Skills Gap Analysis Explained: Steps to Conduct It Effectively

Analyzing and acting on skill gaps has become one of the major talking points when it comes to talent acquisition, management and retention.

McKinsey, BCG, and Gartner have all produced compelling reports on the current acute focus on skills. But the statistic that has really turned many heads is from the World Economic Forum who reported that by 2030 more than 1 billion people will have to be reskilled. This is not just a critical insight on the skills gaps of today, even the current generation of elementary school students are expected to feel the impacts of this change, with 85% of them needing to prepare for jobs and roles that don’t even exist yet.

As more industries continue to become digitally mature, there is an ever increasing strain on the talent pool. A great example over the last few years is the Cyber Security industry. The Information Systems Security Association (ISSA) and analyst Enterprise Strategy Group ESG have both focused heavily on analyzing this skills gap. They recently reported that despite a heavier workload, unfilled positions and worker burnout are adding even more fuel to the skills gap fire.

It can be easy to look at these high level stats and say “it’ll be right”, “we’re doing just fine”. The reality of the situation though, is that individuals, teams, and organizations as a matter of survival need to become more agile and focused when it comes to managing skills. When 69% of employees think it’s easier to find new jobs, than new roles in their existing organization, it’s clearly time to do things differently.

What is a skills gap analysis?

A skills gap analysis is a tool that helps organizations identify opportunities for training and internal mobility among staff and teams. It looks at where an individual, team, or organization is currently versus where you want or need to be in the future.

From a high level, this means looking at the skills missing throughout the organization currently, versus skills that will drive future success. From an individual level, it’s about identifying gaps in skills or skills that are untapped and how these align with your organization’s strategic objectives and priorities.

The benefits of skills gaps analysis

There are lots of reasons why analyzing skills gaps is important. Not only does it help organizations understand how to build better workforces, but it also helps retain staff, reduce hiring and training costs, and increase overall profits. By identifying skills gaps and opportunities to upskill, you can create higher performing teams who are happier and more productive. This also means better internal mobility and more strategic recruitment in the future.

Skills gap analysis and how it affects internal mobility

As some jobs disappear, some change, business needs evolve, and good talent becomes more difficult to find, obtain, and retain, focusing on skill gaps and internal mobility is only becoming more crucial to the success of organizations around the world.

Continual learning and upskilling is essential not only for the individual, but for the workforce at large. This is where analyzing skills gaps is essential. While it can seem like a large undertaking, once you have a process set up (along with some tools to help automate some of the process), finding gaps in career skills and helping staff upskill or fill gaps in teams becomes easy.

The best way to understand and fill skills gaps is by becoming a skills based organization. While it can seem overwhelming, if set up right, it can become a streamlined process with huge rewards.

So, how can we understand, measure and act on skill gaps?

How to identify skill gaps

Conducting a data-driven skills gaps analysis requires a specific process to ensure it is streamlined, consistent, and easily repeatable.

  • Review strategic goals and objectives: Start from the top and think about what your organization is moving towards.
  • Understanding this can help identify the skills needed to get there.
  • Identify current skills of your workforce: Map the skills of your teams and individuals to see what the makeup of your workforce is currently.
  • Assess and identify future skills: Now is the time to find those gaps. Test and rate skill levels and analyze this to find where individuals and teams can develop skills or learn new skills and close gaps.
  • Create a way to close the gaps: Once you know the skills that are missing or need improving, the next step is to design a way to close them through training, development, internal mobility, or new talent.
  • Repeat!: Businesses change and evolve all the time. It’s important to look for skills gaps regularly to see where staff can grow, learn, and evolve with changing industries and business needs.

The following process is meant to support your team and organization in how to perform a skills gap analysis.

  1. Define an organization-authored assessment methodology:

    An organization-authored assessment is a common framework that helps ensure that all employees are assessed equally and consistently. This improves both fairness and accuracy, and facilitates the ability to effectively compare entities such as employees, teams, roles and locations.

    💡We suggest using a structured-subjective™ approach which brings together the best of objective, and subjective assessment methodologies to create a scalable, and truly effective model to perform assessments and capture high quality data.

  2. Create a fit-for-purpose skills inventory

    A skills inventory
    is a centralized and structured database of skills data, qualifications and employee attributes that helps to create a unified understanding of skills within an organization.

    💡It’s best to keep your skills inventory in a structured way so that the needs of your organization are met and that subjective overlap or ambiguity in defining skills is managed and determined by the organization itself.

  3. Add context and groupings to skills data

    Skills shouldn’t sit in isolation, but rather should be mapped to all the necessary entities within your organization. It’s all about being as relevant as possible, and putting in the effort early to get the desired, longer term results.

    💡By grouping skills by job function or organizational structure, the organization can achieve a suitable level of specificity without generating surplus amounts of data which can also overwhelm employees and result in a degraded level of accuracy.

  4. Provide a fixed, universal numeric rating scheme

    A fixed universal numeric rating scheme declares an organization-wide, standardized methodology for measuring ability that will apply to all employees, and all skills, creating a level playing field and ensuring all data is compatible. This allows data to be combined, compared, and “slice and diced” in any direction.

    💡Standardizing a rating scheme that can be applied universally ensures that the structure will always be able to adapt to the changing needs and skills of the organization into the future.

  5. Specify the criteria for each rating via a detailed description

    Defining a detailed criteria for each rating within the organizational rating scheme guides employees in their assessments by providing a set of rules and references.

    💡Some criteria that Skills Base have used include Level of knowledge (eg: Self trained, real-world experience, formal training), Ability to train others, Ability to explain subjects, Ability to sell, install, configure or maintain products, Years of experience.

  6. Conduct an employee self-assessment

    An employee-conducted self-assessment provides first-hand data of the employee’s perceived abilities. This method not only provides an accurate “first-cut” of information, it also significantly reduces the effort, time and administration required in establishing a skills management repository by distributing the data entry load amongst all employees. This results in rapid results that are both current and accurate.

    💡Communicate the value of self assessments to your employees. It’s not about micromanaging or a waste of their time. The results from their skills assessment provides a data baseline to give them more power in conversations with managers and the organization as a whole – on training, L&D, projects and much more

  7. Perform an additional, supervisor-conducted assessment

    A second supervisor-conducted skills assessment of the employee serves to review, verify and validate the employee responses. The supervisor responses should not generally be used to override the employee’s, but rather combine to achieve a weighted assessment. This serves to further increase the accuracy of the data.

    💡 Make sure supervisors and managers take the time to provide commentary on any differences in scores given. Additional relevance can add to more constructive feedback and experiences for each employee.

Now that we have a better understanding of the steps involved in performing a skills gap analysis let’s take a closer look at the process.

Identifying and mapping skills

The first step to understanding any skills gap is to build the underlying data structure or schema. This is usually comes in the form of a skills taxonomy, ontology, inventory or library. The goal is to have a clear picture of what skills are important to your workforce now, but also what will be required in the future to execute your strategy.

For example, you’re a tech company and you know that in order to remain relevant and competitive you need to develop a meaningful understanding of how artificial intelligence or deep learning could complement your product. By building these skills into your skills library, even if no one in the team is currently competent, you will be providing a transparent baseline and have a clear picture of the truth as it is today.

Armed with this insight, you can then move forward on decisions to upskill existing staff in highly targeted ways or bring in new skills through recruitment. It might also be that you only need certain skills as a stepping stone so you could contract them on a short term basis. This approach is not only efficient, it is outlining the critical path for you and your whole team.

Once your skills data is an accurate reflection of your organization, the next significant step is to create skills mapping between the different parts of your organization.

  • Skills need to be mapped to people
  • Skills need to be mapped to teams
  • Skills need to be mapped to roles

This is all about adding further context and structure to your underlying skills data, which in the long run will have tangible, measurable benefits to your ability to manage, visualize and act on the data (more on this later).

Setting a rating criteria for competency

Let’s say you’re looking for a restaurant on Google Maps. You search for something in your area, and there are five restaurants close by. Now, what if there are no ratings to provide an easy way to compare those five restaurants? The rating scale is there to create a clear, unified understanding for making comparative decisions.

Setting up a rating criteria for your skills is just as important. You can report 10 people having the skill “CSS Development” but without a way to understand ability, it can be useless – especially when trying to analyze your skills gap.

In Skills Base, you have full control over the ability to create a rating scale that makes sense to your organization. The table below is what this could look like.

Skill Rating Level
Skill Rating Name
Rating Description
Level 1
Low / No Skill
  • Limited or no experience
  • Limited or no knowledge, familiarity and/or training
  • Undemonstrated understanding
  • Extensive assistance or supervisor required
Level 2
Basic Capability
  • Less than 1 year of experience
  • Reasonable knowledge, familiarity and/or training
  • Demonstrated understanding
  • May require assistance
Level 3
  • Over 1 year of experience
  • Good knowledge, familiarity and/or training
  • Demonstrated proficiency
  • Able to apply autonomously
Level 4
  • 3+ years’ experience
  • Strong knowledge, familiarity and/or training
  • Demonstrated advancement
  • Able to assist others
Level 5
  • 5+ years’ experience
  • Expert level knowledge, familiarity and/or training
  • Demonstrated mastery
  • Able to train others

Setting skill targets for teams and roles

Now that you have a skills taxonomy correctly mapped to the different entities within your organization and a unified understanding of measurement, an often overlooked task is setting targets.

Setting targets is one of the most important steps to understanding and acting on skill gaps.

The reason for setting targets is to create a data structure for differentiating teams or roles by capability. Let’s take the role of Software Engineering as an example. No matter where an individual is at in their career, the skill “python” is relevant to your organization. What differentiates a junior software engineer to a senior software engineer is the target that you set.

Junior Software Engineer
Software Engineer
Senior Software Engineer

As you can imagine, this gives you the ability to easily understand the skill gaps of individuals, teams and roles. It also gives you the ability to see where strengths are. For example, a junior software engineer might also be Expert in Ruby on Rails.

When you begin to look at hundreds of people, across many roles and thousands of skills, this becomes a task that is completely unmanageable with spreadsheets or manual processes.

Measuring skill gaps

Congratulations! Your data structure should now be in a great place.

The next step is to get your people to perform a skills assessment based on the skills that were mapped to them.

There’s a lot to cover on how Skills Base approaches assessment through a proven Structured Subjective™ methodology. For detailed information on the different skills assessment approaches take a look at our Skills Base Methodology Whitepaper.

Skill gap analysis tools and visualization

Your machine is now complete (or is it?). You’ve put the effort in to create a process for managing and measuring skills, now insights can be found and acted on in real time. One of the most sought after visualizations for comparing skills gaps and strengths is the trusted skills matrix.

By setting up a skills inventory, and creating the necessary mapping we can now start to better understand the gaps of individuals, teams, roles and even different geographic locations at the click of a button. Below are three different skills matrices that span from an individual developer, to the entire development team, and all developers in our Sydney, Australia office.


Having these skill insights at your disposal now gives you the ability to act on, and close any gaps that might exist.

Closing current skill gaps

Each individual is different and will have their own strengths and weaknesses. It’s important that training and education can be made in a targeted way, not just for the benefit of each individual, but to also improve the ROI on training in general.

As an example, the developer we looked at earlier, Erica Bowden, is highly competent in her role but has one skill gap. There’s no use providing training that targets skills she is already expert in. Instead we can look specifically at the “solutions acquisition” gap, and send her to a workshop, provide mentoring, or get her to take some online training.

In Skills Base, you have the ability to map skill levels to individual training courses no matter where they sit.

Individuals that complete training can then demonstrate their ability by using the skill, and any skill level changes will be reflected in their next assessment.

Closing future skill gaps

People are dynamic. They learn new skills, their interests change, and they aspire to grow. Organizations need to better understand this and provide genuine career pathways that align to each individual.

Rather than just looking at current skill gaps, we can begin to look at the skill gaps that might exist for an aspirational role. Let’s say someone is a developer, but they want to be a senior developer. By having the skill targets set, and mapped properly, we can begin to build a long term learning pathway; creating a better employee experience and retaining more skilled people.

This can also work for adjacent roles and skill sets. Maybe someone is tired of being a software developer and instead wants to become more customer-facing as an account manager. By comparing current skill levels, and the target skill levels of any role, decisions can be made on how best to act.

In Skills Base, you have full control over understanding and acting on these future skill gaps, and linking this with the training that will help each and every individual thrive.

BONUS: Skills gap analysis timeline

Becoming a skills based team or organization can be a daunting task. When starting from scratch we suggest beginning smaller– focusing on a team, or a department within your organization. From there you can prove the ROI and outcomes, manage change and then expand broader across your organization.

Here is a high level timeline that you can think about working towards. It’s worth noting that each and every business and team will be at different stages.

  1. Week 1 to 2 – Creating a skills inventory

    The first two weeks of your timeline should be dedicated to getting your skills data right. Make sure that your skills inventory is relevant, has the right naming structures, descriptions and that your workforce will understand.

  2. Week 3 to 4 – Create data relationships and rhythms

    The next two weeks should be about ensuring that any data relationships are correct. Skills should be correctly linked to the right people, teams, roles, and office locations to ensure that you can properly perform skills gap analysis at a later date. In this time, you also want to begin communicating the value to your team. Letting them know what is coming, what to expect and the outcomes of the assessment process. Take them along for the journey!

  3. Week 4 to 6 – Invite and perform initial assessments

    After your setup and configuration is complete, now is the time to sit back and invite your selected teams to begin their assessments. The goal here is to continue communicating value to ensure a very high completion rate.

  4. Week 7 – Analyze results of first assessment

    When the assessment data is in, now you’re ready to start analyzing the results and understand your skills gaps. If you’re lucky enough to be using Skills Base, these insights can be automatically displayed at an individual, team, location, role or organization-wide level.

  5. Week 8 and beyond – Keep it going!

    After building the cadence for your first assessment process, it’s important that you keep it going to the rhythms of your business. The more assessment data points you get, the more detailed insights you can get on changes in an individual’s skill levels, gaps across teams, or across your business.

Over to you

Understanding, measuring and acting on the skills of your people and organization is all about becoming skills based. This article is just the tip of the iceberg and there are so many more benefits no matter what industry, geographic location, size of organization, or digital maturity. If you want to see how you can start acting on your skill gaps, book in a time to talk to the Skills Base team today.

Ready to kickoff your skills gap analysis project?

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A Skills Base Whitepaper

The Skills Base Methodology
A Framework for Skills-Based Organizations and Teams