How to conduct a skills gap analysis: a step-by-step guide

As your organization grows, the skills you need to execute your business strategy evolve. In other words, what got you to where you are won’t get you to where you’re going. But how do you know which skills you need? And how do you equip your workforce to meet the future needs of your business? That’s where a skills gap analysis comes in.

What is a skills gap analysis?

A skills gap is the difference between the skills your organization needs to successfully execute its strategy and those present in its current workforce.

A skills gap analysis is a plan for addressing gaps that exist within your organization. Then you can plan a way to close them—whether that’s through training, hiring, or outsourcing.

3 steps to conduct a successful skills gap analysis

There are three critical steps to a skills gap analysis: determine the skills and skill levels needed, measure existing skills, and address any gaps. Here’s each in more depth:

1. Identify the skills needed—and the level of proficiency required.

The first step is to consider which skills are needed to execute your business strategy—current and future. Start by clarifying the scope of your analysis: are you evaluating the entire organization, a department, or specific mission-critical roles? The scope will determine the level of detail required.

Think about the technical and soft skills you’ll need to implement these strategies. The best way to do this is to list out your business objectives and map competencies to each of the objectives. This ensures that required skills are directly tied to measurable outcomes, not assumptions or legacy role definitions.

For instance, if your organization wants to focus on maximizing productivity, you’ll want to focus on skills that will help you achieve that goal. This could be data collection, measurement, and analysis; project management skills; or results-oriented.

In addition to current objectives, consider the capabilities your organization will need 1–3 years from now. A skills gap analysis should account for both immediate operational needs and future-state strategy.

• Are there skills that are becoming more prevalent? 
• What technology will your organization need to adapt to—and build roles around?
• Are there positions you need to create to accommodate changes in your business model? 

For example, chief security officers weren’t a common role in the early 2000s. This role has become more popular as technology and data security have become integral to business operations.

As you build your list of required skills, distinguish between:

• Technical skills (e.g., data analysis, coding, regulatory expertise)
• Behavioral or soft skills (e.g., adaptability, communication, critical thinking)
• Leadership capabilities (e.g., strategic thinking, change management, coaching)

This broader view ensures you’re not only preparing for functional execution, but also for collaboration, innovation, and change.

Once you have a list of required skills, make a note of the desired skill level for each critical skill (e.g., basic, intermediate, advanced). Be explicit about proficiency expectations. For example, is “project management” required at a foundational awareness level, or at an advanced level where the employee can independently lead cross-functional initiatives?

Consider documenting proficiency levels using a defined scale (e.g., 1–5 or foundational to expert). Clear proficiency standards allow you to later compare current capability to future needs in a measurable way.

Finally, prioritize the skills you’ve identified. Not every skill carries equal weight. Identify which capabilities are business-critical, revenue-impacting, or risk-sensitive. This prioritization will guide decision-making in later steps of the analysis.

2. Measure existing skills.

The next step is to determine the skills your current workforce possesses. This requires building a structured skills inventory so you can accurately compare current capability against the future-state requirements identified in Step 1.

This can be accomplished through tools such as:

• Performance reviews
• 360s
• Skills assessments
• Behavioral assessments

You may also incorporate:

• Self-assessments (with defined proficiency scales)
• Manager evaluations calibrated across teams
• Job knowledge tests or technical assessments
• Direct observation of performance in critical tasks

Where possible, combine both top-down and bottom-up input. Managers can assess performance and readiness, while employees can provide insight into strengths, untapped skills, and areas of interest. This dual perspective helps surface hidden capabilities and prevents underestimating internal talent.

Compare the results with the skill sets required to execute your business strategy. Make note of any gaps to address.

To make this comparison actionable, document:

• The required skill
• The required proficiency level
• The current proficiency level
• The size of the gap (e.g., 1-level difference, 2-level difference)

Using a consistent rating scale (such as foundational, intermediate, advanced, expert, or a 1–5 scale) allows you to quantify gaps rather than relying on general impressions.

For example:

This type of structured comparison transforms a qualitative discussion into measurable workforce data.

It’s also important to treat skills measurement as an iterative process. Workforce capability evolves as employees gain experience, complete training, or move into new roles. A skills gap analysis should not be a one-time audit, but part of an ongoing workforce planning cadence.

Finally, be cautious of over-reliance on subjective assessment. Behavioral data, standardized evaluations, and clearly defined competency frameworks can reduce bias and improve consistency across teams.

3. Address skills gaps.

Hiring, training, mentoring, and outsourcing are all options for addressing skills gaps.

Before selecting a solution, prioritize the gaps you identified in Step 2. Not every gap carries the same business risk. Consider:

• How critical is this skill to executing strategy?
• What is the impact of not closing this gap?
• How urgently is the capability needed?
• Is the gap widespread or limited to specific roles?

By ranking gaps based on business impact and urgency, you can focus resources where they will deliver the greatest return.

The method you use depends on how soon you need the skill, how quickly the gap could be closed by upskilling existing employees, and your budget for learning and development.

Many organizations use a “build, buy, borrow, or rent” approach to determine the best solution:

• Build – Upskill or reskill existing employees
• Buy – Hire new talent with the required skills
• Borrow – Leverage internal mobility, stretch assignments, or mentorship
• Rent – Outsource or contract for specialized expertise

Mentoring

If your current employees have the desired skills but need to advance their competence, mentoring might be a great option for you. While it takes time, it’s one of the least costly ways to upskill your employees. Connect employees with more senior team members who can help them hone and develop the desired skills.

Mentoring is especially effective when:

• The skill exists internally, but at limited proficiency levels
• Knowledge transfer is critical to succession planning
• You want to build leadership capability over time

Training

If your budget allows for it, you might hire a professional training firm to develop employees. For example, sales teams may bring in firms like Sandler Training to increase sales and negotiation skills. This allows your employees to learn from seasoned experts who teach this type of content for a living.

Alternatively, if resources allow, you could develop internal training programs—such as those Starbucks offers its employees. These programs often train employees on critical skills that many will need to develop over time—including management, leadership, and communication skills. 

Upskilling and reskilling are particularly effective when:

Internal knowledge retention is strategically important

The skill gap is moderate rather than severe

The capability will be needed long-term

Hiring

You may find that the best way to fill a skills gap is to bring in a new hire or improve your existing hiring process. 

Whenever you’re hiring, be sure to outline the hiring requirements. What soft skills do they need? What technical skills does the role require? What behavioral traits would the ideal candidate possess? (Read more about creating a thorough job description in this blog.)

Hiring may be the right choice when:

• The skill is absent internally
• The gap is urgent and business-critical
• The expertise required is advanced or specialized
  

However, hiring carries a higher cost, longer ramp time, and integration risk compared to developing internal talent.

Outsourcing

If the skill you need is only for a limited amount of time—such as during a particularly busy period or for a particular project—you may decide to outsource. This allows you to gain the skills you need without bringing on an additional employee.

You might also outsource if you have an ongoing need that doesn’t warrant a full-time hire (e.g., graphic design, videography, public relations, etc.).

Outsourcing is often appropriate when:

• The capability is temporary or project-based
• Speed is critical
• The skill is not core to long-term competitive advantage
  

When should you conduct a skills gap analysis?

Skills gap analyses aren’t a one-and-done business activity. Whenever you develop or change your business strategy, consider whether your employees have the skills to make it happen. This should encompass both soft skills and technical skills.

Other times you might identify skills gaps include:

• When you miss business objectives
• When you’re having problems meeting business goals
• When you introduce new technologies

Skills Gap Analysis Example 

A structured skills gap analysis becomes far more actionable when documented in a clear matrix. The example below illustrates how to compare current capability against future requirements and prioritize action.

How to Use This Matrix

To apply this framework effectively:

1. Define proficiency levels clearly.
   Use a consistent scale (e.g., 1–5 or Foundational → Expert) to reduce subjectivity.
2. Assess current levels objectively.
   Combine performance data, manager input, and structured assessments.
3. Determine target levels based on strategic need.
   Not every role requires expert-level proficiency.
4. Evaluate gap severity.
   Consider both the size of the gap and the business impact.
5. Assign specific, accountable action plans.
   Each gap should have a clear owner, timeline, and measurable outcome.

Bringing Behavioral Science into Skills Gap Analysis

Skills gap analysis works best when it goes beyond technical capability. People with the same skills can perform very differently based on behavioral factors like pace, collaboration style, decision-making, and comfort with ambiguity, especially as roles evolve and strategy shifts.

Predictive Index brings behavioral science into the picture with validated insights that help leaders align people to role demands, target development more effectively, and make smarter hiring decisions when upskilling isn’t enough. That way, you’re not just closing skill gaps, you’re building capability that fits the work ahead.