How to use a gap analysis to achieve business goals

Summary

A gap analysis is the process of comparing your current business performance with your desired performance. It can be used to help establish company strategy and identify any shortcomings your business may have. Learn how a gap analysis can help fortify your business goals.

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?

If you’re not sure how to get started, try a gap analysis. This document can help you identify how to get from your current state to your ideal future state—or your ultimate end goal.

What is a gap analysis?

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.

When to perform a gap analysis

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.

During strategic planning

If your team is looking to create a strategic plan for growth, using a gap analysis early on in the strategic planning process can help give your team a good starting point. A gap analysis provides data-driven guidance on what your team needs to get from their current state to a specific end goal. That way, your team has at least some sort of footing when they begin creating a strategic plan to grow and improve your business.

When you encounter performance issues

If your team is unexpectedly underperforming, creating a gap analysis can help you identify any shortcomings in your team's current situation. Once you identify the root cause of the gap, 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. Because they’re able to fix the issue, and because the project manager created a gap analysis previously, they’re able to develop a solution to make up for the number of products they weren’t produced due to the defect.

When stakeholders need additional context

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 4 steps of creating a gap analysis

While it may seem complex, creating a gap analysis is not as complicated as it seems. Try this four-step process to create a gap analysis for your team.

​1. Define your business goals

In order to compare current performance to desired performance, you first need to define what your ideal future state looks like. You can do this by setting measurable goals. Any goal setting methodology works. If you don’t already use one, try using objectives and key results (OKRs) or key performance indicators (KPIs) . Regardless of which goal-setting framework 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.

2. Benchmark your current business performance

Use the goal format that you identified in the previous step to benchmark your current business performance. If you have historical data or past gap analyses, you can also use this information to inform your benchmarking.

This is also a good time to evaluate your current processes. 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 you want your team to use to reach the desired target state.

3. Analyze gap data

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.

4. Compile a detailed report

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.

Common gap analysis tools

​While there are four main steps to completing a gap analysis, there are some frameworks you can use to assist in your planning. Here are some of the most common frameworks people use for their analysis.

SWOT analysis

A SWOT analysis is a project management technique that's used to identify strengths, weaknesses, opportunities, and threats for a business. Usually, people complete a SWOT analysis by visualizing each section in 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.

McKinsey 7S model

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.

Nadler-Tushman congruence model

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 individuals who interact when things get done. 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.

Craft gap analyses with a work management tool

Gap analyses work best when shared with stakeholders in a convenient and organized manner. A work management tool like UDN Task Manager 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 UDN Task Manager to assist with work management.