Skills Gap

No workforce can be effective with underlying skills gaps. Here we cover how to identify and address different skill gaps.

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What is a skill gap and how to identify it

While skills gaps have always existed, workforces are currently undergoing dramatic changes that have exposed the shortage of expertise required for the new digital economy.

Therefore, in order to build an effective workforce for the future, organizations need to understand their existing skills gaps.


What is a skill gap?

A skills gap is the difference between an employee’s current abilities and the skillset best suited for their job.

Companies have a desired set of skills to perform a given role successfully. This list of skills is dynamic and changes depending on external market forces and internal organizational changes.

Finding employees to match the required skills for every position is challenging; therefore, skills gaps exist.

Many factors can contribute to skill gaps:

  • A lack of experience
  • Inadequate training
  • Poor recruitment
  • Employee turnover
  • Failures in the broader educational system
  • Change in roles or responsibilities

Skills gaps can lead to workplace inefficiency, with staff struggling to handle their responsibilities or perform assigned tasks. In addition, severe skill gaps may lead to employees being unable to perform their roles.

In addition to focusing on an individual’s skills gaps, the concept can also be applied at a company-wide level.

Management can use skill gap assessments when introducing new procedures, technologies or take them into consideration when looking at work culture.

The importance of analyzing skill gaps in your company

Skills gap analysis is a critical tool for organizations to assess the effectiveness of their workforce. Identifying any skills gaps present and understanding how they limit company performance is becoming essential thanks to new technologies transforming many business sectors.

With new technologies finding widespread use across the business world, the need for skills gap analysis is only growing.

At a time when digitization and automation are redefining what companies need from their employees, skills gap analysis offers the roadmap to a better, more efficient way of working.

Even before the pandemic, the World Economic Forum estimated that half of all employees worldwide need reskilling to learn how to operate in the new technology-powered workplace. Skills gap analysis is the key to successful reskilling and upskilling programs and understanding where workforces need to improve.

Identifying any skills gaps present and understanding how they limit company performance is becoming essential thanks to new technologies transforming many business sectors.

With AI, automation, and other advances, many roles are becoming obsolete, and organizations need to source new skills to match growing technological needs. However, research by McKinsey in 2021 shows 87% of organizations expect to experience skills gaps in the coming years, with 43% saying they already have one.

The graph displays the research results by McKinsey on the skills gap. The research question is, “When skill gaps are expected to occur within the organization.” And the results are: 43% - now, 22% - in next 2 years, 22% - in next 3-5 years, 5% - in next 6-10 years, 6% - none in next 10 years.

A 2022 survey of CEOs by Deloitte found labor and skills shortages were the 2nd most cited external factor disrupting their business strategy. Also, with the rise of the digital economy, a Salesforce survey found that 76% of global workers don’t feel equipped to operate in new digitally-focused workplaces.

To respond to this gap, organizations must assess their existing workforce and develop active training programs and recruitment strategies to meet the moment.

Benefits of successfully overcoming skills gaps lead to a range of benefits, including:

  • Developing a complete understanding of your workforce
  • Greater productivity
  • Improved agility
  • Clear workforce planning strategy
  • Competitive advantages over other organizations

The three types of skills gaps

Skills gaps can exist in various forms. However, generally speaking, they can be separated into three main types:

  • Knowledge Gap – a lack of knowledge related to the job. This could be the specific knowledge required to perform tasks successfully, the knowledge needed to understand how the work fits in the wider organization, or the institutional knowledge particular to a given organization. Removing knowledge gaps can improve employee performance and collaboration between staff members.
  • Skills Gap – while knowledge generally refers to learning information and an individual’s intellect, skills refer to the ability to apply the proper knowledge in a given situation. Whereas employees can pick up knowledge through studying, skills must be performed. The skills needed for a particular job could be mental (e.g., coding ability), physical (e.g., fitness required for a physical role), or soft skills such as communication and emotional intelligence.
  • Performance Gap – a lack of motivation or engagement leading to poor performance. Unlike the previous two types, performance gaps occur when an employee with all the tools to be successful underachieves. This could be for several reasons, including poor management or individuals being a bad cultural fit for the organization.

Skills gap vs. performance gap. What is the difference?

The concept of skills gaps can sometimes be confused with performance gaps. While similar, they describe different root causes for underperforming staff members.

Skills gaps Performance gaps
Refer to a lack of knowledge, expertise, or skills preventing an employee from maximizing the potential of a given role. Refer to a lack of motivation or poor management misdirecting an employee’s efforts.
Occur when employees need to gain the skills, knowledge, or capabilities to apply them correctly to a given situation. Occur when employees have the requisite skills but need more motivation or supervision to apply them effectively.
Examples could include understanding how an organization operates, how their work fits within wider processes, or the specific skills needed to fulfill the role, e.g., technical knowledge or soft skills. Examples could include disgruntled employees with personal grievances in the workplace, new hires being a poor cultural fit, or managers failing to assign or oversee tasks correctly.


The challenges of addressing skills gaps

While many workforces clearly have a problem, addressing skills gaps is challenging. Research from McKinsey found only 33% of capability-building programs always or often achieve the desired results.

The graph shows how many % of the respondents distributed among the answer to the research question: How often capability-building programs succeed at achieving desired objectives. The results are: 1% - never, 10% - rarely, 30% - often, 3% - always, 6% - don’t know

So why is it so hard to overcome workforce skill gaps?

  • The same McKinsey research found leadership plays a critical role in the success of skills gap programs,particularly in setting an example for employees. Surveys found that 65% of respondents believe executives should participate in L&D courses as trainers, facilitators, or learners. Leadership buy-in and modeling the same behavior asked of employees improves success rates when addressing skills gaps.
  • Whether through training or hiring, overcoming skills gaps costs money. Many organizations want the benefit of an up-to-date productive workforce but are unwilling to make the investments necessary.
  • Similarly, many organizations look to take shortcuts when it comes to addressing skills gaps. For example, McKinsey has developed a lengthy process around planning, developing, and implementing infrastructures to retrain employees post Covid. Their research found organizations that follow every step are 2.5x more successful than those that skip just a single stage.
  • When looking to remove a workforce skills gap, it is easy to define the objectives; it is much harder to define the journey. Employees like to learn in different ways, and it can be challenging to implement appropriate formats that cater to everyone’s preferences. Whether it is digital learning, group workshops, expert coaching, or one of many other formats, the best skill gap programs are tailored for each employee.

How to identify the skills gap

Identifying this gap is crucial for L&D professionals, as it helps in designing training and development programs that directly address the organization’s needs.

1. Clearly define organizational objectives

Before you can identify a skills gap, you need to understand where the organization is headed.

What are the long-term and short-term goals?

What skills are required to achieve these goals?

Tip: Regularly revisit and revise objectives to reflect changes in the business environment and organizational strategy.

2. Conduct job role analysis

Examine every job role in the organization. Understand its requirements, responsibilities, and the skills necessary for success.

Tip: Involve both upper management and frontline employees in the analysis to ensure a comprehensive understanding of each role.

Check out our latest Skill-based Talent Management article

3. Survey employees and managers

Use questionnaires, feedback forms, or interview sessions to gather insights from employees and their managers about their perceived skills and training needs.

Tip: Utilize anonymous surveys to encourage honest feedback and to ensure that employees feel safe sharing their views.

4. Perform skills assessments

Use online tools (like Valamis), quizzes, or practical tests to evaluate the current skills of employees. Compare the results against the desired skill levels.

Tip: Rotate the types and formats of assessments to cater to different learning styles and reduce the potential for rote learning.

5. Analyze performance metrics

Review performance reviews, project results, and other relevant data to identify areas where employees are falling short.

Tip: Use data visualization tools to spot patterns and trends over time, enabling a more holistic understanding of skill gaps.

Read our recent blogs to gain more insights on the topic: 10 Valuable Training Metrics to Know and How to Measure and Evaluate Training Effectiveness

6. Competency frameworks

Develop or utilize existing competency frameworks that detail the knowledge, skills, and abilities required for each role.

Tip: Benchmark your frameworks against industry standards and continuously update them as the industry evolves.

7. Feedback from external stakeholders

Sometimes clients, suppliers, or other external partners can provide insights into areas where your employees might be lacking.

Tip: Regularly schedule feedback sessions and establish open channels of communication with these stakeholders.

8. Industry benchmarks

Check industry standards and trends. Are there new tools, technologies, or methodologies that are becoming standard? If so, there might be a skills gap.

Tip: Subscribe to industry newsletters, join relevant professional organizations, and actively engage in forums to stay updated.

9. Skill inventory

Maintain an inventory of current employee skills. This database can help in identifying gaps quickly and can be updated annually or semi-annually.

Tip: Incorporate a digital tool or platform that allows real-time updates and easy access for managers across departments.

10. Focus groups

Organize group discussions among employees to understand their challenges, the skills they feel they lack, and areas where they believe training could benefit them.

Tip: Ensure that focus groups are diverse in terms of department, seniority, and demographic to get a broad perspective.

Ways to fill the gap

There are various ways to fill skills gaps and develop a future-proof workforce. This includes training in the form of:

  • Reskilling – training employees to transition to a new role
  • Upskilling – adding new skills, so an employee improves at their existing role
  • Digital training – focusing on the digital skills needed in the modern workforce

Or new hiring practices based on filling existing skills gaps and recruiting better-skilled staff.

Addressing workforce gaps requires extensive skill gap analysis, the process of determining the difference between what an organization needs from its staff and what it currently receives.

Skill gap analysis requires effective HR processes to accurately reflect the performance of employees and identify the skillsets and knowledge currently lacking or underdeveloped.

More practical tips for L&D professionals

Collaborate with HR: Human Resources usually has data on employee performance, turnover rates, and hiring needs. This information can be valuable in identifying skill gaps. Schedule regular sync-up meetings with HR to ensure alignment in objectives and shared data.

Adopt continuous learning: Instead of occasional training sessions, foster a culture of continuous learning. This ensures that skill development is ongoing and adapts to changing needs. Utilize microlearning and just-in-time training modules that employees can access on demand.

Leverage technology: Use Learning Management Systems (LMS) and other e-learning platforms to deliver timely and effective training. Regularly update and refresh the LMS content, ensuring that materials are current, relevant, and engaging.

Advice: Check out Valamis and its Skills Management features

Stay updated: Ensure you’re aware of industry trends and emerging technologies. Regularly attend seminars, workshops, and conferences. Set up Google alerts or other monitoring tools for industry news and updates.

Video: Exploration of the most significant learning and development trends for 2023 by Rob MacAllister, Customer Success Director at Valamis

Customize training programs: Not every employee learns the same way. Offer a mix of training mediums – online courses, workshops, webinars, hands-on training, etc. Use adaptive learning platforms that adjust content based on individual learner’s progress and needs.

Track and measure: Use analytics to measure the effectiveness of training programs. If a program isn’t bridging the skill gap, it might be time to revise it. Incorporate both qualitative and quantitative metrics, and compare them against industry benchmarks when possible.

Seek feedback: After training sessions, seek feedback from participants. This can provide insights into areas that might need further emphasis. Use a mix of feedback tools such as surveys, one-on-one interviews, and digital feedback platforms. Use our Training Evaluation Form.

Pilot programs: Before rolling out a large-scale training program, conduct pilot sessions to gauge its effectiveness and make necessary adjustments. Ensure a diverse group of participants in pilot sessions to gather a wide range of feedback.

External training: Sometimes, the best way to bridge a skills gap is by bringing in external trainers or sending employees for external training programs. Continuously evaluate the effectiveness and relevance of external training providers to ensure quality.

Iterate: The process of identifying and bridging skills gaps is ongoing. Regularly revisit your strategies and make necessary adjustments based on results and feedback. Dedicate a team or individual to monitor the entire process, identify areas of improvement, and ensure that changes are implemented in a timely manner.

By diligently identifying and addressing the skills gap, L&D professionals can ensure that their organizations remain competitive, adaptive, and poised for success in an ever-evolving business landscape.

Skills Gap Analysis Guide