How to conduct a skills gap analysis

In this article, we discuss how to conduct a skills gap analysis. It provides a comprehensive guide and actionable steps for identifying and addressing skill gaps within organizations effectively.

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Conducting a regular skills gap analysis in your business ensures that your team consistently performs at its peak performance. By measuring your current skills against your business plans will also ease you through your roadmap and help reach targets in record time.

This article will run through everything you need to know about skills gap analysis. It covers all the fundamentals and offers advice on the best ways to isolate and eradicate skill gaps in your business.

What is a skills gap analysis? Copied

A skills gap is the difference between a job’s demands and the assigned employees’ skills. Skills gaps are caused by several factors, including technological changes, the economy, and demographic shifts. For example, as baby boomers retire, fewer workers are available to fill their shoes. People who remain in the workforce lack the skills required to create a culture of career agility. Meanwhile, millennials who enter the workforce have very different wishes and skill sets compared to baby boomers. As a result, there is a growing disconnect between the skills employers need and the skills their employees possess.

The skills gap has impacted the economy for quite a while now. In 2016, Deloitte released a report that found the skills gap cost the U.S. economy $500 billion yearly in lost productivity; as the skills gap grows, this number will only increase.

A skills gap analysis can be conducted on either an organizational or individual level.

The two types of skills gap analysis

  • organizational skills gap analysis focuses on the macro level. It is the evaluation of the collective skills of a team and/or business to see whether they meet current and future needs.
  • individual skills gap analysis focuses on the micro. It is the assessment of a particular employee to check whether they have the necessary skills to excel in their role.

There are external consultants who can perform a skills gap analysis for your business. But you can also conduct them internally, an option that will save you both time and money. To do this you will need to know how to conduct an effective skills assessment.

Briefly, though, a skills assessment can be done in many ways, for example:

  • employee interviews give you a first-hand account of the rationale for decision making.
  • performance reviews provide clear indicators of ability and progression within a role.
  • surveys and questionnaires can offer honest insight, especially if conducted anonymously.
  • skill matrices are a powerful visual aid for analysis on both the macro and micro level.

Skills matrix


The business impact of a skills gap in the organization

A skills gap can prove costly. If your current skills aren’t meeting your needs then your business isn’t running optimally – you have a leakage of potential. This can lead to capital haemorrhage if not addressed quickly. A case study on the skill gaps in American manufacturing highlights this, revealing that if not addressed: 2.4 million positions may remain unfilled in the United States, which could have a potential negative economic impact of $2.5 trillion.

Audit failure is another big risk. If your staff members are not sufficiently qualified and/or certified for their tasks your business may not be compliant with general standards. Getting caught out by an auditor is costly and can negatively impact your business continuity.

Further benefits of a strong skills gap analysis

There are even more benefits! By conducting a thorough skills gap analysis you’ll also have:

  • Progression reports – allowing you to monitor skill development on both the organizational and individual level.
  • Market knowledge – providing a deep understanding of which skills are relevant for the industry of today. As well as insight into the skills needed for the future.

Steps to perform a skills gap analysis Copied

Regardless of whether the skills gap analysis you want to perform is at the organizational or individual level, you need to determine which skills you require, assess your current skills, and then close the gaps between the two. Here’s how you do it:

1.     Determine which skills are required

The first step is to evaluate the skills and competencies you need to execute your company’s business strategy. You can do this project-by-project, team-by-team, or by analysing the organization as a whole.  Depending on which skills are under the scope, the questions you need to ask will differ. By and large, though, the question will be: what qualification is required to run this particular equipment/task? Once you have a list of skills you desire, you are ready to move onto step two.

2.     Assess current skills

The second step is to assess your current workforce. The question you need to ask is: does my workforce possess all of the skills determined in the last step? To find out, you need to perform a skills assessment using one of the above-mentioned methods. All are effective ways to measure which skills a current team or individual holds, however, none are as foolproof as a skills matrix. A skills matrix is a live document that can be updated and edited as skill sets change and develop. This tightens your business, making it watertight with no skill leakages!

3.     Close the gaps

Onto the third step: alignment. Once you’ve isolated the areas where your skills aren’t adequate for your business goals, you can start closing the gaps.  You can do this by recruiting new talent, or, ideally, by developing your current team through dedicated training. Now that you know precisely which skills need working on you can tailor your training to make it pinpoint accurate according to your needs.

Why you need a skills management system Copied

There are many ways to conduct a skills gap analysis and for identifying weak spots in your organization. There is, of course,  the old tried and tested method of observation which has been used for centuries – millennia even! As business standards have evolved though, and standardized practices became common practice, it is no longer wise to allow room for human error when it comes to managing your skills.

In the modern-day, many businesses don’t allow human error to creep in by using spreadsheets to manage their skills data. Even these methods are starting to tarnish though and are proving to be less effective than they used to be. This is why you need a skills management system.

Excel just doesn’t seem to be enough Copied

You may be used to using Excel for all your skills management and perhaps still reminisce about its glory days. Making matrices on Excel used to be a doddle, that was until data became the mountain it is now. To manage your skills you need to process all the paperwork that comes with it: certificates, workplace instructions, job descriptions, and so forth.

Managing clunky data isn’t fun at the best of times. But when you’ve got managers breathing down your neck demanding for reports, and you’re breaking out in sweats thinking about that big audit day coming up, unergonomic matrix makers can be devastating! As you scramble through your computer trying to source all your data, the stress can pile up. The last thing you need! Undoubtedly, the unyielding spreadsheet will bring more disappointment, more frustration, and more distraction away from the tasks you really should be handling.

It needn’t be like this, though. And it isn’t, because we’ve got the solution to help you close your skills gap in an automated way! Using AG5 simply replaces any Excel spreadsheets you have floating around your organization with a single, centralized, cloud‑based repository containing all the information about your employees’ skills. Smart, hey!

A tool for skills management

A skills management software can help optimize and maximize your business potential in two ways:

  • by providing the tools you need to shape your task force according to skill sets.
  • by offering insight into where you need to concentrate your training: great for targets, excellent for keeping auditors at bay.

Centralizing your skills data is the best way to guarantee that the right people are assigned to the right tasks. AG5 Skills Management Software does this and more. Yes, it consolidates your data. But, more usefully,  it allows you to arrange this data by department, by site, by team, or however, you need into visual and easily managed skill matrices. This ensures the right person is running every aspect of your business every time.

All your learning data in one centralized skill hub 

You want everything in one place, right? Then centralize it with AG5. You can have all content from your different learning, training, and also HR management systems integrated and accessible in one system. AG5 Skills Management Software provides a clear overview of who needs training and in what. It offers crystal insight into where a potential skills gap could emerge. What’s more, it sends notifications when qualifications are up for renewal, safeguarding your business from any future audits. When that penciled-in date starts to loom closer,  you’ll be safe in the knowledge that everyone is sufficiently qualified to perform their work.

Book a live demo with a skills expert to see how AG5 Skills Management Software can help protect your company. You can also try out one of our five free skills matrix templates.

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Original version | July 15, 2021

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