What is a skills gap?

A skill gap is a deficiency or lack of essential abilities and competencies within an individual or a group, which prevents them from achieving their desired performance level in their job roles. This gap can exist due to a disparity between the skills required for a particular job and the skills currently possessed by employees.

Within a workplace, a skills gap is the difference or mismatch between the skills an employer needs for a particular role and the skills a workforce possesses. Most organizations have a skillset that employees must possess to execute a role successfully. When an employee or candidate lacks some skills in this skill set, a skills gap arises that impacts their performance and productivity.

Skills gaps exist at the personal, organizational, and industry levels.

What is the difference between a skills gap and a knowledge gap?

A knowledge gap is a lack of specific understanding or expertise related to a role. It is when a worker lacks the technical know-how to perform tasks, connect their job to an organization’s wider goals, or keep up with developments in their field. Knowledge gaps exist due to insufficient training.

Skills gaps, on the other hand, are insufficiencies in how a worker applies their knowledge to given tasks. A trained employee with poor communication skills may be unable to work as part of a team, communicate their ideas, or collaborate with others.

Identifying knowledge and skills gaps within your organization involves:

• Establishing relevant competency levels
• Measuring proficiency levels
• Developing relevant skills and competencies
• Aligning relevant skills with company goals

Tip: Use a competency framework to define the competencies required for each role and department in your organization—these can be:

1. Core competencies such as communication and teamwork
2. Functional competencies that relate to specific job functions, such as copywriting for marketing and handling objections for sales
3. Technical competencies that relate to the specialized knowledge, tools, or processes to perform job-related tasks, such as content management systems (CMS) for marketing and customer relationship management (CRM) for sales

Complementary resource: Learn how to conduct competency mapping in your organization.

What are the factors contributing to the skills gap?

Skills gaps arise due to evolving industry trends, insufficient training, rapid technological advancements, tool and process innovation, and changes in job requirements.

Evolving industry trends

Industries are in a constant state of flux, with some growing rapidly and others declining. Because of this dynamism, the skills needed to operate within an industry change fast, creating a need for constant upskilling and reskilling.

Many workers find little time to or are unaware that they must adapt their skills to evolving industry trends, leading to outdated skillsets.

Insufficient training

Things are not better for recent graduates leaving learning institutions either. The educational system remains sadly behind on technological innovations and evolving industry trends, focusing more on theoretical knowledge than practical applications. A Salesforce survey shows that 76% of employees don’t feel equipped to operate in newly digitized workplaces.

Because of this gap, institutions are churning out workers who cannot thrive in today’s workspaces.

Rapid technological advancements

Technological advancements across different industries create the need for specialized skills. With more businesses adopting cloud computing, for instance, employers need DevOps, cybersecurity experts, and cloud infrastructure technicians. Many IT currently in the field cannot fill these roles.

Tools and process innovation

Elsewhere, the introduction of new tools, processes, and systems to the workspace also demands new skills. Employees working with artificial intelligence (AI) must understand AI auditing, AI integration, and machine learning to complete their tasks successfully.

Meanwhile, few companies offer on-the-job training to familiarize employees with new tools, creating serious skills gaps that impact productivity.

Changes in job requirements

All of these changes redefine what skills are needed for a given role. With AI, cloud computing, and other innovations in play, an IT expert in today’s landscape looks very different from the IT guy of 10 years ago. This means that existing workforces are becoming obsolete as job requirements change.

What skills do most employees lack?

According to Springboard’s State of the Workforce report, companies are facing significant skills gaps that are affecting their competitiveness. Essential skills currently in demand include technical skills, such as:

• Cybersecurity
• AI and machine learning
• Cloud computing
• Content and social media marketing
• Web development
• Data analytics

The traditional learning experience has also prioritized hard skills over soft skills, such as communication, project management, collaboration, problem-solving, critical thinking, emotional intelligence, and leadership, which employers say workers need to succeed in the workplace.

Other skills largely missing from the workforce include:

• Flexibility and adaptability
• Resilience
• Creativity and innovation

See also: How to create a skills matrix for your teams in 9 steps.

What is an example of a skills gap?

An example of a skills gap is when a company introduces a new technology, such as a customer relationship management (CRM) system, and the existing employees lack the technical skills to use it effectively.

For instance, if sales teams are unfamiliar with the CRM software, they may struggle with data entry, tracking leads, or generating reports, resulting in inefficiencies and reduced productivity. This gap occurs because the required skills (proficiency in the specific CRM) are not yet present in the workforce.

Skills gaps can also arise from industry shifts or emerging trends. For example, a marketing team may face a skills gap in data analytics as companies increasingly rely on data-driven strategies to understand customer behavior and optimize campaigns. Without employees trained in analytics tools or techniques, the organization may miss opportunities to gain competitive insights. Addressing such gaps often requires targeted training, hiring new talent, or investing in continuous learning programs to upskill the existing workforce.

Why is it important for companies to identify skills gaps?

Skills gaps limit an organization’s competitiveness, productivity, and bottom line. One study shows that companies may lose up to $1 million annually due to skills gaps alone. If companies cannot fill open positions due to skills gaps—a situation that could cost the economy $2.5 trillion between now and 2028—they could experience stalled projects and decreased profitability.

Do skills gaps affect business strategy?

According to a Deloitte survey of CEOs, skills gaps and labor shortages are the second-most prominent cause of business strategy disruption. Companies need skilled workers to execute their business strategies, meet key KPIs, deliver products and services to customers, and market their offerings. Without a skilled workforce, business strategies become little more than plans on paper.

How do skills gaps affect team performance?

Skills gaps lower a team’s quality of work. When employees are not specifically skilled to handle a task, they are more likely to make errors, waste time, and miss important KPIs.

Skills gaps also limit productivity and lower morale because under-skilled employees who struggle to deliver or collaborate on important projects often feel frustrated, replaceable, and useless to their organization.

How can companies identify skills gaps?

Companies can identify skills gaps in their workforce by conducting:

• Effective performance reviews
• Regular employee surveys
• Skills assessments
• Comprehensive skills gap analysis

The goal of these tasks is to identify the core employee skills crucial to your company goals, determine how many of these skills already exist within your company, and devise ways to add those missing from your workforce through recruitment and learning and development initiatives.

Conducting a skills gap analysis is the most effective way to evaluate the skill levels in your company.

Complementary guide: Learn how to assess employee skills and competencies with proven methods, best practices, and expert insights.

How can companies bridge skills gaps?

Once you identify gaps in your workforce, bridge them through:

• Employee development and training programs
• Continuous learning and career pathing initiatives
• Active recruiting
• Digital training
• Upskilling and reskilling your current workforce
• Mentoring and coaching

Because the business landscape is always changing—and the necessary skill sets with it—a company that hopes to remain competitive must change alongside it. This means providing your employees with the tools they need to understand and use new technology, meet changing customer needs, and be productive.

Create a conducive environment within your company for continuous learning, upskilling, and reskilling. This can mean anything from offering on-the-job training and collaborating with local institutions to provide subsidized courses to workers to rewarding employees who upskill.

You can also conduct industry benchmarking and arrange for mentors and coaches to help develop your most important talents.

Why do many companies fail to bridge skills gaps?

Initiatives to bridge skills gaps within an organization often fail because companies give up halfway. Training, talent development, and recruitment are expensive investments that take long to pay off. Many employees simply don’t see the need to invest in employee development.

However, to remain competitive, companies must use the latest, most efficient innovations in their field. This requires employees who not only understand but can also leverage emerging technologies to help their companies reach their goals.

With Deel Engage, you can streamline these processes, conduct gap analyses, and train your existing workforce fast and with minimal hiccups.

See how we helped reev replace 4 HR tools and:

• Streamline seven HR processes, including career pathing, skill feedback cycles, and growth conversions
• Communicate career growth opportunities and performance goals with their team
• Launch a training library
• Launch 360 feedback cycles for their initiatives

“Deel Engage is our all-around tool for career and personal development processes.” Christina Bacher, Team Lead, People and Organization, Reev

How can companies measure the success of skills gaps bridging initiatives?

After you fill skill gaps in your company, measure the success of your initiatives by tracking key performance metrics, such as:

• Employee loyalty and morale
• Productivity levels
• Error rates
• Workforce turnover
• Competency assessment scores
• Positive employee feedback

You can tell whether your reskilling and upskilling initiatives are working by measuring changes and improvements in worker output and work quality.

Skill development also boosts morale because it helps workers feel useful and secure in their positions. Collecting employee feedback is an effective way to determine the effectiveness of your training programs.

Bridge your company’s skills gaps with Deel Engage

Bridging skills gaps within your company is a key function of talent management. Eliminate the guesswork and long hours laboring over spreadsheets with Deel Engage.

Our suite of talent management tools includes:

• 360-degree feedback software to help you gather feedback from multiple perspectives—peers, direct reports, superiors
• Career frameworks and career pathing programs to help you map out role and growth requirements
• Learning management system for executing in-house training programs—powered by AI

Additionally, Deel HR, our truly global HRIS solution, is always included for free. Book a demo today to explore these resources and close gaps within your team.