A great deal of attention has been placed on the power and business benefits of skills-based talent strategies by HR experts, pundits, and technology providers over the past several years. The value proposition is built on the theory that assessing individual skills enables more precise identification and development of the skills most critical to achieving evolving business requirements. As ongoing research by the World Economic Forum has found, almost 40% of global workers' skills are projected to become obsolete or substantially change in the next 4-5 years alone. With 63% of companies identifying skills gaps as the single largest obstacle to business transformation, understanding how to design and conduct a meaningful and accurate skills gap assessment is a major priority for organizations of all sizes.

The most prominent driver of what is projected to be a massive transformation in jobs across industries, professions, and roles is the rapid adoption of automated and AI technologies. Over 50% of jobs in the U.S. are expected to be reshaped by AI alone, adding to the expansion of robotics and the Internet of Things (IoT) that is underway in response to labor shortages and pressure to lower operating expenses.

HR leaders are recognizing the risks to their businesses, with 41% of executives surveyed by Gartner reporting that their workforces lack the skills needed to adapt to operational changes. Of equal concern is that 50% of organizations fail to assess and manage employee skills, while 62% state uncertainty around the skills their employees will need to properly plan and execute future business requirements. Deloitte has reported that only 16% of companies have developed strategies to address near-term concerns related to skills gap assessment, while only 17% have confidence in their ability to understand future needs.

Understanding how skills and skills gap assessment are critical

A skills gap refers to the difference between the types, proficiency levels, volume, and location of 1) individual skills that are necessary for assigned employees to successfully execute specific tasks and 2) the skills and proficiency levels that current employees possess. These occur due to a number of factors, including:

• Poorly executed or compromised selection and hiring decisions.
• Work process changes without associated upskilling.
• Insufficient or ineffective training and development related to improved industry work methods and approaches.
• Staffing levels or task responsibilities change through resizing (layoffs, flattening, reorganizations).
• Role deconstruction due to automation and Agentic AI that handle repetitive, lower-value tasks.
• Worker under-motivation to accept, develop, and/or adopt new skills and approaches to performing current or future tasks.

The goal of conducting a (continuous) skills gap assessment is to generate a comprehensive understanding of current skills and proficiency levels for both individuals and the business, aggregate those at the functional and business levels, and compare them to the business's strategic capability requirements. The value generated is a detailed analysis of the skills gaps that can be addressed through a variety of talent strategies, including hiring, transfers, upskilling, and outsourcing. 

The value of skills-based HR and talent practices has been demonstrated to drive enhanced organizational agility, productivity, and innovation, as well as heightened talent mobility, engagement, retention, and productivity. The transparency that such an analysis can deliver translates evolving corporate requirements into employee growth opportunities that are easier to understand and pursue. 

While quality employee skills assessment represents a common challenge for many organizations, it is only part of the challenge. Skills gaps directly impact organizational readiness and agility. Gartner reports that ongoing evaluation of skills gaps is critical, as employee performance decreases by 26% when employees are not prepared in advance of changes to business and operational requirements. Furthermore, companies are ill-prepared to address this: only 8% have reliable data on both current workforce skills and those needed to achieve business objectives, and only 23% can develop the skills needed for future operational success.

The value and use cases for skills gap assessment

The key benefits of conducting a skills gap assessment start and end with objective, evidence-based HR insights into the people who create and deliver the organization’s value proposition to its relevant markets, customers, and stakeholders. Understanding, with some level of certainty, the combined capabilities and proficiency levels of the workforce relative to what is required to achieve business needs yields a range of business-relevant benefits. Those include:

• More effective workforce and talent planning, with more detailed identification of the skills available and needed for accurate staffing projections and efficient talent deployment. This supports more efficient and cost-effective use and deployment of people, and less reactionary recruiting efforts and selection decisions. 
• Employees are viewed as organizational resources rather than manager-owned assets, a mindset that too often leads to talent hoarding, resulting in limited career mobility and advancement, higher turnover, lower engagement, and higher labor costs. 
• Better business alignment of L&D programming with critical organization capability requirements, business objectives, and operational priorities, now and into the future
• More precise targeting of skills development to a) current role deficiencies, b) current job growth opportunities, and c) future role gaps closed for mobility and career advancement. 
• More accurate succession planning and personalized development/mobility implementation for critical roles (current and emerging) as well as key leadership positions.
• Unit/team performance risk management reduction by ensuring the availability of the right skills in the right quantities at the time they are needed to perform the work. 
• Employee-to-job fit improved with clearer mapping of the skills and proficiency levels needed and possessed by individuals to successfully perform the essential job tasks.
• Better identification of candidates with transferable skills who might otherwise be “unseen” for advancement into jobs in other functions, business units, or work locations due to a lack of awareness of their capabilities or unconscious bias among hiring managers.
• Greater staffing agility is supported by enabling the identification of internal resources with matching skills, so they can be redeployed more quickly to meet emerging needs, opportunities, and crises.
  
  

Designing and conducting a skills gap assessment

A skills gap assessment is a process, a set of related talent practices, an ecosystem, and ultimately, when properly designed and executed, a robust organizational capability. It is established as an essential strategic planning process, a hedge against operational risks, and a source of objective, enterprise-level talent evaluations. The most effective solutions are designed and tailored to each organization’s unique mix of HR maturity, team capabilities, budget and resourcing, available technologies, and business leadership’s awareness, acceptance, and approval. The steps to take include:

1. Identify organization strategies, direction, and operational priorities 

As with any HR strategy, program, process, or platform, the process begins with a review of the mission, strategic objectives, and functional or operational priorities it aims to achieve. From those, the critical organizational capabilities required to achieve current and future business, financial, and operational (function-specific) objectives should be clarified, enabling the translation of these into the crucial employee skills that flow from them.

A related or alternative consideration equally appropriate for all businesses, but especially suitable for small to medium-sized businesses (SMB), is to focus the translation of strategies and priorities on operationally-crucial functions (sales, manufacturing, supply chain), or “critical roles” that are assessed as delivering a disproportionate impact on strategic objectives. Conducting (or using the output of) a workforce segmentation exercise can make the skills translation more targeted, efficient, and achievable by a smaller staff.

2. Organize a skills catalog and structure

The next step is essential, particularly when working to identify the important skills being leveraged across a full (or wide) range of jobs in multiple functions, specializations, and organizational and career levels. The universe of potential skills applicable across every existing job can be massive, ranging from as few as less than 100 foundational skills to over 115,000 general and highly specialized ones. The best guidance for any organization is to curate the list and limit the possibilities to those most relevant to jobs in the industry and those for which it is hiring and employing people. The reason? Too many choices make analyses and decision-making increasingly difficult.

Three levels of skills cataloging databases exist, and reflect increasing levels of sophistication: 

• Dictionary – a simple, unstructured list of definitions for all known skills.
• Taxonomy – a hierarchical inventory that groups related skills into categories and subcategories.
• Ontology – an AI-created inventory that identifies detailed categories and interconnections between skills and the roles in which they are exercised, in the context of the jobs and tasks to be performed.

There are a number of ways to create such a catalog, starting with a simple extraction of all skills listed in job descriptions and competency models (for a dictionary), curating an existing list from an open-source provider such as lightcast.io, onetonline.org, or esco.ec.europa.eu (taxonomy), or purchasing access to a commercially available skills architecture platform such as Fuel50, Gloat, or Eightfold (ontology) that embeds the catalogs into skills management, assessment, analysis, and reporting capabilities. It should be noted that some providers have expanded their taxonomies into ontologies.

Whether creating from scratch or curating (editing) any provider's catalog, the key is to work with job experts (function and operations managers, subject matter experts, and compensation specialists to review and refine the lists for any given role or job family. A skilled facilitator can lead working sessions where experts gather to review, refine, and prioritize the skills (and, ideally, proficiency levels) essential to meeting performance expectations and those that separate top performers from all others. Ask them to consider:

• Which of these are essential, non-negotiables?
• Which are nice-to-have, but less critical?
• Have we captured all of the critical hard and soft skills required for individual, team, and operational success?

When leveraging skills platforms, especially those that use AI-generated skills listings, a similar (or automated, survey-based) process should be followed to validate the intelligent, technology-enabled recommendations. Human judgment must always be exercised, as the subsequent use of skills assigned to each job will be relied upon for candidate screening and selection, performance standards, employee mobility and advancement, and compensation-related decision-making.

3. Assess and collect employee data 

The collection of employee skills data will be based upon the catalog methodology utilized – whether fully automated (as with skills-based talent platforms) or based upon employee and/or managerial input (as is common with dictionaries and taxonomies). The individual employee evaluation process should include leading-practice skill assessment standards and methods, with formal, standardized definitions of each skill and objective proficiency levels. 

The range of possibilities to be used is maturity-based, with each one adding increasing levels of objectivity and (presumed) accuracy. Those include:

• Self-assessments: Employees either self-select the skills they purport to have or rate their proficiency in role-specified skills. While these are a starting point, their accuracy and reliability should be evaluated. Proficiency level assessments should use forced- choice options (e.g., none, basic, working, advanced, expert), ideally with behaviorally anchored ratings (e.g., “Master = leads teams effectively through crises and uncertainty consistently”).
• Manager assessments: Managers evaluate the selected skills and proficiency levels of their direct reports and have override/edit privileges. These add to the reliability and validity of employee self-reporting. 
• 360-degree feedback: Skills evaluations in which the employee (most often managers and leaders) is evaluated by their managers, peers, and subordinates on a predefined (role- and function-based) set of skills.
• Skills scraping: The basis of AI-enabled skills platform assessments, this involves a contextual search of existing employee records for mentions, descriptions, and other references that indicate the presence/possession and proficiency levels of skills acquired and practiced across one’s career. These pull information and make skill inferences from resumes, employee profiles, position descriptions, project assignments, performance appraisals, competency and talent calibration assessments, coursework completions, and certifications earned.
  
  

4. Analyze and capture trends and skills gaps

After completing employee data capture, analyses are conducted to identify trends, strengths, and gaps in the skills required across functional, job family, critical role, market/location, and job level groupings. The insights should be generated on an ongoing basis to track trends indicating improvements, changes, or persistent weaknesses in required skill sets. Examples of crucial insights that the analysis should produce include:

• A strategic skills mapping that summarizes the required (or critical) skills and their associated proficiency levels relative to enterprise-level needs. This enables the identification of overall gaps and pockets of expertise that can be moved or redeployed as needed.
• A functional, job-family, crucial-role, department, or job-level skill-gap assessment with drill-down into individual employee evaluations. This allows the evaluation of hiring, upskilling, and outsourcing requirements. It also focuses attention on skills shortages that pose risk to strategic goal attainment.
• Skill proficiency gap analyses that highlight shortcomings in proficiency levels. This reveals training, development, and possible outsourcing requirements, particularly useful for addressing skill development needs related to emerging strategic capabilities (e.g., AI, advanced analytics, new product or service sales methods).
  
  

5. Prioritize critical skills gaps 

Once the analyses have been produced, distributed, and discussed, decision-making should focus on prioritizing and determining resource requirements for different response options. The sessions are most often led by the CHRO with the top leadership team, and then cascaded down by responsible HRBPs or COE leaders to functional, business unit, operations, and location leaders and managers. 

The key questions to ask are how those leaders view the strategic priority of each skill gap or proficiency shortcoming, accompanied by the HR experts’ insights, considerations, and concerns. For example, to what extent is each identified skill shortage or proficiency level an operational problem or risk to strategic objectives? What will be needed to address those, and in what timeframe can the issue be resolved or risk reduced? What future or current strategic priorities, such as the introduction and adoption of advanced AI, manufacturing, analytics, and digital product development, cannot be achieved without proper skill acquisition, development, and retention? 

The gaps should be documented in a prioritized manner, with a risk-reward assessment to identify where strategic investments make the most sense and yield the strongest return. These should be prioritized by role, department, intervention type, and timeframe for initiation and completion.

6. Plan actions to close gaps

Closing the skills gaps often depends on the nature and extent of the issue and the timeframe for resolution. The more strategic the risk posed by a skill shortage (e.g., cloud infrastructure cybersecurity for an energy company), and the longer it will take to develop the skill internally, the more likely a hiring or outsourcing effort will be required.

As a result, a talent strategy should be developed to address each priority gap by comparing and selecting among various talent and procurement solutions. Known colloquially as the “6B’s” (adapted from the work of Dave Ulrich and others), it includes solution sets (Buy, Build, Borrow, Bind, Bot, and Bounce) that range from hiring to training to outsourcing, as well as automating processes depending upon the severity and immediacy of the need. 

Additional strategies that can ease the burden of fewer or less-skilled workers include process improvement/streamlining, job redesign, organizational restructuring, and the redeployment of individuals with transferable skills, on a temporary or full-time basis, to either coach and guide or directly address the issues identified in the skills gap assessment.

Best practices in skills gap assessment

Creating a robust process and related practices for planning, collecting, evaluating, analyzing, and developing action plans is essential. However, lessons learned from implementations highlight important considerations to keep in mind when developing this critical and highly effective approach to talent management.

Establish a continuous process

A once-and-done approach will not suffice, as normal turnover, role changes, transfers, key player or manager retirements, new hires, organizational restructuring, and “right-sizing” activities will naturally change the number and proficiency levels of skills held within and across teams. Work process changes and the adoption of advanced technologies make skill reassessments mandatory. As a result, performing a skills gap assessment at least annually is essential. Given the number and quality of commercially available skill management platforms, the availability of continuous assessment and reporting capabilities makes this investment a high-value proposition.

Target critical role populations

The opportunity to drill down and track specific employee groups should be taken to ensure that strategically crucial enterprise capabilities are developed, nurtured, and retained. Identify the strategically critical roles and use them to pilot new or improved skills gap assessment processes and analyses. Assess both leadership and managerial skills and gaps based upon evaluations of their effectiveness in delivering excellence and efficiency in business, financial, operational, and employee outcomes.

Identify and formalize ownership

Governance of an enterprise skills gap assessment capability is a must-have, as unlike a compensation structure, recruiting ecosystem, or leadership development program, skills management does not have a traditional COE or HR owner. Engage top leaders, especially those who employ critical-skills employees, to oversee, review, and champion the analyses and resulting action plans.

Integrate the assessment

Embed skills assessments in an ongoing process—whether as part of an annual self-assessment tied to the performance review process, talent calibration meetings and discussions, career development discussions, or individual development planning. Use the data consistently in workforce planning, talent acquisition and L&D strategy development, career and mobility planning, and organizational design activities.

Share all employee systems data

The successful use of advanced (e.g., AI-based) skills gap assessment technologies relies upon access to the full range of employee data, from pre-employment (resumes, achievements, roles and responsibilities) to learning activities, formal assessments from classes, certifications, succession planning and management, and talent calibration exercises.

Promote skills-based talent evaluation and mobility

Use the skills data to identify “hidden talent”, those highly skilled workers whose work (or style) does not garner attention, whose prior experiences with other employers are unrecognized, or whose managers underestimate their strengths or fail to promote them adequately. Failure to create a culture that supports talent development and mobility is a major reason for poor results. Consider the value of talent marketplace technologies that promote employee awareness of appropriate career opportunities outside their function or business unit, and that leverage skills assessments to identify where skills overlap can be leveraged.

A key advantage of those technologies is their ability to conduct less intrusive assessments of skills possession and proficiency levels. The streamlining of an otherwise bureaucratic process will be appreciated by employees and managers.

Relevant Practices & Tools

Emerging Workforce Planning Practices that Drive Broader Skills-based and Future-focused Staffing Projections. >

Emerging workforce planning focuses on the future with a highly refined level of detail, moving the analysis from roles and critical segments to specific skills that aggregate into organizational capabilities... more »

Assessing Current and Future Skills-based Requirements and Gaps to be Filled. >

Bringing workforce planning into a skills-based level of assessment requires cataloging the skills required by the positions to be included, identifying the availability of those skills in the current workforce, determining future needs, and creating a gap analysis... more »

Developing a Winning Talent Strategy to Identify Key Capabilities and the Most Appropriate Workforce Mix. >

A talent strategy defines the talent needs and associated objectives necessary to meet top business goals. It is both an integral part of the HR strategic plan and a direct informer of the talent management strategy and planning process... more »

Auto-generating Career Opportunities by an AI Technology-driven Talent Marketplace. >

Talent or Opportunity Marketplace systems are Artificial Intelligence (AI)-enabled software that have varying capabilities, but primarily match employee data to job requirements... more »

The Skills Taxonomy Tool: Define and Organize Job-relevant Skills Used in Different Jobs Across a Company. >

A tool to categorize and define the abilities needed to perform jobs across the enterprise. It is a catalog that can be used in collecting and assessing the individual and aggregate availability of skills required to perform different jobs in the organization... more »