Identifying Skills Gaps

A Step-by-Step Playbook for Building a Future-Ready Workforce

Jun 24, 2025

Identifying and closing skills gaps is a cornerstone of any skills-first talent management strategy. This article provides a comprehensive, actionable guide for HR leaders and managers to uncover, analyze, and address skills gaps, enabling organizations to stay agile, competitive, and ready for the future.

Understanding Skills Gaps in Today’s Workplace

Definition and Causes:

A skills gap is the difference between your workforce's skills and those needed to achieve business objectives. Causes include rapid technological change, evolving industry standards, new business models, and shifting customer expectations. For example, the rise of AI and automation has created new demand for data science and digital literacy skills, while traditional roles are being redefined or phased out.

Current Statistics:

Skills gaps are a global challenge and are prevalent across industries. In the tech sector, the demand for cloud computing and data science skills far outpaces supply, while in food service, management, and leadership skills are in short supply. Surveys show that over 80% of organizations report significant gaps in digital, leadership, and critical thinking skills.

Business Impact:

Unaddressed skills gaps lead to reduced productivity, higher turnover, missed business opportunities, and stunted innovation. In the U.S. alone, skills gaps cost the economy an estimated $13 billion every month.

The return on investment in closing talent shortages is well worth it. Walmart, for example, used AI-driven analytics to identify and address skills gaps in real time, resulting in a 30% reduction in time-to-productivity for new hires. Chipotle’s investment in employee education led to a 3.5x higher retention rate among participants and a 7.5x higher promotion rate to management roles.

Relationship to Organizational Performance:

Skills gaps are directly linked to organizational outcomes through Key Performance Indicators (KPIs) such as project completion rates, customer satisfaction, and revenue growth. Companies with persistent gaps face operational inefficiencies, customer dissatisfaction, and increased costs. Conversely, companies that actively address gaps report improved agility, innovation, and competitiveness. Through its Project Oxygen, Google has seen up to a 35% improvement in team performance.

Setting the Foundation:

A systematic skills gap analysis provides the foundation for targeted training, better hiring decisions, and strategic workforce planning. It transforms anecdotal observations into actionable insights.

The Skills Gap Analysis Framework

Overview of the Process:

A skills gap analysis compares current workforce capabilities to business needs, identifying where gaps exist. The process involves cataloging existing skills, identifying required skills, measuring proficiency, and aligning findings with business goals.

Individual and Team/Organizational Analysis:

It is important to evaluate skills gaps at the individual level and for business units or project teams. At the individual level, analysis focuses on role-specific requirements to determine development needs and staffing adjustments. At the team or organizational level, it addresses broader capability needs for projects or business units.

Linking to Business Objectives:

Effective skills gap analyses are tied to strategic priorities such as digital transformation, market expansion, or customer experience to ensure relevance and impact.

Quantitative vs. Qualitative Approaches:

Quantitative: Use skills matrices, rating scales, and performance metrics.
Qualitative: Gather insights via interviews, manager feedback, and behavioral assessments.
Combining both offers a holistic view.

Timeline and Milestones:

Establish clear timelines for planning, data collection, analysis, and action planning. Assign responsibilities and set review checkpoints to maintain momentum.

Planning Your Skills Gap Analysis

Defining Scope and Objectives:

Determine which roles, teams, or departments to include and the specific goals you aim to achieve (e.g., upskilling for a new technology rollout, improving project delivery).

Identifying Stakeholders:

Engage HR, business leaders, managers, and employees. Their input ensures the analysis is relevant and actionable.

Selecting Assessment Methods:

Choose methods that fit your context:

Self-assessments
Manager evaluations
360-degree feedback
Skills tests
Performance data analysis
Digital tools (e.g., Fuel50, iMocha, Together Platform)

See “Decoding Skills Assessments: A Guide to Selecting the Right Tools for Skills-First Talent Management” to learn more about selecting skill assessment methods.

Communication Plan:

Clearly communicate the purpose, process, and benefits to all participants. Use meetings, emails, and FAQs to build trust and encourage honest participation.

Establishing Baseline Metrics:

Document current proficiency levels and business outcomes to measure progress over time. Use these as benchmarks for future improvement.

Identifying Critical Skills and Requirements

Analyzing Job Roles:

Review job descriptions with managers to ensure you measure the right skills for each role—update requirements to reflect emerging needs. Propagate these changes through your hiring process from job postings to candidate evaluations.

Industry and Competitor Benchmarking:

To identify gaps and opportunities, compare your organization’s skill requirements with industry standards and competitors.

Consulting Subject Matter Experts:

Engage internal and external experts to validate which skills are truly mission-critical. For example, NexTech Solutions collaborated with workforce development experts to identify and address software development skill gaps, improving project completion rates by 30%.

Technical and Power Skills:

Assess both technical (hard) and power (soft) skills. For instance, Google’s Project Oxygen revealed that emotional intelligence and coaching were as important as technical expertise for managers.

Prioritizing Skills:

Focus on skills with the most significant impact on business outcomes. Ask:

What skills are most valued by our company?
What skills are on the rise in the industry?
Which skills are tied to our core business processes or strategic initiatives?

Measuring Current Skills and Capabilities

Assessment Methods and Tools:

Use a mix of:

Self-assessments (surveys, digital platforms)
Manager ratings
Formal skills tests (e.g., Codility, iMocha, Vervoe for technical roles)
Practical assessments and work samples

As mentioned earlier, review “Decoding Skills Assessments: A Guide to Selecting the Right Tools for Skills-First Talent Management” to learn more about selecting skill assessment methods.

Performance Review Analysis:

Leverage historical performance data and 360-degree feedback to identify strengths and weaknesses. Walmart and Acme Corporation used performance data to pinpoint training needs, improving productivity and client satisfaction.

KPI Contribution Assessment:

Analyze how current skills contribute to key performance indicators, highlighting areas where gaps impact results.

Comprehensive Skills Inventory:

Compile all data into a central skills inventory or matrix, providing a holistic view of workforce capabilities and enabling ongoing analysis.

Analyzing Skills Gap Data

Quantifying and Categorizing Gaps:

Assign ratings to each skill and calculate the difference between current and required proficiency levels. Use a skills gap matrix to visualize and prioritize gaps by urgency and business impact.

Visualizing Results:

Present findings using dashboards, heat maps, or matrices. This makes gaps visible and actionable for stakeholders and leadership.

Prioritizing Gaps:

Focus first on gaps that pose the greatest risk or offer the most significant business opportunity. For example, Acme Corporation prioritized gaps in emerging technologies, leading to a 25% increase in project efficiency.

Identifying Patterns and Trends:

Look for recurring gaps across roles or departments to inform organization-wide interventions. AI-powered tools can help uncover hidden trends and predict future needs.

Presenting Findings:

Share clear, actionable summaries with leadership and stakeholders. Use visual aids and concise reports to drive decision-making and secure buy-in for action plans.

Developing Action Plans to Close Skills Gaps

Build vs. Buy Strategies:

Decide whether to develop talent internally through upskilling or reskilling development programs, or hire externally to fill critical gaps. Walmart, for instance, used customized learning paths to upskill existing employees, reducing time-to-productivity by 30%.

Training and Development:

Design targeted programs using a blend of:

Classroom training (ideal for foundational knowledge)
Online learning (flexible, scalable)
On-the-job training (hands-on, contextual)
Mentorship and coaching (personalized support)
Simulation training (for high-risk or technical roles)

Succession Planning and Career Pathing:

Integrate skills gap data into succession planning and career development to build a future-ready workforce. This ensures continuity and supports employee growth.

Mentoring and Knowledge Transfer:

Pair employees with mentors or cross-functional teams to accelerate learning and bridge gaps. Google’s Project Oxygen used targeted coaching to close managerial skill gaps, improving team performance by 35%.

Measuring Progress and Adjusting Strategies:

Track improvements using the same metrics and methods established during the analysis. Continuously monitor, measure, and refine your approach to ensure ongoing alignment with business goals.

Case Studies and Examples

Google’s Project Oxygen: Used performance data and feedback to identify and address managerial skill gaps, resulting in a 35% improvement in team performance.

Walmart: Leveraged AI analytics to identify training needs, creating customized learning paths and reducing new hire time-to-productivity by 30%.

NexTech Solutions: Collaborated with workforce development experts to close software development skill gaps, improving project completion rates by 30% and reducing errors by 25%.

Acme Corporation: Focused on emerging technology skills, leading to a 25% increase in project efficiency and better client feedback.

American Airlines: Faced with a cloud computing skills gap during a major digital transformation, American Airlines partnered with IBM to provide hands-on training for IT staff, resulting in successful migration and optimized operations.

NASA: Built an internal talent-mapping database to match employees with data science skills to relevant projects, maximizing internal capability and reducing reliance on external hires.

Chipotle: Addressed management skill gaps by offering a debt-free college degree program, significantly improving retention and promotion rates.

General Electric: Launched Predix University to rapidly upskill employees in data analytics and software engineering, fostering a culture of continuous learning and innovation.

Amazon: Invested in in-house leadership development to close leadership gaps, resulting in higher employee engagement and internal mobility.

Best Practices for HR Managers:

Start with clear objectives and leadership support.
Use a combination of quantitative and qualitative assessment methods.
Involve stakeholders at every stage for relevance and buy-in.
Leverage technology for data collection, visualization, and analysis.
Prioritize action plans based on business impact.
Continuously monitor, measure, and refine your approach.

By systematically identifying and addressing skills gaps, organizations can future-proof their workforce, drive innovation, and achieve sustainable business success, ensuring their organizations remain resilient, innovative, and ready for the future.

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