Gap Analysis

Gap Analysis:

A formal study of the steps necessary to improve from current level to desired level of performance in areas such as:

Organization (e.g., human resources)
Business direction
Business processes
Information technology
Information security

In business and economics, a gap analysis is a tool that helps an organization identify its actual performance to determine how to attain its expected performance. At the core two questions present: “Where are we now?” and “Where do we want to be?” If a company or organization is not making the best use of its current resources or is forgoing investment in capital or technology, then it may be producing or performing at a level below its potential. This concept is similar to the base case of being below one’s production possibilities frontier.

The goal of gap analysis is to identify the gap between the optimized allocation and integration of the inputs (resources) and the current level of allocation. This helps provide the company with insight into areas which could be improved. The gap analysis process involves determining, documenting and approving the variance between business requirements and current capabilities. Gap analysis naturally flows from benchmarking and other assessments. Once the general expectation of performance in the industry is understood, it is possible to compare that expectation to the company’s current level of performance. This comparison becomes the gap analysis. Such analysis can be performed at the strategic or operational level of an organization.

It can be conducted, in different perspectives, as follows:

Gap analysis provides a foundation for measuring investment of time, money and human resources required to achieve a particular outcome (e.g. to turn the salary payment process from paper-based to paperless with the use of a system).