How to Conduct a Skills Gap Analysis (in 6 Steps)

Every company—small and large, across industries, and around the globe—is facing challenges due to the big skills shift. Driven by digitalization and automation, roughly 40% of the global workforce will need reskilling of up to six months by 2024, according to a report by the World Economic Forum. 

COVID-19 has only heightened the challenges businesses face. As a result of the pandemic, consumers are shopping and consuming information through digital channels more than ever. As automation advances, businesses can simplify processes in many roles through robotic process automation and hyperautomation.

All of this means companies now face an acute skills gap in their existing workforce while they struggle to find the right skills in their talent pipeline. The much-quoted “war for talent” is really on as workers in the U.S. and elsewhere quit their jobs in record numbers. 

At the same time, as new technology replaces certain roles, some employers are prioritizing reskilling to help staff take on different internal positions. Properly identifying skills gaps is a strategic imperative, and it should be a top priority for any CEO or CHRO. 

What Is a Skills Gap Analysis?

At its core, a successful skills gap analysis allows you to identify if and where skill gaps exist within your team or organization. It also helps you determine whether any skills gaps are small enough to be bridged through employee upskilling and reskilling. The analysis can tell you where in your company skills development will have the biggest impact. 

Properly identifying skills gaps is a strategic imperative, and it should be a top priority for any CEO or CHRO.

Running an effective skills gap analysis will help ensure you’re setting the right priorities and focusing on the business wins that can help solve the challenges of today’s workforce. At the same time, conducting a skills gap analysis will help ensure that viewing the business from a skills lens becomes an ongoing part of your business planning toolbox.

The Recipe: How to Do Successful Skills Gap Analysis

Conducting a skills gap analysis for your team or organization might sound like a straightforward process, but the devil lies in the details. Follow these six steps.

1. Start internal conversations about skills, not jobs. 

When starting off, it’s important to drive all conversations you have with other leaders, managers, and involved parties (such as L&D and HR employees) from a skills point-of-view and not fall back into the language of “job families” and “job grading.” Different employees who hold the same role might have very different skill sets. As a result, they may pursue different pathways to adapt those skill sets to industry and company needs. 

Approaching your skills gap analysis from a skills lens and focusing on key “future skills” (like coding, data analytics, advanced advisory, and customer centricity, to name a few) also helps prevent you from making this a conversation about job losses or job additions. This is about having the right combination of skills in your organization to adapt to changing needs. This includes the transition to remote and hybrid work and the changes they have brought.

2. Identify future skills needed in your company and industry.

Understanding the key trends in your industry and what your competitive landscape will look like in 5 or 10 years will help you set your target range of skills needed. Several types of skills identification software (which we’ll dive into further in Step 3) can provide you with standardized models of what skills will be required by industry and function. This can give you a helpful starting point to sketch the relevant target skills.

Finally, frontline managers as well as talent acquisition in your organization will likely have a lot of on-the-ground knowledge about the skills they’re struggling to find in job candidates. This can provide you with short-term validation of your key trends and provide other useful information for your skills gap analysis.

3. Measure employees’ existing skills.

Knowing your target set of skills will allow you to determine your “distance” to those skills. The most effective approach is to run an organizational diagnostic of your current skill set using some of the sophisticated applications available. There are so many options to choose from,  so I will avoid making a specific recommendation for one tool here. However, there are a few considerations when selecting your toolkit:

• Choose software that will allow you to match future skills needs to existing skills at an organizational level. This tool will ideally give you a visual depiction of the “distance” between existing and future skills in your organization by unit. This information will allow you to prioritize which business or regional unit to start with as your pilot (which I’ll discuss further in Step 5).
• Choose a (possibly different) tool to dig deeper at an individual level. This means assessing each employee in the pilot group for their current skill sets and pathways to upskilling, reskilling, and/or redeployment.

Especially when running the organizational diagnostic, it’s important that the tool you use can build on unstructured data from multiple other sources within your company (for example, your Human Resource Information System and your people engagement tool). This will keep the workload a lot lighter for Human Resources.

You can also gain valuable information for your skills gap analysis through information attained from:

• Performance reviews
• Conversations with key frontline managers
• Employees’ past work experience
• Employee degrees, certifications, and education
• And more

To measure the “distance” between your employees’ current and desired skills, you might consider organizing the information you collect in a variety of ways, including the following:

(You can also download this skills gap analysis template and checklist to help you start your analysis at an individual or organizational level).

4. Communicate your findings to employees and define learning pathways.

Having run the organizational and individual assessments only tells you the what (i.e., what your skills pathways could be) but doesn’t solve for the how. Understand that some employees may be reluctant to start spending time upskilling or retraining for new positions. But their underlying motivations are key in driving the change process. 

The most successful skilling initiatives focus on the individual nature of the process, providing employees with choice and a curated learning pathway to shift their skills.

5. Start small (with one department or division in your organization).

After you identify skills gaps across your company, pick one business or geographic unit where there’s an obvious challenge and a clear path to solving that challenge. This is critical to getting business buy-in for skills development at a broader level. As your pilot, it will allow for proof of concept.

Say you have an automotive insurance company. Claims adjustment is an area being disrupted by user-powered and machine learning-based apps. These allow for the automated processing of claims, rendering the existing skills of claims adjusters redundant. At the same time, insurance companies are grappling with a tremendous need for data science skills. This need could at least partly be met by many of the employees currently working in claims adjustment, especially given their experience with data and mathematical skills. 

Assessing the combination of cognitive capabilities (aptitude) and motivation for doing something new (attitude) will let you determine how much of the current workforce will need to be reskilled. Hiring on the external market can help close the remaining gap. 

In addition to allowing for more business buy-in, picking an obvious area of change as a pilot offers a safer environment for experimentation in the initial phases of running a skills gap analysis.

6. Make the skills gap analysis an ongoing activity.

Finally, as the markets move more rapidly than ever, the skills needs of businesses are also changing rapidly. Solving for the skills shift will only be sustainable if you embed the skills gap analysis and insights from that analysis into the daily business.

Effectively, that means ensuring you build these insights into your approach for talent acquisition, talent reviews, and succession planning, as well as, of course, reskilling, upskilling, and career pathing. Also, remember to run the skills gap analysis on an ongoing basis (and not, for example, on a 3-5 year cycle).

Skills Gap Analysis Template and Checklist

Use this free downloadable Emeritus Enterprise skills gap analysis template and checklist to get started on the process for your organization. We further break down each step and provide a simple way to assess skills gaps in your company as you launch internal conversations about the future of work.

Learn more about how you can partner with Emeritus Enterprise to identify skills gaps within your team or organization and close those gaps through reskilling and upskilling.