Skills gaps in UK small businesses: what they cost

Key takeaways

A skills gap is the difference between the skills a business needs and the skills its people have. Small businesses that do everything in-house carry more gaps than they realise, because the work still gets done, only slowly and unevenly. There are three fixes: train, hire or buy.

• A skills gap shows as slow work, repeated errors or avoided tasks.
• Digital, data and marketing skills are common gaps in small firms.
• 3 fixes: train for frequent work, hire for core work, buy the rest.
• A skills matrix for a team of 10 takes about an hour to draw up.

What is a skills gap?

A skills gap exists when employees lack the skills needed to do their current job to the required standard. It is different from a vacancy, where there is nobody in the role. With a skills gap the role is filled, which is why the problem is easy to miss.

• The hidden costs of doing everything in-house
• Generalist vs specialist: who should do the work?

What do skills gaps cost?

Skills gaps cost extra hours, lower quality and lost opportunities. A task that takes twice as long doubles its labour cost. Work the team cannot do is turned down or done badly. The Office for National Statistics publishes vacancy figures showing how hard some skills are to hire, which is one reason gaps persist.

• Learning curve cost: when staff learn on the job
• Struggling to recruit staff? When outsourcing fits

How do you identify skills gaps?

Identify gaps with a skills matrix. List the skills the business needs down one side and your people across the top, then score each person from 0 to 3. Rows with no 2 or 3 are gaps. Rows with only one are single points of failure. The exercise takes about an hour for a team of ten and is worth repeating every year.

• List 15 to 20 skills the business relies on.
• Score each person: 0 none, 1 basic, 2 competent, 3 can teach.
• Highlight skills where nobody scores 2 or more.
• Highlight skills held by one person only.

• The one-person department: risks and hidden costs

Should you train, hire or buy?

Choose by frequency and importance. Train when the skill is used weekly and someone has the aptitude. Hire when it is core to your offer and fills a role. Buy when it is specialist, occasional or changing quickly.

• Ongoing staff training cost: keeping skills current

When is a gap acceptable?

A gap is acceptable when the skill is rarely needed and the consequence of doing it slowly is small. No small business can hold every skill. The aim is to know where the gaps are and to have a plan for the ones that matter.

• When not to outsource

What does a skills gap look like day to day?

A skills gap rarely announces itself. It shows as tasks that take longer than they should, work that is avoided or postponed, the same mistake recurring, and dependence on one person who half knows the answer. Staff with a gap often work longer hours to hide it, so the first visible sign may be tiredness or a resignation.

• Tasks routinely overrun their estimate.
• Certain jobs are always left until last.
• Results in one area have been flat for a year or more.
• Outside suppliers cannot be briefed or challenged properly.

How do you price a gap?

Price a gap by the extra hours and the missed results. If a task takes an untrained employee 4 hours a week longer than it should, at a loaded £19.81 an hour that is about £3,600 a year. Add any measurable shortfall, such as advertising spend that produces half the enquiries it could. The total tells you how much it is worth spending to close the gap.

What mistakes do businesses make when closing gaps?

The frequent mistakes are sending someone on a one-day course and expecting expertise, training a person who has no time to practise, and hiring a specialist for a function that needs ten hours a week. Match the fix to how often the skill is used. Training without practice fades within months.

• Learning curve cost: when staff learn on the job

What does this look like in practice?

A pattern we see with reporting: the business holds years of sales data and nobody can analyse it beyond totals. Decisions are made on instinct. The gap is not software, which they already own, but someone who can use it.

• See client work
• BPO Solutions for UK businesses

Skills gap checklist

Complete this in one sitting.

• Draw up the skills matrix.
• Mark the gaps and single holders.
• Rank gaps by business impact.
• Choose train, hire or buy for the top three.
• Set a date to review.

• The hidden cost audit: score your business in an hour

Next step

Send us your top three gaps. We will suggest whether to train, hire or buy for each in a 30-minute call.