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Home / Blog / The Business Case for Conducting Skills Gap Analysis on Your Employees

The Business Case for Conducting Skills Gap Analysis on Your Employees

Learn what a skills gap analysis is, the potential benefits, and how to conduct one here.

Pohan Lin
Senior Web Marketing and Localizations Manager
Contributing Experts
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The need for a streamlined hiring process has never been more evident in the business world. However, a lack of technical skills and knowledge is often the biggest obstacle within HR and recruitment circles.

As technology, artificial intelligence (AI), and other business developments advance at a rapid pace, few job candidates are equipped with the technical knowledge companies need at present or to prepare for the future. A necessary first step is to determine exactly what skills are lacking, what to hire for, and what to train for within existing teams.

This article looks at how conducting a skills gap analysis can solve all these HR headaches and more.

In This Article

What Is Skills Gap Analysis?

A skills gap analysis is a formal investigation that HR teams can run within an organization to assess teams' existing skills and capabilities and how this compares to organizational needs. The outcome of a skills gap analysis shapes proactive recruitment, workforce planning, and talent development strategies to bridge the gaps in the talent pool.

A skills gap analysis process involves collecting and analyzing internal skills gap data.

The process itself can be done manually by collecting resumes and feedback from stakeholders, with the help of people analytics software, or with advanced processes that require machine learning operations and AI.

The Advantages of Running a Skills Gap Analysis

Pinpointing Specific Training Needs

A skills gap analysis examines your employees’ skill sets in relation to your business requirements. This insight forms a highly accurate foundation for training and development initiatives.

Improved Employee Retention

Employees stay where they see potential career development and value. By proxy, employees leave when they feel stuck doing the same job with the same skills year in and year out. In fact, survey data reveals that, of employees who consider quitting their jobs, 94% said it was due to a lack of training.

A skills gap analysis enables you to provide critical, current training that can immediately make workers more valuable within the organization. By upskilling employees, you also improve their career trajectory.

Equipping employees with the skills they need shows you're committed to the growth, development, and well-being of your staff. And what do happy, fulfilled, and productive employees equate to? Higher retention levels, of course.

Improved Employee Satisfaction and Engagement

Employees are more invested in their work when they know how to do good work and are supported by competent colleagues. By addressing skills gaps directly, you can increase the job satisfaction and engagement of your employees – both of which directly influence overall productivity, performance, and morale.

Industry Competitiveness

Equipped with the latest skills and knowledge, companies that invest in skills gap analyses are also much better placed to remain competitive and ready for change. Through this, you can also

keep up with tech advancements and drive innovation while promoting business growth.

Reduced Errors and Compliance Issues

Running regular skills gap analyses helps companies stay compliant, as special regulatory and compliance obligations are met more easily when employees have updated knowledge.

A skilled and adequately trained workforce also reduces the risk of costly errors and accidents that would otherwise occur much more often if tasks were handed over to untrained employees.

Improved Customer Satisfaction

Running a skills gap analysis helps companies improve their customer satisfaction levels.

By knowing exactly which skills you need to meet specific customer needs, you can allocate the right employee to the right task. This enables them to deliver exceptional customer service across all touchpoints.

How to Conduct a Skills Gap Analysis (In 8 Steps)

Here are eight crucial steps to consider when crafting an effective skill gap analysis.

Step 1: Outline Organizational Objectives and Goals

Define the specific functions and activities needed for business success. You can do this at a high level, as well as granularly per department and per role.

Define objectives and key results (OKRs) so that you have a clear picture of what success looks like. Use this definition to create the key performance indicators (KPIs) you will use to measure progress.

Step 2: Identify Required Skills

What are the key skills and traits needed for effective performance to attain the goals you’ve outlined in Step One?

Make a list with clear definitions of skills and the level required for your purposes. Plot these on a skills matrix or skills taxonomy chart. You can compare this against industry benchmarks and best practices.

Step 3: Evaluate Current Skills

Determine each team's existing skills. Your analysis may require observation, surveys, interviews, performance evaluations, and self-assessment tools.

Plot the soft and hard skills that exist within teams on your matrix to determine which skills are covered.

Step 4: Spot Skills Gaps and Prioritize

Do a thorough investigation of how current skills compare with the required skills on your matrix per role and per department.

The gaps between existing skills and what's needed to achieve core business goals will vary in urgency. Bear in mind that you can address urgent needs by moving employees with required skills between departments if you have an internal mobility program.

Decide which gaps will have the most significant impact if they are addressed. Prioritization should take into account the immediate impact on profits, compliance, and productivity. Also, look at the risk caused by a skills gap before deprioritizing it.

Step 5: Develop Targeted Training Programs

Determine which training programs and channels are the most effective to address internal skill gaps, such as online courses, workshops, and mentorship programs.

You’ll need to design individual learning journeys per department and for each employee to learn or improve a skill. You’ll also need to create capacity for them to take the necessary training by bringing in contingent workers or temporarily lightening workloads.

The best way to monitor individual learning journeys is via a learning management system (LMS). Investing in this software will also make it easier to do future skills gap monitoring as you’ll have a record of what training each employee in your organization has received.

Step 6: Determine the Impact on Workforce Planning and Hiring

Wherever it is necessary to get more hands on deck, you’ll need to hire the right people to fill skills gaps you can’t cover by training.

A significant aspect of this is hiring for specific skills that your departments need over diplomas and credentials. Skills-based hiring is growing in acceptance, and it makes complete sense for this specific reason.

Step 7: Integrate Continuous Improvement

To maintain an effective workforce, skills development must be an ongoing process. Key competencies must be regularly reassessed, and training plans must be updated in line with evolving business and industry trends.

Build skills analysis and training into your performance management cycles and individual KPIs. Make trend research a departmental responsibility by assigning one or more people per department the responsibility of identifying emerging technologies and processes that workers can train for. Review these trends per quarter and incorporate them into your learning plan.

Step 8: Measure the Impact

Measure how the skills assessment process is directly linked to your business priorities.

For example, you can run surveys and collect employee data to determine improvements in employee performance, productivity, retention, and innovation.

Some Last Thoughts on Running a Skills Gap Analysis

The case for conducting a skills gap analysis on your employees cannot be overstated. The process yields significant benefits, from retaining the best talent to overtaking competitors.

By taking the time to upskill and reskill your team according to your findings, you create a better, happier workforce that is future-fit and ready to take your organization to the next level.

Pohan Lin
Senior Web Marketing and Localizations Manager
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Pohan Lin is the Senior Web Marketing and Localizations Manager at Databricks, a global Data and AI provider connecting the features of data warehouses and data lakes to create lakehouse architecture. 

With over 18 years of experience in web marketing, online SaaS business, and e-commerce growth, Pohan is passionate about innovation and is dedicated to communicating the significant impact data has in marketing. 

Featured in: Spiceworks and Parcel Monitor.

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