Gap analysis is a useful for tool for helping an organization to keep focus on the big picture. By identifying where a company currently stands and where it wants to be, it becomes easier to isolate those methods and strategies that will attain the desired level of performance.
A practical definition
The concept of gap analysis is really a very simple one. In fact, many people use some form of gap analysis daily. As soon as a person says, “I want to lose 10 pounds,” he is performing a type of gap analysis in his head, because he has identified his current weight and what he would like that weight to be.
The benefit of gap analysis is that, by identifying the gap, it is easier to form a plan of action to mitigate that gap. Taking the example of weight loss, a strategy would be developed to lose the unwanted 10 pounds (i.e., a combination of diet and exercise that produces a calorie deficit).
In order to be able to perform a gap analysis appropriately, there are several prerequisites to keep in mind. First, the person, or persons, involved in performing the gap analysis (the analyst) needs to have an objective understanding of the issues that need to be addressed. Part of this understanding will be to understand what information is relevant. Second, the analyst will also need to know what real assets are available. These assets may be information resources, company profiles, policies and procedures, financials, and more. Last, the analyst must understand the barriers and challenges faced in achieving goal performance.
The use of gap analysis
Gap analysis tools range from advanced statistical methods to asking the simple question, “Why are we not on target?” However, three models are of particular importance--the McKinsey 7-S model, the Burke-Litwin casual model and the Nadler and Tushman organizational congruence model.
McKinsey 7-S Model
The McKinsey 7-S Model is named for the consulting firm of the same name. The model is basically a framework for performing gap analysis. The 7-S model outlines seven groups: Strategy, Structure, Systems, Style, Staff, Shared Values and Skills.
The analyst simply plugs in the current state and the desired state of each grouping. While the groups are self-evident and the simplicity is quite nice, the groups are also highly integrated. The problem with high integration is that as soon as the smallest aspect of one changes, they all change. These changes can occur in quite unexpected ways because the groups are highly people-centric. Anytime the human element is a defining point, expect the subsequent definition to be dynamic.
As a result, this framework will not suit all businesses. The 7-S model works best in environments such as manufacturing because there are a large number of persons in the labor force and this fact helps to mitigate fluctuations, as it would affect analysis.
Burke-Litwin casual model
The Burke-Litwin model, created by W. Warner Burke and George H. Litwin, is a model of organizational performance and change. The model focuses specifically on change management. Variables are divided into two groups--transformational factors and transactional factors.
Transformational factors include the environment, leadership, culture of the organization and strategies. A factor is said to be transformational when the changing of that factor would transform the operations of the organization in some fundamental way. These factors are difficult to change because they are tied into belief systems as to how the company should run; changes are generally the result of external factors.
Transactional factors are named such because they constitute the daily transactions of a business. Improvement of these factors can be seen in quality improvement initiatives and efficiency initiatives, for example.
The primary problem with the Burke-Litwin model is that there is no apparent flow from one variable to another. As a result, a company may be able to define its transformational and transactional factors, but this does little to actually improve the situation.
Nadler and Tushman organizational congruence model
This model is the most popular of the gap analysis tools. It is easy to implement and understand. The model, developed by David A. Nadler and Michael L. Tushman, looks at the processes of the business itself and divides those processes into three distinct groups--Input, Transformation and Output.
Input would include the environment the business operates in, the resources it possesses (both tangible and intangible) and the culture of the company. The transformation includes the systems in place, the people and the tasks. Basically, transformation includes anything that transforms input to output. Output may occur at a system, group or individual level.
In using the Nadler and Tushman model, remember that the model is dynamic; it will, and must, change over time. Also, the congruence, or fit, between the different components is why the company performs as it does, so pay special care to identifying how factors fit with each other. The better the fit, the better the company’s performance. This model acts as a framework to help the analyst align various factors of a company to respond effectively to the external environment and internal conditions.