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It’s an age-old business dilemma: You want to grow your business, but aren’t sure where or how to allocate resources to make it happen. Sound familiar? If so, you may need to conduct a gap analysis.
A gap analysis is an examination and assessment of your current performance for the purpose of identifying the differences between your current state of business and where you’d like to be. It can be boiled down into a few questions:
Conducting a gap analysis can help you improve your business efficiency, your product, and your profitability by allowing you to pinpoint “gaps” present in your company. Once it’s complete, you’ll be able to better focus your resources and energy on those identified areas in order to improve them.
A gap analysis template visualizes the difference between reality and target for your organization, making it easy to show employees where there is still room to grow. In our discussion around the gap analysis template below, we’ll talk specifically about how a gap analysis can be used within a department; it can also be used for your entire business or for a single process. The four steps outlined in the template below will help ensure you know precisely what issues you’re facing and how to go about fixing them.
This may sound overwhelming, but bear with me. Do you have a strategic plan or a Balanced Scorecard? First, identify the priority of that plan or scorecard. For example, let’s say your banking organization wants to increase growth by 30% a year and has been growing at 8% per year. That puts your “current state” at 8% growth. Or, perhaps you work for a manufacturing organization that is producing revenue of $180,000 per employee, and your goal is to grow that to $250,000 per employee. That would put your current state at $180,000 per employee.
Keep in mind, your current state doesn’t have to be financial. If your nonprofit currently serves 10,000 meals a week to the homeless, that is your current state. Or, if you work for a municipal government, you might have 200 public safety incidents per 100,000 citizens per year—another example of current state.
You are likely now thinking, “We have a lot of current states!” And you’re probably right! You can actually run a gap analysis on each one. For the purposes of this article, try to stick with the current state that best represents your entire department.
This future goal is sometimes called a desired state, future target, or stretch goal. In order to accomplish this, you’ll want to think about how you are doing today in your current state (from step one) and where you really want to be within a reasonable timeframe. If you are doing a gap analysis within the context of your strategic plan, take a look at the targets on your plan. These targets may be three to five years out, which is ideal. Where are you with them? To answer that, go back to your current state areas of focus.
You could even chart it out and see a clear representation of the current state and the future state.
Now that you’ve recognized where your organization is currently and where you want it to be in the future, it’s time to bridge the gap.
Take a look at the chart above; the “gap” is the gray shaded area, which demonstrates the difference between where you are and where you want to be. When identifying gaps in your department, you need to ensure that your goal and your current state exist in the same time period. So if your future goal is three years out, you need to extrapolate your current state out for three years to see the appropriate gap. For example, if you’re growing at 8% and you want to be growing at 30% a year for three years, you’ll want to consider how much revenue you have currently and how much you’ll have in 3 years at your current pace. If you currently have $100 in revenue, you would be at almost $220 with 30% growth in three years, and $126 with 8% growth in the same time period. So your gap is $94.
Some organizations do not project out three years. Instead, they may say they wish their soup kitchen was serving 25,000 meals today instead of 10,000 meals. Therefore, their gap is 15,000 meals.
This is a great time to figure out why there is a gap.
Now that you’ve discovered why the gap in your department is taking place, it’s time to figure out the proper course of action to close it. Use the following guidelines to ensure the improvements you come up with are solid:
Two final pieces of advice! First, once you’ve worked through this gap analysis template and created your own, be sure to follow up on the improvements. Otherwise, there’s a real risk that the solutions you’ve so carefully engineered will fall through the cracks.
Also, be careful about trying to close too many gaps at once. Sometimes they are all related and it’s easy to do so, but other times, you may end up putting too much stress on the organization and find that no gaps are being closed. A gap analysis can also be complemented by other strategic planning frameworks, including a SWOT Analysis. Using these tools together will help set your organization up for success far into the future.
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