How to Conduct a Capability Gap Analysis for Organizational Development
This article first appeared on Acorn Labs in October 2023.
A capability gap analysis is a systemic process that evaluates and identifies the gaps between an organization’s current capabilities, and its desired capabilities. The main goal of a gap analysis is to find which skills, processes, tools, knowledge and behaviors fall short of delivering on your business goals, so you can devise strategies to effectively bridge those gaps.
Why is it important to analyze capability gaps?
A strategic gap analysis is an essential process for organizations across all industries and sectors. They play a pivotal role in helping businesses achieve their desired outcomes, improve business processes, and enhance performance.
Most importantly, a capability gap analysis helps build strategic alignment between business objectives and business capabilities, driving organizational success. As an example, you can optimize your resource allocation (such as budget and talent) based on which capabilities have been determined by a gap analysis to be of the highest business priority to develop.
If your capability gap analysis reveals gaps in leadership talent or your current leaders’ capabilities, you’ll know to focus learning and development (L&D) on current and future leaders, enabling them to better perform their jobs. This means you’re more likely to achieve business goals and create a sustainable succession planning process.
Making use of technology like a performance learning management system (PLMS) can help in measuring actual performance improvement as a result of training to close gaps. A performance learning management system (PLMS) allows organizations to address the topics of performance and learning in one platform. With a PLMS leaders can continually assess and improve learners based on their specific and role-based capabilities.
Training linked to performance ensures employees’ skills and confidence in innovating new ideas, addressing challenges as they arise and proactively mitigating risks to the business. Regular, ongoing capability gap analyses enable continuous improvement within your organization.
How to do a capability gap analysis
A capability gap analysis is comprised of five steps:
- Evaluate your desired state. This step involved defining your business desired goals and determining the capabilities needed to meet those goals.
- Analyze your current situation. Collect data to gauge the current competency levels of your capabilities, typically categorized as beginner, intermediate, or advanced. Use multiple data sources for a comprehensive and objective assessment.
- Find the gaps. Compare your current capabilities with desired capabilities to identify gaps and diagnose the root causes of them.
- Develop an action plan. Prioritize capability gaps based on their impact on organizational goals and use a capability heat map to guide your strategy. Perform a training needs analysis to determine the type of training required.
- Implement and monitor progress. Execute the action plan and monitor key performance indicators (KPIs) to track improvement and prove your training ROI.
The business impacts of not conducting a capability gap analysis
The most obvious impact of not analyzing capability gaps is that you won’t have a clear understanding of where organizational capabilities fall short of where they should be to achieve your strategic objectives.
It leads to strategic misalignment between business strategy and capabilities, as you won’t know which capabilities need development. You won’t be able to efficiently allocate resources such as budgets and talent, or assign effective learning strategies for employees, leading to higher employee turnover.
The end result is decreased productivity and performance, as your employees won’t possess the right capabilities to actually perform their roles.
