from the data a skills analysis provides. That helps you be more intentional in your recruitment efforts and target a more compatible audience.
- It helps reduce costs—recruitment inherently means spending time and resources, which isn’t always necessary. A skills gap analysis gives you data you can use to augment the skills of your existing workforce and promote internal mobility instead of hiring externally.
- It helps foster high-performing teams—ensuring employees acquire the skills necessary to be competitive and efficient improves team performance and productivity. That also boosts employee morale and satisfaction.
- It helps develop future-proof L&D programs—a skills gap analysis is vital for understanding what skills your employees lack that will be critical in the future of work. Thanks to that knowledge, you can build L&D programs around relevant learning content, ensuring they don’t become obsolete.
- It helps you gain a competitive advantage—the outcomes of accessing data from skills gap analysis are crucial for meeting your business objectives and being ahead of the competition. Knowing your workforce’s strengths, potential, and weaknesses is a remarkable competitive advantage that ensures a good employer value proposition.
Best Practices in Skills Gaps Analysis
Skills gaps lead to revenue losses and productivity decline.
But, despite not being easy to forecast the exact abilities an industry will need in the future, it's possible to determine what kind of competencies your company values and compare them to current trends and demands.
A skills gap analysis embodies these efforts and can guide workforce planning, L&D program design and recruitment processes.
Before conducting it, you must determine whether you want to identify skills gaps on a company or team level and the technique you'll use to gauge your staff's skills inventory.
Some of the best practices for a skills gap analysis are:
- Skills assessments - pinpoint specific areas where training or development is needed.
- Employee interviews - offers insights into their perceptions of their own skills and career aspirations, aiding in identifying both skills gaps and potential areas for growth.
- Job-related tasks - helps to identify if there are skills missing that are essential for optimal job performance.
- Surveys - gather broad-based feedback on various aspects of work, including perceived skills deficiencies and areas needing improvement.
- 360-degree reviews - includes input from supervisors, peers, and subordinates, providing a well-rounded perspective on an employee’s skills while highlighting gaps and areas for development.
Getting the Results from a Skills Gap Analysis
The outcomes of a successful skills gaps analysis are increased productivity, better L&D programs, empowered employees, competitiveness and reduced costs.
These are vital for fostering a future-proof workforce that uses the maximum of its potential and helps you stay ahead of trends and competition.
3 Key Takeaways
- Skills Gap Analysis is Essential for Business Competitiveness: It's a critical tool for aligning workforce capabilities with evolving industry demands, helping organizations understand their workforce's potential, identify skill deficiencies and develop strategies to address these gaps.
- Regular Analysis Aligns with Rapid Skill Evolution: Conducting a skills gap analysis regularly (every three to six months or when strategies change) is recommended due to the fast-paced development and transformation of skills in the modern workforce.
- Combination of Techniques for Comprehensive Analysis: A multifaceted approach using performance reviews, surveys, interviews and 360-degree feedback is key to effectively identify skills gaps at both individual and team levels, informing targeted training, development programs, and strategic hiring.
For more expert articles on talent management and organizational development, subscribe to the People Managing People newsletter.