Workforce Planning

How to Conduct Workforce Gap Analysis

Understanding the skills your workforce has (and lacks) is critical to business success

January 17, 2024
5-minute read

In today’s business climate if your organization isn’t evolving, it is probably dying. That’s the cold, hard truth – so making sure your workforce is equipped to handle this evolution is imperative. One effective way to make sure they are is by conducting a workforce gap analysis or skills gap analysis.

A workforce gap analysis reveals the skills your people have and of equal importance, what skills they lack, so you can make smart, informed decisions about how to adjust your team in order to hit future company goals.

Done correctly, this analysis helps scale teams to support your organization’s future growth. Organizations that forgo these crucial skills assessments risk being ill-prepared for future challenges and also risk running into problems such as talent shortages, skill misalignment with strategic objectives, increased turnover, reduced productivity and ultimately hindered organizational growth.

Let’s delve into the steps involved in conducting an effective workforce gap analysis and go over the key elements a successful and effective gap analysis needs to include.

Define Strategic Workforce Objectives

Before you can identify workforce gaps, you must have a clear understanding of your organization’s strategic objectives and future goals. These objectives serve as the foundation for the entire exercise. Consider questions such as:

  • What are our short, mid and long-term business goals?
  • Which markets or regions are we targeting for expansion?
  • What new products or services are we planning to launch?
  • Are there any technological advancements or disruptive factors that could impact our goals?

By starting your workforce gap analysis with your strategic goals, you can pinpoint the specific skills and capabilities that will be crucial for your organization’s success.

Identify Core Skills

Once you’ve defined your strategic objectives, identify the core skills required to achieve those goals. These skills can be both technical and soft. Most companies engage with department heads, team leaders and key stakeholders to compile a comprehensive list of needed skills. But companies can also benefit from leveraging data on the skills that are trending in the external labor market to hypothesize future skill requirements.  

As you map out future skill needs, make a clear link back to your business’ strategic objectives. Ask questions like ‘How do we need to work differently together in the future to achieve our strategic objectives?’ ‘What do we need more or less of to deliver on customer commitments in the short, medium and longer term?’ The outcome should be a list of skills your business strategy requires. For example:

  • Technical Skills: Programming languages, data analysis, project management, industry-specific certifications, etc.
  • Soft Skills: Communication, leadership, adaptability, problem-solving, etc.

Assess Current Workforce

Evaluate your existing workforce to determine how well it aligns with the identified skills. This assessment ideally involves a thorough analysis of your employees’ skills, experience, and qualifications, but companies are at varied stages of readiness for this work. Depending on your current ways of working, you may have skills data readily available in your core systems, but if you don’t, consider leveraging software and analytics tools to streamline the gap analysis process. These tools can help you manage employee data, identify trends, and make data-driven decisions. Additionally, predictive analytics can forecast future workforce needs, aiding in long-term planning. If you don’t have skills data or budget for additional support readily available – consider what data you do have that can help you understand skills in your organization. Possible sources include:

  • Courses and certifications completed in your LMS
  • Recruiting profiles you have hired for in the recent past
  • External certifications and professional credentials held by your employees (if your company pays for these, finance will have records)
  • Employee speaking events (demonstrating expertise to the market)
  • Reward and recognition systems where employees recognize each other’s expertise and contributions
  • Formal promotion criteria that have been satisfied by employees to reach certain levels of your company often include skill requirements

Analyze Your Gap

With a clear understanding of your current workforce and future needs, calculate the gap between what you have and what you need for the future. Identify the areas where your organization will end up with surplus skills, and areas where you may have excess. This gap analysis serves as the foundation for your workforce strategies.

Here’s a sample skills prioritization framework you could use to analyze your gap:

Develop a Workforce Strategy

Now that you’ve identified the gaps in your workforce, it’s time to devise strategies to address them. Your workforce strategy should align with your organization’s overall strategic objectives. Here are some strategies to consider:

  • Recruitment and Talent Acquisition:
    Hire new talent with the required skills for the future.
  • Learning & Development:
    Invest in employee development programs to bridge skill gaps and develop employees with skills adjacent to the ones you need for the future.
  • Succession Planning:
    Identify and develop internal talent for future leadership and other positions critical to delivery of business strategy.
  • Outsourcing and Partnerships:
    Collaborate with external partners or outsource specific functions to focus in-house effort on areas you want or need to own completely.
  • Diversity and Inclusion:
    Enhance diversity to tap into a broader talent pool, create inclusivity to capture the full range of innovation and ideas your employees have.
  • Retention Strategies:
    Implement measures to retain business critical employees.
  • Compensation and Benefits:
    Review compensation and benefits offerings to ensure they support the skill and career trajectories that align with business strategy.
  • Redeployment:
    Consider areas where you have surplus skills and figure out how, if possible, to redeploy them to areas with skill deficit.
  • Communication:
    Be as transparent as you can with employees about the company’s direction, the skills that will be needed for the future, and how to build careers in alignment with those.

An Ongoing Process

Workforce gap analysis should be an ongoing process. Regularly reassess your workforce gaps in response to changing market conditions and business goals. Adjust workforce strategies as needed. Periodically evaluate the progress and results of your gap analyses. Assess whether your strategies have successfully closed the identified gaps and contributed to achieving your strategic objectives. Calculate the return on investment (ROI) of your workforce development initiatives.

Conducting a workforce gap analysis is a strategic imperative for organizations aiming to stay competitive and agile in an ever-changing business landscape. By aligning your workforce with your strategic goals, identifying gaps and implementing targeted strategies, you can ensure that your organization has the right talent in place to thrive and succeed. Remember that with a workforce gap analysis adaptability is key to meeting the evolving needs of your organization.

TalentNeuron Can Guide Your Journey

As the leader in global labor market intelligence, TalentNeuron is here to help companies power smarter, faster talent decisions with our structured data insights and tailored guidance. With TalentNeuron’s insights into how to use effective competency models effectively, we can help your organization plan for your future workforce, source critical skills and build a hybrid work strategy with confidence.

Want to learn how TalentNeuron can help you leverage competency models to empower your HR team to make more informed and strategic decisions to drive your company into the future?