Why leading companies prioritize skills gap analysis to address future challenges

Technological disruptions, the shortening half-life of skills, and talent shortages are making skills gaps an increasingly critical issue for businesses worldwide. Failing to address these gaps not only costs companies money, but also leaves their workforce vulnerable to layoffs and burnout.

With  75% of employers across Europe not being able to find workers equipped with the right skills,  prioritizing the development of internal talent and getting more strategic around skills is key. But without knowing which skills the workforce possesses and which will be necessary in the future, it’s impossible to effectively align people’s development with the business’s strategic needs.

The rising cost of ignoring skills gap assessment

A recent World Economic Forum survey found that over 60% of businesses report facing skills gaps—the top global barrier to business transformation. Meanwhile, many organizations have only a vague understanding of their existing workforce’s professional skills to develop.

Failing to close the skills gap can have a more significant impact on revenue and market share than many companies realize. These costs include not only turnover and recruitment expenses, but also lost productivity, decreased employee engagement, and reduced innovation and growth.

By 2030, 85 million jobs could go unfilled due to a lack of skilled people and a shrinking talent pool. If unaddressed, this deficit could lead to approximately $8.5 trillion in lost annual revenues by 2030. A cost that could be avoided by identifying and bridging the skills gap early on.

Matching skills-gap analysis with a holistic talent strategy

Recent research shows that 63% of workers acknowledge their work environment is evolving quicker than ever before. Meanwhile, six in ten organizations agreed that the workforce is underprepared for change.

To ensure their organization is future-proof, HR and learning departments need an accurate understanding of employees' skills and skills gaps. This competency gap analysis enables strategic workforce planning, effective recruitment and retention, training, and clear career paths. According to McKinsey, aligning HR processes with skill needs can increase employee engagement by 50% and boost productivity by 40%. 

“Skills gaps within the company not only slow down business growth and hinder economic success but they also keep individuals from realizing their full potential. Employers that take a practical approach to the skills gap analysis with a holistic talent strategy can reduce the impact and cost of this challenge,” says René Janssen, CEO of Lepaya. 

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Start your employee skills assessment now

To assist leading companies in identifying their existing skills gaps, Lepaya has launched a Skills Gap Analysis Tool that provides HR and people leaders with an initial understanding of the critical skills their teams can develop.

Lepaya’s employee skills assessment tool gives L&D, HR, C-level, and team managers key insights into: 

1. The top skills to train for their people’s development 
2. Why these skills matter for their industry context and business growth 
3. The next steps to close skill gaps and develop their teams.

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“There is a disconnect between the skills that employees have and the skills that companies need to stay at the top of their industry. Skills and labor shortages are two of the most urgent concerns our society is facing today."

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The impact on organizations is enormous. According to PwC's global CEO survey, 52% of CEOs believe that labor and skills shortages will significantly affect the profitability of their industry in the next 10 years. Further implementing a robust skills assessment and tracking system to evaluate the existing skills of employees and to identify any gaps is needed,” says Marlene de Koning, Director of HR Tech & Data at PwC.

Avoid lay-offs by filling the talent pipeline for long-term business success

When skills gaps are identified late, companies often resort to drastic strategies like ‘fire and hire’—terminating existing employees and hiring new ones with skills more aligned to the company's strategic direction. For instance, since last May, there have been over 4,600 job cuts in the US to free up resources to hire people with AI capabilities, including at IBM, United Parcel Service, Duolingo, Grammarly, and more.

However, relying solely on recruitment to address skills shortages is not only expensive and disruptive to teams but also offers no guarantee that skilled talent will be available in the job market.

As challenging as it may seem, layoffs can be avoided when talent up- and re-skilling is seen as a strategic priority. Spotting skills gaps early and investing in learning and development to close the skills gap is crucial to fill the talent pipeline and ensure long-term business success.