Using Excel, or even pen and paper, this skills gap analysis method will give you actionable results to improve your organization.
There’s a hot debate at the macro level whether there really is a skills gap—a gap between the skills employers need and the ones employees have to offer—or not. Some argue there never was one. Others argue that it not only exists, but it’s getting worse.
As an HR manager or corporate trainer, though, you don’t care about the macro level. You care about your own company. Maybe you need to fix a major skills gap immediately to compete or maybe you just want to learn how to prioritize your training and hiring budgets, either way it pays to do a skills gap analysis.
We’ll explain what a skills gap analysis is, then show you how to do one yourself. (Not to brag, but we’ve developed a free, downloadable Excel template that adds a crucial step related to skill importance that will net you more actionable results than other methods.)
Let’s get to it.
What is a skills gap analysis?
A skills gap analysis is a tool for determining the gaps between the skills your employees have today and the skills they need for your organization to accomplish its goals moving forward. Doing a regular skills gap analysis can help your organization in a number of ways:
- It helps you make the best use of your training budget. At a time when companies are spending more than $1,200 per employee, per year on training, doing a skills gap analysis can tell you how you should prioritize that training spend to get the best results.
- It improves worker retention and productivity efforts. According to a LinkedIn study, 94% of employees would stay at a company longer if it simply invested in helping them learn. A skills gap analysis can mark the beginning of that investment, while giving workers skills they need to perform better in their role.
- It prepares your company for major disruption. Staying ahead of the major skills your organization needs to have to survive—whether it’s developing AI or analyzing data—will ensure you’re not scrambling when it’s too late and your competitors have already adjusted.
- It informs your long-term recruiting strategy. Whatever skills you can’t develop internally, you’ll need to hire externally. A skills gap analysis can help you update those job descriptions and skills requirements so you’re bringing the right people into the organization.
A skills gap analysis can be scaled up or down as needed depending on available resources and needs. You can perform one on the whole organization, a single department, or an individual worker.
How to do a skills gap analysis in 5 steps
Our skills gap analysis method is similar to a lot of other methods out there, but with one critical difference that we believe offers more actionable results. I’ll explain what that critical difference is when it pops up in the process, so for now just follow along.
Though we’re doing this in Microsoft Excel to automate some of the math, it’s not required. You can do this entire process on pen and paper. For simplicity’s sake, we’re also acting as if you’re performing this analysis on a whole team or department, rather than an individual.
Step 1: Identify the skills needs of the group you’re analyzing
The first step with any skills gap analysis is to meet with the stakeholders of the group you’re analyzing—likely a department head or team lead—to figure out the skills that group needs to succeed.
The skills you decide on can come from a number of sources. You could review job descriptions or the mission statement of the organization. You could analyze industry trends or customer feedback. It doesn’t matter if they’re soft skills (e.g., emotional intelligence) or hard skills (e.g., AI programming).
The important thing to keep in mind is that now is not the time to assess what skills this group does or does not have. It’s just what’s needed to thrive long-term. Once you’ve landed on 5 to 10 skills you want to prioritize, you can move on to the next step.
Step 2: Download our free skills gap analysis template
The rest of the steps that follow will leverage this Excel template.
Step 3: Rate the importance of each skill you identified
OK, enough teasing. This is the critical difference with our method that I mentioned earlier.
While every skills gap analysis method out there factors in employee competency regarding different skills, none of them also factor the priority of each skill. What does it matter if an employee lacks a skill if it’s a relatively low priority for the department? Conversely, which gap is really a big deal because that skill is paramount to the success of the company? That’s where this step plays a key role.
When you open the Excel file, you will see this in the first tab:
Rating skill importance in a skills gap analysis
Take the skills you identified in step one and add them under “Skill Name.” Then, under “Skill Importance,” rate each skill on a scale of 1 to 5, with 5 being the most important skill for the team or department, and 1 being the least important.
Think carefully, and rank the skills on paper first if you have to. If you end up with a bunch of 4s and 5s, you didn’t do this step right. Ideally, you should end up with importance ratings across the entire scale.
Your final result should look something like this:
A finished example of rating skill importance in a skills gap analysis
Once you’re done, move on to the second tab in the spreadsheet: “Skill Ratings.”
Step 4: Rate the competency of each employee for each skill
This step is the bread and butter of your analysis, where you’ll assess the competency of each current employee for the skills you’ve identified.
Where it says “[Team/Department Name],” add the team or department you’re analyzing, then add the employees on that team or department below—one for each row. You’ll notice the skills you entered in the last step have already been populated in separate columns on this tab.
For each skill, assess each worker on a scale of 1 to 5: 1 meaning they’ve already mastered that skill, and 5 meaning they don’t have that skill at all. That may sound backward, but again, we’re trying to measure a gap. The higher the number, the more severe the gap.
You can come up with competency ratings using a number of different sources:
- Performance reviews
- Skills assessments and tests
- Surveys and interviews
Whatever methods you use, the final result should look something like this:
A finished example of rating employee skill competency in a skills gap analysis
Now it’s time to see where your gaps are. Head to the last tab in the spreadsheet: “Results.”
Step 5: Analyze your results
Your “Results” tab will look something like this:
An example of the results from a skills gap analysis
The numbers in each cell where an employee and a skill intersect are generated by multiplying the skill importance in the first tab by the skill competency rating in the second tab. The bigger the number, the bigger the skill gap. Or, for visual folks: red is bad, green is good.
The “Gap Total” row at the bottom sums up the skills gap for your entire team. In the example above, you can see leadership (315) and digital literacy (300) represent the biggest skills gaps. Note that emotional intelligence was rated as more important than digital literacy earlier (5 vs. 4), but the average competency rating for digital literacy on this team is much lower than that for emotional intelligence, which is why digital literacy represents a larger gap.
The “Gap Total” column, on the other hand, sums up the gaps for each employee. In the example above, you can see Vision (117), War Machine (114), and Loki (113) need the most work.
That’s it! You’ve done a skills gap analysis.
Next steps based on your skills gap analysis results
Of course, finding a skills gap isn’t the same as filling a skills gap. Once you’ve finished your analysis, it’s time to use those results to inform your learning and hiring strategies moving forward. Here are just a few ways you can go about it:
- Create or purchase new training content. If you have a learning management system (LMS), you can create or purchase courses dedicated to improving specific skills gaps. Many LMS vendors offer customers a course library with premade content for a large variety of skills.
- Start a mentorship program. The other great thing about a skills gap analysis is it tells you who’s already adept at certain skills. You can use this information to pair up workers in a mentorship program and help them teach each other important skills.
- Consider the contingent workforce. If there are certain hard skills that are going to be impossible to develop internally, consider hiring temporary or part-time workers with those skills to quickly shore up processes and complete projects that need immediate attention.
- Refine your recruiting strategy. Review everything—your talent sources, your job descriptions, your interview practices, your candidate assessment templates—to ensure you’re prioritizing the right skills in your job applicants and setting your business up for success long term.
When it comes to HR and talent management, things are changing right now faster than we can comprehend. According to Dell, 85% of jobs that today’s students will be doing in 2030 haven’t even been invented yet. By performing a regular skills gap analysis, and adjusting your learning and hiring strategies accordingly, you can set your organization up to roll with the punches of disruption.
Did you like this article? Head to our talent management blog to read more like it. Here are some examples that might spark your interest:
Looking for Human Resource software? Check out Capterra's list of the best Human Resource software solutions.