Gap Analysis

What is Gap Analysis?

Gap analysis is a method that companies use to gauge their current performance next to their performance goals. In other words, gap analysis is the process of identifying a performance gap and then developing a plan to bridge that gap.

Companies often pursue gap analysis when they notice they are not operating at peak efficiency, or in other words, when it has become apparent to business leaders and personnel that the company is not utilizing its current resources (money, workforce, material, time) to its full potential.

When a gap becomes apparent, it is time for companies to quantitatively and qualitatively define that gap with benchmarks, goals, gap evaluation, and solutions.

Gap Analysis Explained

Gap analysis consists of 3 basic factors:

Current State - Gap - Desired State

Gap analysis can be compared to planning a route between one geographical destination and another. You need to look at a map and measure the distance between where you currently are and where you’d like to be. Once this distance gap is identified, you can begin to plan the most efficacious route and methods you’ll use to traverse the gap.

It is the same for any gap analysis. Businesses compare their current perforce with their desired performance and identify how much space sits between them. Once these two are identified, companies can begin to plan the best methods to close the gap.

The 4 Steps of Gap Analysis

In most cases, when you are initiating a Gap Analysis of your business, you’ve already noticed a gap that you would like to address. Now it's time to formalize the process.

Gap Analysis Step 1: Benchmark Your Current Performance

The first step of Gap analysis is to assess your business’s current benchmarks. These benchmarks can be gathered through statistical data where the performance is measured in easily defined numbers and/or qualitative data that measure performance using surveys and recorded feedback.

For example, the number of products produced in a day can be represented by a specific number and range of time. On the other hand, customer satisfaction is often represented by direct feedback with words.

Typical benchmarks can include:

• Production productivity
• Quality performance
• Customer satisfaction
• Employee satisfaction
• Sales revenue
• Marketing reach

Throughout gap analysis, good data is your best friend. Bad data can lead to bad decisions, so make sure to gather data from reliable sources that look at the whole picture.

Gap Analysis Step 2: Define Your Goals

Once your benchmarks have been gathered, it's time to set some realistic goals that you would like to achieve. It is crucial that you have a clear company vision and mission. Specifically, why are you trying to achieve your goals?

These goals should have 5 basic qualities.

1. Specific: Make sure your goals are precise. Use exact language and numbers to mitigate any confusion when setting your goals.
2. Measurable: Though not mandatory depending on the goal, often having a number value will help you track current performance and growth later on.
3. Achievable: Continuous improvement is all about creating real improvements over time. Your goals need to be manageable. Although it may be tempting to shoot for the stars, organizations and personnel will quickly lose interest if the goals seem impossible.
4. Time-bound: There needs to be a timeline in which the goals are supposed to be achieved. If not, there is little incentive to move forward toward the goal.

Taking these 4 qualities into account, instead of saying: “We want to achieve more compliance and standardization”, a good mission statement could be phrased: “we plan to integrate a standardization tool within 90% of our businesses by the end of the year.”

Gap Analysis Step 3: Analyze the Gap

Now that you have your benchmark performance and a precisely defined goal, you can begin to analyze and quantify how big of a gap there is between the two.

However, there's more to do than simply quantifying the gap. You also need to investigate and find out why the gap has been occurring.

If you’ve identified a gap in quality performance, you’ll need to understand why quality is suffering. This will help you develop a proper strategy in the next step.

For example, perhaps you have experienced a gap in quality performance due to one or more of the following lacks:

• An influx of new personnel that lack training
• A lack of standardized best practices available to workers
• Lack of traceability to track finished work
• Disorganized data in multiple areas (excel, paper, other systems)
• No visibility to measure progress in real-time
• No unified system to bridge the gap between equipment, tools, software, and people.

Once you’ve identified the reasons for the gap, you begin to make informed decisions when implementing your solution.

Gap Analysis Step 4: Develop Solution

Now that you have identified and accurately quantified your gap, it is time to develop and implement a strategy to close it.

Developing a strategy requires 4 essential phases. And just like our previous steps, everything needs to be accurately defined and measurable through quantitative and qualitative data.

1. Evaluate potential solutions: When looking for solutions, it is always best to evaluate expected change with cold hard numbers. Often solutions cost money and resources and you don’t want to blindly choose anything. Calculating prospective return on investment is essential.
2. Create a detailed plan: With a solution in place, you now need to point it in the right direction. Make a detailed plan to focus all improvement measures on your singular goal. It may be tempting to solve two issues at once but if they are not intrinsically connected, it's best to tackle each gap one at a time.
3. Make Change: Once you’ve chosen your solution and created a detailed plan, it's time to close the gap. Follow your plan to ensure you stay on track. If any changes have to be made, be sure to document them so that you can accurately track progress.
4. Observe Change: Developing and implementing strategies to close gaps is a dynamic process that requires a lot of observation. While your strategy is deployed, be sure to capture as much quantitative and qualitative data as you can and review if the changes are working or if adjustments need to be made.