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Why a Skills Gap Analysis is Critical to Your Bottom Line

  • Hiring
  • Article
  • 6 min. Read
  • Last Updated: 07/22/2021

Man looking at skills gap analysis.
Performing a skills gap analysis can help make sure you’re hiring employees that can make the most impact on your bottom line.

Table of Contents

When it comes to hiring, conducting a skills gap analysis is a helpful way to make sure you're hiring the candidate who has the skills needed to help you reach your organization's goals. And, it can also save your company money in the long run.

What is a Skills Gap Analysis?

A skills gap analysis is the process of determining desired skills for your workforce, assessing the skills of your prospective or current employee(s), and identifying any gaps. In short, a skill gap analysis helps you identify the skillsets of each employee to determine who, or where, skills need to be developed, or hired for. It's a great way to determine where your current or future workforce needs to grow in order to help your business remain competitive. 

And, it's a great way to improve your hiring process, too, as it can help you hire individuals who have the skills needed to make an impact on your bottom line, right from the get-go (and long into the future).

How a Skills Gap Analysis Can Improve Your Bottom Line

It can optimize the hiring and onboarding process

Conducting a skills gap analysis gives you insights into your entire workforce, and can be especially helpful when looking to fill open positions within your organization. By performing a skills gap analysis prior to making any new hire, you can identify gaps in the skillsets of your current team, and hone-in on those you'll want your new hire to have, in order to help close them.

Not only that — hiring a candidate with the right skill set for the job can help with retention, so you don't end up having to repeat the hiring process again within a few months (especially given today's tight labor market!).

Still, even qualified new hires may need some on-the-job training to fill in minor skills gaps. You can use insights gathered from your skills gap analysis to figure out where new hires fall short of certain expectations, and make the most of your training budget during the onboarding process by creating tailored training programs. This means that your new hires won't spend unnecessary time in trainings developing skills they already have, and they can start their new role off on a stronger foot. 

It can help you attract and retain talent

A skills gap analysis can also be used to identify opportunities for professional growth within your current workforce. You can use this information, again, to offer tailored training opportunities that can help improve employee satisfaction and engagement, which in turn can help you avoid employee turnover and build a more sustainable workforce.

Use your skills gap analysis to provide a more robust development program for employees, which can make you stand apart from your competition during the recruitment process.

It can improve your competitive edge

Having a better understanding of your team's strengths and weaknesses can help you improve processes and programs in order to optimize your organization’s performance. By using insights garnered from your skills gap analysis to improve recruitment, hiring, and onboarding processes, as well as employee development and engagement, you set yourself up to have a better edge over your competition.

How to Attract the Right Talent Using a Skills Gap Analysis

Attracting the right talent can be critical to growing your business. Conducting a skills gap analysis before you begin the recruitment process can help you better assess the particular skills your organization is looking for and whether your candidate(s) are capable of helping you reach your business goals.

Step 1. Determine business needs

What does the future of your business look like? Understand your company goals and the skills that will be needed to achieve them. Aligning a candidate's experience, interests, and competencies with organizational goals can lead to greater productivity and retention, and create opportunities for employee career advancement.

Step 2. Identify skills gaps within your current workforce

Once you determine your business needs, assess the skills of your current employees and identify where additional skills are needed. Consider turning to managers for feedback on the role for which you are hiring. What skills gaps do they see in this role today, and possibly in the future? By understanding the skills you have on your team, and what you need, you can improve your recruitment strategy using a more targeted approach.

Step 3. Determine which skills are needed for future work trends

As you identify your goals, core competencies, and key performance indicators (KPIs), don't forget to research the skills needed to meet the needs of future work trends. For example, how will automation impact your employees? How about hybrid or flexible work schedules? Anticipating future skills needs will help you better prepare as work demands continue to evolve.

Step 4. Identify core competencies

Once you have a clearer picture for what skills are needed for the role, it's time to take out the red pen and review the existing job description. Are the skills you're looking for clearly defined in the job description? If not, be sure to add them before you begin the recruitment process.

Using a Skills Gap Analysis to Improve the Hiring and Onboarding Process

Candidate evaluation

Now that you've attracted new talent, it's time to evaluate whether they'd be a good fit for your organization. Which of the core competencies appear on the candidate's resume? Use the core competencies you've identified to craft interview questions that dive deeper into the candidate's experience using these skills, as well as hypothetical questions to assess how comfortable they would be applying those skills as part of your team.

Another way to assess the candidate's skill is by conducting an in-basket exercise. In-basket exercises mimic the actual tasks that a new hire will be expected to perform on the job. When conducting an in-basket exercise, it's important to keep the position's core competencies and KPIs in mind in order to evaluate the candidate effectively.

Here's an example of a simple in-basket exercise for a sales position: let's say you want to prioritize clear written communication and the ability to problem-solve using resources. An appropriate exercise would be to provide the candidate with a mock query written by a potential customer, giving them access to a product catalog and FAQs. Then, give the candidate a set amount of time to respond to the query.

With this exercise, you can assess how well the candidate works under pressure, the strength of their written communication skills, and their ability to use resources to find information.

Onboarding new hires

Once you've found the right fit and have settled on an offer, your skills gap analysis can be used to identify what the first few weeks might look like for your new hire. Use the information you've gathered about their skillset(s) during the hiring process to create a targeted onboarding experience, offering more relevant trainings, or to identify the projects in which they can put their strengths to use right from the get-go.

How Paychex Can Help

Whatever goals your company has set, it can be hard to reach them without first figuring out the skills you need on your team to do so. A skills gap analysis is a fundamental way to help make sure your new hire(s) can strengthen — and stay with — your organization. It's also a great tool to help identify growth and development opportunities for current team members, so that you can remain competitive in the marketplace.

If you're looking to hire and retain top talent in today's competitive labor market, Paychex is here to help. With Paychex , you'll have access to a dedicated HR professional who can help you implement effective hiring, onboarding and employee engagement strategies that can set your business up for even greater success.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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