Conduct a Skills Gap Analysis in 5 Steps [Free Worksheet]

Oct 20, 2025 | Articles, Digital Transformation, Employee Training and Employee Experience Design, Instructional Design

Your training programs are running, but employee performance isn’t hitting the mark. Engagement is low, and business goals feel just out of reach. What’s missing? The answer may just be a skills gap analysis.

To build training that truly resonates and drives results, understanding the specific gaps between your team’s current abilities and the skills they need for future success is critical. This is where a skills gap analysis becomes your most powerful strategic tool.

In this article, we’ll guide you through a step-by-step process for conducting an effective skills gap analysis. We’ll incorporate key insights on scaling this process from our experts at Litmos and provide a free, downloadable template to get you started immediately.

What is a skills gap analysis?

A skills gap analysis is the process of identifying the difference between the skills your workforce currently possesses and the skills your organization needs to achieve its strategic goals. It’s a critical diagnostic tool that helps you pinpoint specific areas for improvement, to help you target your skills-based learning and development (L&D) efforts for maximum impact. By conducting this analysis, you can make informed decisions about training, hiring, and strategic workforce planning.

Why conduct a skills gap analysis?

“A proactive skills gap analysis helps organizations stay competitive by continuously evolving their workforce capabilities.” – Dr. Jill Stefaniak, Chief Learning Officer, Litmos

If left unaddressed, skill gaps can lead to decreased productivity, missed targets, and a disengaged workforce. A formal analysis helps you move from guessing to knowing. It provides a clear roadmap for:

Strategic Workforce Planning: Align your team’s skills with the company’s future goals, ensuring you have the right talent to stay competitive.

Targeted L&D Investment: Focus your training budget on the areas that will yield the highest return, closing the most critical gaps first.

Preparing for Change: Proactively equip your team with the skills needed to adapt to new technologies, market shifts, and digital transformation.

Boosting Employee Engagement:  Show employees you are invested in their growth. As Litmos Chief Learning Officer, Dr. Jill Stefaniak notes, learners are most engaged when they see the utility, relevance, and value in their training. A skills gap analysis is the first step in delivering that value.

Improving ROI: Direct training investments towards the most critical areas to ensure resources aren’t wasted on unnecessary development.

How to conduct a skills gap analysis: A 5-step guide

A thorough skills gap analysis can seem daunting, but breaking it down into manageable steps makes the process straightforward.

Step 1: Define the Scope and Goals

First, decide whether you’re analyzing an individual, a team, or the entire organization.

  • Individual Analysis: Focuses on one employee to prepare them for a new role or improve performance.
  • Team Analysis: Evaluates a department’s collective skills to enhance project outcomes.
  • Organizational Analysis: Assesses the entire company’s skill inventory against long-term business objectives.

Once you’ve set the scope, define your goals. Are you trying to boost sales figures, improve customer satisfaction scores, or increase innovation? Your goal will determine which skills to focus on.

Step 2: Identify Crucial Skills for Now and the Future

List the key skills and competencies required to meet your goals. Think about both current needs and future demands.

  • Review Job Descriptions: What are the core requirements for each role?
  • Analyze Business Goals: What new skills will be needed to achieve your 3-year plan?
  • Research Industry Trends: What skills are becoming essential in your sector?

Step 3: Measure Current Skills and Collect Data

This is where you assess your team’s current capabilities. You can gather this data through:

  • Performance Reviews: Manager evaluations provide a structured look at employee competencies.
  • eLearning Assessments: Use your LMS to test knowledge and identify patterns in assessment results.
  • Surveys and Self-Assessments: Ask employees where they feel confident and where they see a need for growth.
  • Direct Observation: Watch employees perform tasks to see their skills in action.

Scaling Your Analysis with Litmos Insights

Instructional designers are often short on time. To scale your needs assessment effectively, the experts at Litmos suggest focusing on four key questions to quickly understand your learners’ needs:

  1. What are learners’ perceptions of utility regarding training? Ask employees what training they’ve found useful in the past and why. This helps you design content that they will actually use.
  2. What do your learners value? Understand their career goals and aspirations. Aligning training with their long-term needs creates powerful motivation.
  3. How relevant is the training to their daily job responsibilities? Learners disengage when they can’t see how training applies to their work. Use job-specific examples and scenarios.
  4. What mechanisms are in place to support learners after training? Learning doesn’t stop when the course ends. Consider what job aids, coaching, or follow-up resources are available to help them apply their new skills.

Step 4: Analyze the Gaps and Prioritize

With your data collected, compare the required skills (Step 2) with your team’s current skills (Step 3). The difference is your skill gap.

Use a spreadsheet to document each skill, the desired proficiency level, the current level, and the resulting gap. Then, prioritize the gaps based on their impact on your business goals. You can’t tackle everything at once, so focus on the most critical needs first.

Step 5: Create and Implement an Action Plan

Now, build a strategy to close the identified gaps. Your plan might include:

  • Training and Upskilling: Develop or source courses for the highest-priority gaps.
  • Hiring: Recruit new talent to bring in skills that are missing entirely.
  • Mentorship Programs: Pair skilled employees with those who need development.
  • Process Changes: Sometimes, the issue isn’t a skill gap but an inefficient workflow.

Focus on Continuous Analysis

A skills gap analysis is not a one-time event. Markets, technology, and business goals change, and so do your skill needs. Make this process a regular part of your talent management strategy. By continuously assessing and addressing skill gaps, you create a resilient, agile, and highly capable workforce ready for any challenge .

“By closing the right gaps, organizations boost employee performance, reduce inefficiencies, and achieve faster, more measurable results.” – Dr. Jill Stefaniak, Chief Learning Officer, Litmos

Your Free Skills Gap Analysis Worksheet

To help you get started, we’ve created a simple and effective skills gap analysis worksheet that is fully customizable. Download this free skills gap analysis worksheet to help you organize your findings and create a clear action plan for building future-ready skills across your organization.

Download your customizable kills gap analysis worksheet today.