A gap analysis is the process of comparing your actual business performance with your desired performance to see what’s missing. You can use these analyses to create company strategies and identify possible shortcomings in your business. Learn how a gap analysis can help fortify your business goals and the four steps to perform your own.
Here's a scenario: your team is about to start their strategic planning initiatives for the next year, but they don't really know where to start. What do you do next?
A gap analysis (also known as a needs analysis) is the process of comparing your current business performance with your desired performance. It helps you identify the "gap" between where your business currently stands versus where you want your business to be. In short, you’re looking for what’s missing.
A gap analysis (also known as a needs analysis) is the process of comparing your current business performance with your desired performance. The "gap" in a gap analysis is where your business currently stands versus where you want your business to be.
Creating a gap analysis can help your business in a few ways. Here's how:
Brainstorm strategies. Creating a gap analysis can help strategic teams figure out potential action plans they can use to hit their goals.
Identify weak points. If your business didn't perform as expected, using a gap analysis can help your team figure out the root cause of certain performance gaps.
Measure actual resources. If your team has a surplus of resources at the end of the year, a gap analysis can help identify specifically how everything was performing, and how resources were allocated so they can be used more efficiently in the future.
Creating a gap analysis is a way to review your current strategies to see what’s working, and what’s still needed. Performing one can help your business in a number of ways, including:
Identifying weak points. If your business didn't perform as expected, you can use a gap analysis to help your team figure out the root cause of performance gaps.
Measuring current resources. If your team has a surplus of resources at the end of the year, a gap analysis can help identify specifically how resources were allocated so they can be used more efficiently in the future.
A gap analysis is a useful project management tool to help you identify how to get from point A to point B. While a gap analysis can be used at any time, you can get the most out of your analysis when you apply it strategically to a specific project or initiative. Here are a few scenarios where using a gap analysis can help you gather the contextual data you need to improve your business.
If your team is looking to create a strategic growth plan, using a gap analysis early in the strategic planning process can help give your team a good starting point. A gap analysis provides data-driven guidance on how your team goes from their current state to a specific end goal. For example, if you’re planning next quarter’s strategy, you can use a gap analysis to review what you achieved in the current quarter. Compare that to the goals you had originally set and you’ll be able to identify opportunities to improve in the coming months.Read: New to strategic planning? Start here.
If your team is unexpectedly underperforming, a gap analysis can be a useful tool to identify any shortcomings. Once you identify the root cause of the gap in your current situation, your team can improve processes to fix the issue without interrupting production. For example, a project manager at an assembly line may notice that production is not meeting expectations. After completing a gap analysis, they find the root cause to be an issue with some machinery. Now they know exactly what to fix to improve production.
If your team is compiling business information for investors or for other business requirements, a gap analysis can be an extremely helpful tool. A gap analysis is useful in this situation because it provides more contextual information than just hard numbers. If management is worried that your team is underperforming for whatever reason, a gap analysis can quell any worries with a detailed plan of how your team is going to close the gap.
The best time to use a gap analysis is when you’re looking for ways to improve, or you’ve realized something isn’t working quite as expected. In practical, real-life examples, here’s what that might look like:
Software development: Gap analyses can show you missing items in your software, helping you to potentially catch errors before you go to market.
Project management: Use gap analyses during the project planning or review stages of project management to show you the areas that aren’t up to speed with the rest of your project. Then, you can make requests for and allocate resources to that work as needed.
Human resources: If you’re on an HR team, you can use a gap analysis during the hiring processes to show you what’s lacking on a team, which in turn, you can look for in a new candidate.
Team leads: As a lead, you’re often looking at the big picture problems. So sometimes, details slip through the cracks that can cause delays or issues down the line. A gap analysis can help you identify when you may have overlooked something, and it might be able to catch them before they create a bigger problem.
Competitive research: Competitive analyses are important tools to boost customer satisfaction. One way to perform the necessary competitive research is through a gap analysis, where you look at the market gap for your industry and strategize ways that your business can fill it.
While it may seem complex, using the gap analysis process is not as complicated as it seems. Try this four-step process to create a gap analysis for your team.
In order to compare current performance to desired performance, you first need to define what your ideal future state looks like, or, in other words, set goals. Anygoal settingmethodology works. If you don’t already use one, try usingobjectives and key results (OKRs) orkey performance indicators (KPIs) to create targeted, specific metrics and business goals. Regardless of which goal type you use, make sure your objectives are SMART: specific, measurable, achievable, realistic, and time-bound. The goals you're setting here define how you’ll measure performance and represent the desired state you want for your business.Read: Write better SMART goals with these tips and examples
At the same time, evaluate your current processes with a business process analysis (BPA). If you're aiming to make process improvements as part of your strategy, looking at the current state of your business process is important. This can help you identify which process improvement methodology your team should use to reach the desired target state.Read: The beginner’s guide to business process management (BPM)
Remember that the “gap” in a gap analysis is the difference between where your business currently stands and where you want your business to be. Now that you understand the difference, it’s time to hypothesize different strategies and tactics your team will need to close that gap.
The next step in this process is to ensure your goals are actually achievable, and not too far out of your team’s reach. You don’t want to set a goal so high that it feels impossible. In the same vein, it’s important to ensure that your team is able to complete their goal in the set time period. If you make changes to your current performance strategy, will your team still be able to achieve the goals you set based on the desired time frame?
It's during this step when you meet with your stakeholders to brainstorm strategic planning initiatives to hit your goals.
Once you've solidified all of your numbers and business goals, create an action plan that clearly dictates how your team plans to close the gap. It's important to use both quantitative data, like the benchmark data you compiled in step two, in addition to qualitative data, such as current processes and past process improvement strategies.Universal reporting for today’s leaders
A SWOT analysis is a type of gap analysis that’s commonly used in project management to identify strengths, weaknesses, opportunities, and threats for a business. Usually, people complete a SWOT analysis via a 2x2 matrix.
Once this matrix is filled, use it to identify gaps that come to light as your team brainstorms each quadrant of the matrix.Read: SWOT analysis: What it is and how to use it (with examples)
Developed by Robert H. Waterman and Tom Peters, the McKinsey 7S framework is a management model that is often used for organization analysis. The idea is that an organization needs seven elements that are all aligned and reinforcing one another. If one part of the seven elements is off, it can affect the entire business.
The seven S's in this model stand for:
Structure: How your business is organized. This could mean how activities are divided and how teams communicate with each other.
Strategy: The hard set of plans that your team uses to move the business forward.
Systems: How performance is measured, along with procedures the team uses to do business.
Skills: The competencies your team members provide for your business.
Style: The behavior patterns of certain groups within your business.
Staff: The individuals that work for you. This also refers to their characteristics and ways the company nurtures and develops their team.
Shared values: Values are the core principles that define how your company approaches work.
You can use this model by testing the relationship between each of the seven S’s. When you change something in strategy, how does that affect systems? Performing a gap analysis here can give you concrete answers to how each of these facets of your organization relate to each other.
The Nadler-Tushman congruence model is a business management tool that identifies the root cause of performance issues. It was developed by organizational theorists David A. Nadler and Michael L. Tushman in the early 1980s.
The idea of the Nadler-Tushman model is that there are four main elements to a business and they each have unique relationships to one another.
Those four main elements are:
Work: All of the individual tasks that make up your business's performance. There are two different perspectives on how to look at work: what is done and how that work is processed.
People: The interaction of individuals during work. Some examples of this include a manager and their direct report, or a team lead and a contractor.
Organizational structure: How your business organizes itself, like how work is delegated, what teams work on what, and how processes are built.
Culture: This is how your team implements group norms, best practices, ideals, and shared values throughout your company.
The Nadler-Tushman model then pairs each of these elements off into six different combinations, so teams can analyze how their business is performing. Those six pairs look like this:
Work and people: This looks at which employees are doing what work. Are the right people completing the right tasks?
Work and structure: This is how your team develops processes to complete work. Is there enough structure and organization that clearly dictates what work needs to be completed?
Work and culture: This focuses on the environment that's created. Does your company culture promote habits that are beneficial to performance?
People and structure: This identifies the organizational structure of your team. Is your team organized in such a way that individuals can produce their best work?
People and culture: This focuses on the attitudes of employees. Are your employees working in a culture that is productive for them? Are they able to identify resources to help themselves be successful at work?
Culture and structure: This pair relates to how culture and company organization may affect one another. Does the organization of your business compete with the company culture, or help it?
Similar to the McKinsey 7s model, when you pair off each of the elements of the Nadler-Tushman model, you can see how those two relate to each other and how changing one facet can affect the other.
Gap analyses work best when shared with stakeholders in a convenient and organized manner. A work management tool like Asana can help your team organize information and streamline communication with stakeholders, so everybody is on the same page. Learn more about how you can use Asana to assist with work management.Universal reporting for today’s leaders