A skill gap analysis simply compares the skills employees currently have against the skills the organization needs now and in the future to achieve its business goals.
It involves a three-step comparison:
Step One: Defining the critical skills and proficiency levels needed for specific roles now and in the future.
Step Two: Measuring the actual skill inventory and capabilities of current employees through employee reviews, performance data, or surveys.
Step Three: Calculating the “gap” or shortfall between the required and existing skill sets.
The role of a skills gap analysis in performance management
The main reason companies do a skill gap analysis is to get clear, factual information based on clearly-defined performance metrics on where to spend their money on employee training and hiring. By figuring out exactly which skills are missing—from technical abilities (hard skills) to people skills (soft skills)—companies can create focused, effective training programs (upskilling or reskilling) and personalized employee development plans for current employees, know precisely what skills to look for in new hires, and make sure they have the right internal people ready for future leadership roles (succession planning).
A dedicated performance management system can be used to perform a skill gap analysis as part of the broader 360° feedback and employee reviews processes.