Skills Gap Analysis: A complete guide

This playbook is meant to be a guide to conducting a Skills Gap Analysis. Before we get to the actual guide, we will give you an introduction that includes research on the subject.
We recommend that you read the entire playbook because it places the whole subject in context. But do scroll directly to the relevant section if you are short of time. The playbook’s sections are listed below.

1.  Skills Gap Analysis: Some context
2.  What is a Skills Gap Analysis?
3.  Why is a Skills Gap Analysis important?
4.  When should organisations conduct a Skills Gap Analysis?
5.  How to conduct a Skills Gap Analysis

Skills Gap Analysis: Some context

As far back as 2011, authors and researchers John Seely Brown and Peter Denning estimated that the half-life of a learned skill was five years. This means that after five years, a skill will have half the value it does today, and most of the skills you picked up 10 years ago are most likely obsolete.

Today, considering technology-related workplace disruptions of the past decade that have been accelerated by the Covid pandemic, we can safely assume that the half-life of skills has shrunk even further. It’s no wonder then that several recent reports have flagged the growing skills gap – the mismatch between the skills an organisation needs to fulfil its goals and the skills its employees or job applicants actually possess – as an increasing threat to business performance because it prevents organisations from operating as efficiently as they should.

Skills Gap Analysis: A complete guide

Organisation leaders indicated that they were aware that skills gaps were an issue well before the 2020 pandemic struck. 

In 2019, for instance, 83% of respondents of a SHRM survey reported that they had trouble recruiting suitable candidates in the preceding 12 months, with 75% of those reporting recruitment difficulties saying that they believed there was a skills shortage among their applicants.

But at least two reports released that year warned that despite being aware of the issue, few organisations were addressing it proactively.

The first report, by McKinsey, on future workforce needs, cited 87% of executives as saying they were experiencing skill gaps in the workforce or expected them within a few years. But less than half of the respondents were clear about how they planned to address the problem.

The second report, by IBM, on skills gaps, said: “Arguably, one of the greatest threats facing organizations today is the talent shortage. Executives recognize the skills gap. They know it’s both real and problematic. But most of their organizations don’t appear to be actively or effectively tackling the issue.”

The Coronavirus pandemic has ensured that skills gaps will remain high in the run up to 2025, according to the Future of Jobs 2020 report. It said increased automation and the economic impact of the pandemic was expected to displace an estimated 85 million jobs by 2025. Though 97 million new roles are likely to be created during this period, displaced workers will need to be reskilled and upskilled to fill them. To plug these skills gaps, on average, companies estimate that around 40% of workers will need reskilling of six months or less, it added.

When the pandemic first struck, organisations swiftly adapted to the changes it wrought on their businesses and workplaces – including plugging skills gaps – in the best way they could. But as it is becoming increasingly clear that the Coronavirus crisis isn’t going to disappear anytime soon, organisations will do well to switch from the emergency mode of coping with skills gaps to thinking strategically about managing skill gaps in the long term.

One of the ways organisations can stay ahead of the curve is to conduct a skills gap analysis to ensure that their workforce stays productive, improves performance and stays competitive in a rapidly changing world. This playbook is intended to be used as a guide for this exercise.

What is a Skills Gap Analysis?

A skills gap analysis is a tool that an organisation can use to improve performance by identifying skills gaps and taking action to bridge it so that it can stay competitive in the long run.

A skills gap analysis can be conducted at several levels:

  • Individual
  • Team or project
  • Department
  • Organisation
  • Industry

 In this playbook, we will largely discuss skills gap analysis from the perspective of teams and organizations.

What is a Skills Gap Analysis?
Why is a skills gap analysis important?

Why is a skills gap analysis important?

Skills gap analysis helps organisations to:

  1. Build high performing teams, which maximises productivity.
  2. Improve the person-job fit, which is defined as “the compatibility between individuals and the job or tasks that they perform at work”.
  3. Develop training and upskilling programs that are aligned to the organisation’s business objectives.
  4. Plan a long-term recruitment strategy, which is also aligned to the organisation’s long-term business objectives.

All of this is known to increase productivity and employee engagement, leading to improved business performance.

When should organisations conduct a skills gap analysis?

While a “skills gap analysis” may seem like a static exercise conducted once a year or so, some organisations may want real-time skills data at their fingertips so that they can ensure teams and departments always have the skills needed to be successful. Real-time skills data is especially important for larger teams and organisations because they have employees joining and leaving quite frequently.

Some tools – including MuchSkills – allow you to track skills in real-time. But if you are happy with a skills gap analysis being a one-off thing, you should conduct the exercise when:

  1. You see a drop in business performance. For instance, when financial targets are not met.
  2. You are introducing a new technology or process.
  3. You anticipate a market disruption such as AI, automation or trends in the gig economy that might disrupt your business.
  4. You want to keep track of the addition or loss of skills due to workforce movement.
  5. You are tweaking or pivoting your business strategy or model based on any of the points mentioned above because you want to stay ahead of the curve.

“Arguably, one of the greatest threats facing organizations today is the talent shortage. Executives recognize the skills gap. They know it’s both real and problematic. But most of their organizations don’t appear to be actively or effectively tackling the issue.”

Source: IBM

How to conduct a Skills Gap Analysis

Regular one-on-ones improve employee engagement

Step 1: Identify current skills availability:

Assess the skills and skill levels available to you right now by conducting a skills mapping exercise.

If your organisation already has comprehensive skills data at your fingertips, that is a good start. If you don’t, you can start by reviewing and analysing past employee/team assessments, conducting new assessments along with interviews and job knowledge tests, and holding one-on-one meetings between managers and team members.

Organisations can often benefit if they ensure skills mapping is an inclusive process. That is, besides the organisation mapping skills (top down), employees are asked to map their own skills (bottom up) where they list their strengths, record their expertise levels as well as list the skills they enjoy using at work because it gives them energy.

How is the employee’s perspective helpful?

It is helpful for many reasons. First, by encouraging and enabling employees to map their own skills, organisations get insights into what skills employees – the people on the ground – have and are using every day. This might help organisations discover skills they may not have considered important but are actually aiding the business’s success. They can then take steps to ensure those skills are always available. 

Two, if employees are given a chance to record their expertise levels, organisations can use the data to see whether they are lacking expertise in a critical skill. Perhaps you have people possessing a critical skill in the organisation BUT you find that all of them are beginners, not experts in it. This data can help guide an organisation’s upskilling efforts so that people can move up the expertise ladder, and generally become more efficient.

Finally, as research has shown, employees who deploy their strengths at work are more likely to be engaged and productive. When employees are given a chance to express what skills they love using, organisations can help them do their best work. It’s a win-win situation for everyone.

Skills mapping must be an iterative process

As a best practice, organisations should treat skills mapping as a continuous process because real-time skills and expertise data is a virtual treasure trove of information that can help them function most efficiently and optimally. In most cases, however, skills mapping is viewed as a one-time exercise – fill in the blanks, shut it and forget it. For instance, organisations use the skill or competency matrix to map skills. Once the data is in, these charts are updated intermittently. Worse, managers and team leaders almost never use this data to guide their decisions. In our opinion, the true value of a skills map comes from it being an iterative process; from it being updated as close to real time as possible. It is only then that organisations can derive the maximum value from the data by deploying the most suitable skills to complete the job at hand. 

What is a one-on-one

Step 2: Identify the skills you need in the future

  • Ask yourself what are the organisation’s goals for the next five years. For instance, are you planning to pivot your business strategy or model anytime in this period? List the skills you need to fulfill those new goals.
  • Study your market and the direction it is heading to see if there are any tech or other disruptions expected. Ask yourself:
    - Are there any new developments such as new tech that is expected to transform the way your industry is operating? At a very basic level, are there any jobs that will become automated? Any jobs that will become redundant?
    - Do your current employees have the skills needed for these anticipated organisational changes or market disruptions?

As mentioned in Step 1, skill levels are important too. So to ensure you have a comprehensive list, don’t just list the skills you need in the future, but also the desired skill levels.

Visualize Soft Skills matrix with MuchSkills

Soft Skills

While thinking of the skills of the future, consider what experts have been saying on focusing on soft skills over hard skills.

Several reports have recommended that organisations focus on developing soft skills like creativity, critical thinking and adaptability as soft skills are more likely to help employees steer organisations through periods of uncertainty.

“The value proposition of humans in the workforce is shifting to essentially “human capabilities,” such as curiosity and empathy,” says this article by Deloitte. “…Many employers continue to overemphasise digital fluency and skills such as coding as a reliable way to futureproof our workforce, when in reality, even coding is not immune to automation,” it says.

Similarly, the Future of Jobs 2020 report emphasises that soft skills such as critical thinking, complex problem-solving, resilience, flexibility, creativity, originality, initiative and emotional intelligence comprise a chunk of the top skills and skills groups that global employers see as rising in prominence in the run up to 2025.

The good news is that talent developers, executives and people managers are among the leaders who seem to be aware of the growing importance of soft skills. According to LinkedIn Learning’s 2018 workplace trend report, they agree that training for soft skills is the top priority for talent development teams.

Fix a skills gap hierarchy

Step 3: Fix a skills gap hierarchy

By now, you will have two lists of skills: a.) The skills your organisation currently has, and, b.) the skills you need in the future. The difference between the two lists is your skills gap. 

If you have also recorded expertise levels while mapping skills, you will have richer data to guide your future strategy.

It is likely that the list of skills that you need to acquire or develop is long. So, the next step is to prioritise them in order of importance based on how the lack of that skill is hurting the business. This allows you to focus your remedial efforts – be it upskilling through learning and development or recruitment – for the most essential ones. After all, fixing skills gaps takes time, money and effort.

Measuring and closing the skill gap

Step 4: Design a solution

It is important to remember that there is no one fix for skill gaps. Below we cite a passage from the introduction of a 2018 report prepared for the US Chamber of Commerce Foundation that sums up the idea rather well.

“The term ‘skills gap’ conjures up the image of one giant chasm, a sort of Grand Canyon between what employers need and what workers can provide. But that suggests that the skills gap is a single problem with a single cause and a single solution. In fact, the gaps around specific skills vary in their characteristics and, as a result, affect different corners of the job market in very different ways. Rather than one canyon, the gap is much more akin to a series of potholes, damaging some industries and avoided by others.”

–  Different Skills, Different Gaps: Measuring & Closing the Skills Gap

This is why experts suggest a multi-pronged approach to fill skill gaps. For instance, Gartner suggests that organisations adopt a mix and match strategy of “build, buy, borrow and rent” to fill skill gaps. Upskilling or reskilling existing employees, hiring part time or full-time talent with the required skills and outsourcing are among the 11 talent strategies it recommends that organisations adopt.

Upskilling and reskilling through training and development is one of the most popular solutions to bridging skills gaps. Global learning and development professionals surveyed for LinkedIn Learning’s 2021 Workplace Learning Report have said that it is their “top priority” and HR professionals in the US believe that the best way to address the skills gap is to hold onsite and offsite training through seminars and workshops. 

For details on how to upskill efficiently, read our Playbook – Upskilling: An 8-step guide to successfully upskill your employees.

Other options include job redesign where an organisation breaks up roles and rearranges tasks and responsibilities in line with changes taking place within the organisation and externally.

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