Skill Gaps in Companies: How to Analyze and Close Them

Stefan Schulze

Three employees sit together and analyze the skill gap in their company.
VIDEO With english subtitles

New technologies, automated processes, work-sharing with AI – all are probable scenarios resulting from digital transformation. Digitalisation is rapidly changing the way we work, which in turn, has resulted in skill gaps appearing within companies. We explain what this means and offer you solutions on how to close these gaps.

What Is a Skill Gap?

The term skill gap originates from the HR and L&D cosmos. For recruiters, it refers to a challenge that is becoming bigger and bigger due to the rapid developments in the world of work.

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3 Examples of Skill Gaps in Companies

Skill gaps are not always immediately obvious. However, at least one of these examples is likely to be familiar to you from your everyday work:

  • Lack of technical and analytical knowledge
    Your organization is jumping on the digital transformation bandwagon with AI and automation as the new hot topics. But, no one has the skills to use new technologies, digitize processes or analyze data.
  • Soft skills in need of improvement
    The hard skills, i.e. the technical knowledge, are adequately available. However, the interpersonal basics, the soft skills, are lacking, communication in the team is ineffective and no creative solutions are found for problems.
  • Developing leadership skills among talents
    Your company relies on young talent - also in management positions. They are technically up to date, but stumble when it comes to team leadership. Strategic planning, conflict resolution and staff development are not among their strengths.

Why Skill Gaps Are so Dangerous

"Mind the gap!" – Anyone who has ever traveled on the London Underground is familiar with this phrase and knows that the gaps between the tube door and the platforms are not so dangerous anymore.

Four people on a staircase, a skill gap in front of them

Skill gaps are a little different. While there are no physical dangers to be feared from a lack of skills, economically they can become critical when the gaps between required and available skills grows too large.

The challenges of skill gaps arise at different levels:

Digitized processes require previously non-existent skills

Every newly introduced measure requires a change in previous routines and places new demands on the skills of the employees. If employees do not have the necessary skills or learn them quickly enough, a skill gap will arise.

The successful introduction of a digital working environment often fails not because of the idea, strategy or technology, but because of insufficiently trained staff.

Lack of learning and development opportunities creates job dissatisfaction

According to the study ”Future Skills – Future Learning”, employees who are satisfied with the learning opportunities contribute more to the company's success than those who are dissatisfied – and more than half of the respondents are dissatisfied! 

So, if skill gaps become too large and there are no appropriate solutions to close them, companies run the risk of alienating employees and failing to achieve the company goals.

Too large of skill gaps reduce competitiveness in the long term

From a business perspective, the most relevant challenge for skill gaps is competition. In the long run, organizations that train their employees in line with digital transformation measures will be better positioned for the future than those that do not.

Those who turn the gap into a chasm will have a hard time, in future, keeping their competitors within striking distance, not to mention placing themselves at risk of being left behind. What's tricky about this is that the race has already begun and that skill gaps are continously growing.

Skills Gaps already Exist today!

The results of a McKinsey survey show that 43% of the companies surveyed already see skill gaps in their companies. 44% expect knowledge and skills gaps to begin showing within the next five years.

Inforgraphic: Expected skill gaps in companies within the next few years
Based on McKinsey & Company

This means that you should examine yourself and your own company as soon as possible. Are there already skills missing in some places? Where will processes be digitized and where will new skills be needed in the future?

No Gaps, no Problem: Advantages of Closed Skill Gaps

In general, every company that deals with digitalisation has competence gaps that need to be filled. Rarely do these show up on the professional side, most often there is a lack of soft skills and digital skills.

Either way, closing (or even preventing) a skills gap benefits you – if you do it right:

1. Increased employee motivation
Employees feel valued through appropriate training measures and feel that their (new) skills contribute to success.

2. Higher innovation efficiency
A larger set of skills also means more creative ideas for solutions. Those who promote the right (soft) skills will also stand out from the competition in the future.

3. Improved overall performance
The smaller the skills gap, the more efficient the entire organization. New technologies and processes are adapted more quickly – this increases efficiency.

Closing every gap completely is a utopian scenario, but those who fill the gaps as far as possible with new knowledge and skills, should be well equipped for future challenges and transformations. 

To achieve this, however, one must be clear about which competencies are important for one's own organization – today and in the future.

Skills Gap Analysis: 3 Steps towards Targeted Further Education

4 people on a staircase, the skill gap in front of them closes with a digital learning platform

Only 20% of companies have a clear definition of the necessary future skills for their organization. In order to be able to make informed and correct decisions and achieve set objectives, however, it should be clear which skills will make the company's strategy successful in the short and long term.

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Basically, this is a comparison of the target and actual state of the skills in the company. Once the requirements are known and the skill gaps are identified, resources can be used more efficiently and, of course, skill gaps can be closed more quickly.

Conducting a skills gap analysis can be divided into three basic phases: Definition, analysis, derivation.

1. Define Necessary Competences

The first step is closely linked to the company's goals. These should indicate which professional knowledge, which operational skills and which strategic qualifications are essential for achieving the company goals at present and in future. This information should be transformed into requirement profiles for all positions.

Two general questions to ask at this point are:

What are the company's goals and how are they to be achieved?

What skills are needed – now and in the future – to reach these goals?

2. Analyze Existing Skills

The as-is analysis examines what qualifications employees already possess and where there is room for improvement. This step can be carried out either through the assessment of managers, the self-evaluation of employees, or a combination of both. Ideally, the results are collected as structured as possible according to clearly defined parameters.

The central questions of this phase are:

What skills and competencies do employees need to perform their daily work?

In which areas is there need for improvement and which skills are employees still lacking with regard to the company's goals?

3. Derive Further Training Programs

After comparing the target and actual state, the findings are transformed into concrete measures and learning content. When selecting and planning training, two aspects should be in the foreground: the learning needs of the employees and the alignment with the company's goals. 

In doing so, you should ask:

What training content will best contribute to employees' individual improvement?

Are the measures aligned with the company's needs?

How to Close a Skill Gap

Once the goals are clear and all the necessary qualifications identified and measures are derived, "all" that remains is for all employees to follow along. And this is where individualized upskilling becomes the solution, which means the targeted training for each employee.

Therefore, the phases of the skill gap analysis can be supplemented by two additional steps.

4. Introduce and Establish Learning in the Company

According to the "Future Skills – Future Learning" study, employees primarily prefer virtual formats and personal responsibility for their personal training. 

Group training courses and weekend seminars meet these requirements only to a limited extent (e.g., in combination with other forms of learning). The trend is toward self-directed learning on digital learning platforms.

The challenge in introducing such platforms is that the training must be integrated into everyday work. The content must also be motivating in order to promote autonomous learning.

Microlearning solutions, in which content is served up in video format as small learning bites, keep the time required for further training within manageable limits. By individualizing the content for each position, the learned knowledge can be applied immediately to create moments of success.

The positive effect is that a culture of lifelong learning is established in the company – and this closes existing or newly emerging skill gaps in the long term.

5. Monitor and Measure Actions

Learning success is measurable and should be measured. Only in this way can it be verified whether the training courses improve the skills of the learners and whether they contribute to closing the skills gap.

With the concepts of Return on Learning and ROI of Learning this is possible! The models help you see what monetary and non-monetary effects are created by employee training.

With the information you gain, you can adjust the right settings to make your learning strategy even more effective.

4 people climb a staircase, the skill gap is closed by Masterplan's learning platform

These Skills Close most Gaps

But what skills and competencies do employees need for the future? What are the so-called future skills?

37% of respondents to the "Workforce Skills Gap Trends 2024: Survey Report" stated that technical or hard skills will be outdated within two years. Only 22% believe that these skills will remain relevant for more than 5 years. 

Conversely, those skills that enable employees – regardless of role, job and position – to improve and expand their hard skills independently are more relevant for the future.

Masterplan has therefore transferred the P21 framework (The Battelle for Kids P21 Framework for 21st Century Skills) to the business world and developed seven universal skills that employees need today and in the future, regardless of their role, in order to master every new challenge: Power Skills.

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Want to find out more about power skills and how you can develop them effectively? Here's all the info! →

Power skills in DACH companies: Important, but only partially present

In a study by Masterplan and Quadriga University Berlin on upskilling in 2024, around 250 DACH companies surveyed confirmed the importance of Power Skills. Nevertheless, most of them only rate their employees' future skills as mediocre.

According to this, there are already skill gaps between the stated relevance of individual skills and their actual level, particularly in the areas of collaboration and leadership, digital skills and communication.

Summed up: Don't Let the Gap Grow too Big!

The bigger the gap, the more difficult it is to overcome it.

If you identify your skill gaps early and act quickly, you have the best chance of remaining competitive in the future. Upskilling, training and development are usually the way to long-term success.

To prevent skill gaps from occurring in the first place or to close them quickly, we give you these three tips along the way:

1. Regularly review your own skills and those of your employees

2. Close skills gaps before they become too large

3. Focus on core and soft skills

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FAQ on the Topic

What is a skill gap?
How does a skill gap analysis work?
How do I close skill gaps in the company?

Stefan Schulze

Stefan Schulze is Content Marketing Manager at Masterplan. In the blog, he explains important terms from the L&D and HR world and writes about methods, concepts and developments in corporate learning.

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