How to Conduct a Skills Gap Analysis: Steps, Best Practices, and a Template

Talent shortages are wreaking havoc on businesses in the global marketplace. 

In industries as varied as manufacturing, marketing, transportation, and trade (and many more), employers struggle to find individuals with the perfect blend of technical and human skills to execute their jobs effectively.

A Manpower research shows that the global talent shortage has reached a 16-year high, as 75% of employers now struggle to find the people they need to drive their businesses forward. 

Yet, for context, only 30% of employers faced similar challenges in 2009. 

At the same, we know that a slew of jobs will disappear in the next few years as automation and artificial intelligence take over. 

Forbes reports that robots will perform jobs like data coordination, accounting, customer service, and executive assistance rather than humans. 

So, how can companies get organized and arm themselves with the skills they need to progress, seize new business opportunities, and remain competitive in the marketplace? And all without investing in skills that may become obsolete soon? 

It starts by conducting a skills gap analysis. 

Let's dig into what this entails, best practices, and why this process is integral to business success. 

🔍 Skills gap analysis definition

A skills gap analysis is a method of comparing the skills and knowledge that employees currently possess with the skills and knowledge required to perform a job or achieve organizational goals successfully. 

By identifying any gaps in skill sets, a business can take proactive steps to fill those gaps and improve employee performance.

Typically, a skills gap analysis is conducted by either:

• HR teams: HR professionals directly perform the analysis. 
• Line managers: in larger organizations, HR teams may lean on line managers to collect data for the analysis.
• External evaluators: outside evaluators can provide an unbiased assessment of the skills gaps.

👨‍💼 Why is a skills gap analysis important in HR?

One of HR's main goals is to ensure employees possess the skills needed for job success. 

Here are eight key reasons a skills gap analysis is instrumental for HR.

1. Gaining a detailed overview of your workforce 

A skills gap analysis provides granular detail about the strengths and weaknesses of your workforce and team or individual skills. 

You'll dig deep into the skills your people already possess compared to those they need to remain competitive now and in the future.

2. Enabling strategic workforce planning 

Understanding current employee competencies allows you to anticipate future talent management needs and develop strategies to ensure a smoothly running business.

Your insights will also improve your recruitment strategies—you'll create a hiring pool database and filter by skill set to pinpoint the best-fit candidates for your role.

3. Identifying internal skill needs 

Auditing employee skills enables you to determine each individual's training requirements and development goals accurately.

You may also have to identify skills used in defunct roles and repurpose them in new business areas.

For example, automation may replace a bank teller's role. But someone working as a teller likely has strong numeracy and problem-solving skills that might be repurposed in a data analyst role.

Upskilling and reskilling initiatives will improve employee competency and engagement, giving you a more motivated staff with improved job satisfaction and productivity.

4. Enabling succession planning 

Understanding each employee's skill set allows you to identify potential successors for key roles. 

Proper succession planning allows your organization to continue running smoothly when key staff members leave, avoiding significant disruption.

➡️ Does your business have a succession plan in place? Our essential guide will help you prepare for handovers in critical positions.

5. Planning L&D investments 

Your HR team will accurately assess your staff's current and future learning and development needs. And your skills gap analysis will also guide decision-making on resource allocation and budgeting for L&D. 

Remember though: it's possible to address skills gaps even if a dedicated budget is tight. 

Take it from Data Leader Clive Benford, who recommends three alternative approaches to addressing a data skills gap in a LinkedIn post.

6. Enhancing performance management 

Establish performance improvement plans based on reviewed skills to support staff in developing their proficiency levels and reaching specific targets. 

Example: perhaps an employee has entry-level green skills, but their growth plan requires a deeper proficiency to meet collective sustainability goals. Regular performance reviews will ensure that staff members remain on track.

➡️ Enhance your performance management systems further with our top tips. 

7. Responding to digital transformation 

Bridging the digital skills gap is an ongoing challenge as companies and individual workers struggle to keep pace with automation and machine learning technologies. 

Salesforce's Global Digital Skills Index, including data across 19 countries, found that workers scored 33 out of 100 points in areas such as:

• digital preparedness;
• access to L&D resources;
• skill level;
•  participation in training. 

A skills gap analysis encourages HR teams to keep an eye on digital transformation trends in the workforce and monitor where their company falls short. 

8. Gaining a competitive advantage 

Performing a skills gap analysis alone won't help your company stay ahead of the competition. You need to act on the data. Designing interventions to bridge the gap between your current position and your goals will give you a competitive edge over industry rivals. 

When time frames are tight and resources limited, you'll be able to target priority areas and focus resources on the most beneficial competencies.

📐 6 Methods for conducting a skill gap analysis

There's no set path to performing a comprehensive skills gap analysis. Instead, incorporate one or more of the below methods into your process. 

1. Skills assessments 

Often used as part of a recruitment process, formal skills assessments evaluate an individual's abilities, knowledge, and competencies in a particular area, such as mathematical skills. 

The assessments might involve: 

• written aptitude tests;
• multiple choice questions;
• hands-on demonstrations;
• job-specific work samples.

The goal of a skills assessment is to identify an individual's current level of proficiency in specific skills and to compare that level with the skills required for their role or with industry standards. 

Tip: One of Zavvy's customers uses our suite of tools to assess their leaders. With this data, they allocate specific career framework levels to base feedback and performance reviews.  

2. Behavioral assessments 

A cognitive-behavioral assessment may involve tasks such as completing a series of puzzles, solving mathematical problems, or answering questions about real-life scenarios. 

Essentially, you're checking for natural or learned skills that demonstrate how employees respond to certain situations on the job. 

For example, do your employees buckle under pressure or remain composed and make informed decisions? 

This type of assessment helps evaluate skills like: 

• critical thinking;
• reasoning; 
• memory;
• decision-making;
• problem-solving.

The assessment results allow us to interpret an individual's cognitive abilities and guide the development of targeted training programs to improve these skills.

3. Focus groups and interviews 

Human interaction can tell us a lot about an individual's skills and bigger-picture company-wide training needs. 

But suppose you don't have time for individual employee interviews. In that case, focus groups can provide skills gap insights that data-driven methods can't offer.

Talking with people from all business areas is essential during a skills gap analysis. 

Involve employees, management, and stakeholders to understand individual and team skills gaps, expectations, and available resources.

4. Role competency analysis 

Role clarity is key for any successful organization, so assessing the competency requirements of each role is a great way to measure skill gaps.

Begin by reviewing the specific tasks and responsibilities of a particular job role. Then create clear and meaningful role descriptions for each. From here, you'll understand exactly which skills are required for an employee to perform their role effectively.

5. 360 feedback

A 360-degree process gathers feedback from peers, managers, direct reports, and business partners to provide a well-rounded view of an employee's skills and performance. 

This multi-source feedback approach is integral in identifying any improvement areas and helps create a personalized development plan.

➡️ Check out our guide to setting up your own 360 feedback system. 

6. Performance reviews 

Reviewing an employee's job performance is an opportunity to explore individual strengths and weaknesses to identify skills gaps. 

People and Culture Director, Grace He, explains how skills analysis goes hand in hand with performance reviews at TeamBuilding.com. 

"Developing the skills base of our existing workforce helps our team to improve and more easily meet their daily work and career goals. I normally encourage our managers to conduct a "skills audit" (competencies review and training needs analysis) as part of the performance dialogue (1:1 meetings and/or annual performance review), so we can identify potential knowledge or skill gaps that might affect the long-term plans of the company or the growth of the individual.

By regularly assessing the knowledge and skills that already rest within our workforce, we can help develop the careers of existing employees and improve retention rates while also identifying the competencies and expertise required of new hires, pertaining to succession planning for the existing team and talent acquisition for the future team." 

Tip: Combine performance reviews with 360 feedback for the best results. Learn how to implement and reap the benefits of 360 performance reviews in 9 easy steps. 

➡️ Discover the differences between performance reviews and continuous feedback and how you can benefit from using both. 

🪜 Your 7-step guide to skills gap analysis success 

Follow these seven steps to execute the perfect skills gap analysis and ensure you're getting the most out of your data:

Preparation and planning 

Before you wade in, plan out the goals of your skills gap analysis, which relies on careful decision-making. 

Consider: 

• The scope of your skills gap audit: Will you assess a specific team or your entire organization? 
• Who will conduct the audit: Base your decision on time and resource allocation. 
• When you perform the analysis: Remember that your results may not be valid for long due to further industry developments. 
• How you'll respond to the outcomes: Ensure you have a plan to improve upon any identified skills gaps.
• Which methods you'll use for conducting your audit: Consider the time and budget available. 
• How you'll communicate the process to your employees: They may have concerns about the assessments and repercussions if they don't achieve high scores in job-specific tests. 

Define your organization's future goals and required skills 

In a Sofigate ThinkTank of HR leaders, one predicted scenario suggests that all workers will be freelancers by 2030. As a result, there will no longer be a need for specific roles. Instead, each person will bring their skill stack to an organization. 

Prepare for this prediction by investing now in the skills your organization requires rather than the roles in your line-up. 

Start internal conversations about skills, stay on top of future of work trends, and determine a list of critical skills your organization needs to achieve key business outcomes. 

➡️ Not sure where to start? Discover the must-have soft skills required for the future workplace.

Perform your skills audit

Once you've identified the skills your organization requires, it's time to assess how you measure up by inventorying your current workforce skills. 

➡️ Follow our complete step-by-step process to a comprehensive skills audit.

For example, you might end up with something like this from The People Experience Hub, which charts skills gaps in HR against their perceived importance. 

Analyze your skills gap data

An effective skills gap analysis consists of: 

• A: the benchmark of your current skills 
• B: the skills you require to be competitive in your industry and achieve your business goals. 

You can only bridge the gap between A and B by comparing these data points and understanding the differences between your current and desired or required skills. 

Define learning pathways for employees 

Use 1:1 meetings, check-ins, and performance reviews to communicate your results to employees and discuss how you plan to use your skills analysis to further their growth.

Tip #1: Suggest learning and development pathways for employees who need extra training. 

Tip #2: Establish mentoring or shadowing relationships to enhance existing skills. 

Tip #3: The key is establishing an open dialogue and welcoming employee input and ideas about their professional journeys. 

➡️ Use these robust training plan templates as a starting point for your L&D programs.

Start bridging the gaps

Develop clear strategies for closing any skills gaps you come across. The aim? 

Focus on the skills that make the most sense to your organization, then prioritize closing any gaps as quickly as possible. 

Some interventions to try:

• training and development programs; 
• recruiting and hiring strategies;
• performance management. 

Resource allocation is at the core of all these interventions, so ensure you have buy-in from stakeholders and the necessary time, budget, and personnel to dedicate to your skills analysis. 

Track and measure the results

Establish performance improvement plans based on reviewed skills to support staff in developing proficiency levels and reaching specific targets. 

Regular reviews will ensure that staff members remain on track.

All industries are rapidly evolving, so skills shortage analysis isn't something you'll undertake once. 

Instead, build regular critical skills check-ins and full audits into your annual calendar. 

Tip: Track the results of your interventions, measure their effectiveness, and make any necessary adjustments for future skills gap analysis.

📝 Skills gap analysis template

Follow a structured skills gap analysis approach by downloading our comprehensive template here. 

You'll save time, stay consistent, and find it a breeze to communicate the results of your research to employees and stakeholders.

🏆 8 Best practices for conducting a skill gap analysis

Follow the below recommendations for a shining example of how to conduct a skills gap analysis.

1. Expect to perform regular skills gap analyses

Prove continuous learning is part of your company culture by making skills gap analysis an ongoing activity. 

As well as delivering a competitive advantage to your organization, you'll also improve employee engagement by offering meaningful learning opportunities that align with the talents and potential of your existing people. 

2. Align your skills gap analysis with business goals 

Stay focused on why you're pinpointing and developing key skills. 

The answer: to align with your company's mission, values, and business goals. 

Perhaps you're expanding into a new business domain, are planning an upcoming project, or have noticed a specific skill on the rise in your industry. 

Whatever your motivation, keep your analysis in the same lane as your business goals.

3. Stay abreast of industry trends 

A few years ago, the word "zoom" meant getting somewhere really fast, while "hybrid" was a type of car. 

These vocab changes illustrate how the work landscape and the technology that supports it have altered immeasurably in a short time. 

Business leaders must stay ahead of the curve and monitor the changing needs of their industry by keeping an eye on emerging trends and the skills required for each. 

4. Dig into skills proficiency 

"Skills" is a broad term that encompasses a variety of technical skills (like digital skills and analytical skills) or soft skills (like empathy and communication skills.) 

But knowing which skills you require should only be the starting point of your analysis. 

Dig deeper by identifying the ideal level of proficiency for each skill and those that employees or candidates possess.

This step is another opportunity to use skill assessments to gauge specific expertise in an area rather than relying on employees to self-report their levels.

5. Prioritize your list of skills 

Few organizations have bottomless budgets, so you'll need to prioritize investment in certain skills over others. 

Tip: List the most critical skills that will enable you to reach your goals and determine the employees you need to upskill first that will deliver the most value to your business. 

6. Achieve buy-in from key stakeholders 

Always consult with company stakeholders before, during, and after your skills gap analysis. The list of stakeholders will look different for each company but may include: 

• team leaders; 
• domain experts;
• executive leadership; 
• recruitment leads. 

Tip: Ensure everyone is committed to the process and willing to allocate resources accordingly. 

7. Base skill-related decisions on data 

Data is your friend when it comes to skills gap analysis. 

Gather as much data as possible and crunch the numbers about current and potential employees, their skill levels, and the future staffing needs of your organization. 

Then, quantify the need for each skill from here.

Tip: If your gut tells you to explore the potential of another skills area, always back up any decisions with hard data.

8. Control your skills analysis rollout 

Tempted to dive in headfirst and analyze the heck out of everything? Instead, tackle your skills gap analysis in phases, starting small with an area that has the most impact and then expanding from there. 

Tip: This measured approach will enable you to learn as you go, providing valuable insights into managing the process, controlling costs, and communicating with employees. 

➡️ Bridge your skill gaps with Zavvy

Zavvy's suite of employee enablement tools will be integral to your skills gap analysis. We've handpicked these solutions to slide into your process: 

• 🌱 Growth plans: define career progression with our customizable templates. Put employees in the driving seat of their careers and tie skills and competencies to L&D opportunities. 
• 🧭 Career frameworks: give your employees reason to commit to upskilling by mapping out the roles in your organizations and clear career pathways between them. 
• 👨‍🎓 Learning Management System: build and run engaging training programs for your team using science-backed methods like spaced repetition, microlearning, and social learning. These are highly enjoyable and increase knowledge retention compared to traditional methods. 
• 🔁 360 feedback software: continue skills development conversations by incorporating them into performance reviews and regular check-ins. Use 360 cycles to gather feedback from a wide selection of peers to assist with ongoing skills gap analyses. 

Contact Zavvy today to book your free, no-obligation demo.