What is a skills gap analysis

A skills gap analysis is a process used by organizations to identify the difference between their workforce’s current skills and the skills required to perform specific jobs and achieve business goals.

In short, a skills gap measures the difference between the desired (should) state and the current (is) state. By identifying any gaps in skill sets, a business can take proactive steps to fill those gaps and improve employee performance.

What is the purpose of conducting a skills gap analysis?

The primary purpose of conducting a skills gap analysis is to identify discrepancies between employees’ existing skills and the skills needed to fulfill organizational objectives.

This analysis enables: 

• Strategic planning
• Targeted training programs
• A workforce equipped to meet current and future demands

Companies can improve productivity, efficiency, and competitiveness by addressing these gaps.

Who conducts a skills gap analysis?

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

Methods for conducting a skill gap analysis

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

Skills assessments

Formal skills assessments, often used as part of a recruitment process, 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.

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. These assessments check for natural or learned skills that demonstrate how employees respond to certain situations on the job. They evaluate skills like: 

• Critical thinking
• Reasoning
• Memory
• Decision-making
• Problem-solving

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

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

Free resource: Core competency matrix with 50 core competencies relevant to all industries

Focus groups and interviews 

How an employee interacts with their colleagues can reveal both individual skills and broader company training needs. If you don't have time for one-on-one employee interviews, focus groups can provide valuable insights into skills gaps that data alone might miss.

Involve employees, management, and stakeholders to understand individual and team skills gaps, expectations, and available resources. Talking with people from all business areas is essential during a skills gap analysis.

Role competency analysis 

Assessing the competency requirements of each role is a great way to measure skill gaps. Role or department-based competency models highlight the skills required for an employee to perform their role effectively. Use these as a benchmark against which to compare employees.

For example, consider a software development team. The competency model for a Senior Software Developer includes skills such as advanced programming knowledge, system architecture design, team leadership, and proficiency in agile methodologies. By assessing the current skills of developers against this model, you can identify gaps such as a lack of experience in agile practices or insufficient leadership skills.

Additional resources: 

• How to Create a Comprehensive Competency Model From Scratch (+ Free Templates) 
• How to Implement an Effective Competency-Based Performance Appraisal in Your Organization
• 9-Step Guide to an Effective Competency Mapping Process

360 feedback and performance reviews

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

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

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

What tools enable skills gap analyses?

Various tools can facilitate a skills gap analysis, including:

• Surveys and questionnaires to gather data on employees’ current skills
• Competency matrices to map required skills against existing skills
• Performance management systems that track employee performance and development
• Learning management systems (LMS) that offer training programs and track progress

Free resource: Free skills gap analysis template

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 and organizational success. 

• ‍Gain a detailed overview of your workforce: A skills gap analysis provides granular details about the strengths and weaknesses of your workforce, team, or individual skills—you understand the skills your people already possess compared to those they need to remain competitive now and in the future
• Enable strategic workforce planning: Understanding current employee skills allows you to anticipate future talent management needs and develop strategies to ensure a smoothly running business (e.g., when recruiting, you can filter your talent pool by skillsets to pinpoint the best-fit candidates for your organization’s strategic goals)
• Identify untapped skills: Auditing employee skills enables you 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 are relevant for a data analyst role
• ‍Enhance performance management: Performance improvement plans based on skills gaps support staff in developing proficiency levels and reaching specific targets
• Facilitate succession planning: Understanding each employee’s skillset allows you to identify potential successors for critical roles
• ‍Plan learning and development (L&D) needs: A skills gap analysis showcases your staff’s current and future learning and development needs and helps guide decision-making on resource allocation and budgeting for L&D‍
• Respond to digital transformation: 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
• ‍Gain a competitive advantage: 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 are limited, target priority areas and focus resources on the most critical competencies

How do you prioritize skills gaps in a large organization?

To prioritize skills gaps in a large organization, follow these steps:

• Align the identified gaps with strategic business objectives to determine their impact on organizational success—you can rate each skill by importance and relevance to business objectives (e.g., skills critical for launching a new product line or entering a new market)
• Focus on gaps that affect critical roles or functions essential to achieving key goals (e.g., a manufacturing company would prioritize skills related to quality control and supply chain management)
• Consider the potential risks associated with unaddressed gaps, such as compliance issues or operational inefficiencies (e.g., failing to address compliance-related skills gaps in a healthcare organization could lead to regulatory fines and legal issues)
• Evaluate the feasibility and cost-effectiveness of addressing each gap
• Engage stakeholders from different departments to gather input and ensure alignment with overall business priorities
• Develop a phased approach to address the most critical gaps first while planning for long-term skill development

Bridge skill gaps with Deel Engage

Deel Engage’s suite of tools will enable you to run an efficient skills gap analysis:

• Career frameworks: Define competency-based role expectations for all levels and departments in your organization
• Performance review software: Assess employee skills against role expectations and use 360 cycles to gather feedback from a wide selection of reviewers to assist with ongoing skills gap analyses
• Learning management system: Build and run engaging training programs for your team using science-backed methods like spaced repetition, microlearning, and social learning

All these modules offer:

• Automated data collection, making the process more efficient and accurate
• Analytics and reporting tools that provide deeper insights into skill gaps
• Real-time tracking of employee training progress
• AI assistant to help create personalized training programs