A gap analysis is a tool used to assess the current performance of a business function relative to standards or expectations. Human resources is a critical strategic function in many companies as of 2013. An HR gap analysis, especially one performed by an outside firm or consultant, can provide insights on improvements and resource needs. The challenges for many small businesses are the costs and time involved in hiring outside help and participating in HR modifications.

Company Perspective

A core purpose of a gap analysis is to assess company HR goals and whether systems and practices in place are up to par in achieving them. A gaps auditor would typically outline organizational HR strengths and weaknesses that contribute or detract from the abilities of employees to operate effectively. The assessor would also provide recommendations for needed improvements in the human resource system, organizational culture and other HR-related practices. He might recommend, for instance, that your small insurance agency invest more time in training and orientation for new employees.

Talent Perspective

The other key perspective in a gaps analysis is the discrepancy between current talent and skills available in a company's workforce and its needs. A key aspect of strategic HR is outlining talent needs that align with near-term and long-term company objectives. The audit helps reveal shortfalls in departments or roles within the company. The gaps analysis also provides details on current skills commonly held by employees in certain roles and the skills necessary by industry standards for success. This assessment includes a recommendation for hiring plans and training needs of current employees. If you plan to add new retail shop locations to your local chain, the assessor might help in work force planning.

Digging In

Whether you perform an external analysis or hire a firm to do the gaps analysis, a thorough review of company policies, procedures and HR documents is important. Evaluators will dig into your employee handbook to see whether basic HR policies are sound, clear and beneficial. They will also assess how well employee evaluations and other HR practices comply with policies. Record-keeping reviews also help to see whether HR professionals meet the legal and ethical standards of their roles. This is especially key in small businesses where one employee lawsuit can ruin the company financially. The analysis also normally includes review of hiring and firing practices, which are essential to talent management.

Program Implementation

Once the analysis is complete, which can take several weeks or even months, the evaluators make recommendations for improvement. Company leaders can simply take the report and work to implement changes themselves, or continue to employ an external firm or consultant to help with that process. The implementation process may involve weeks or months of mentoring, training of HR staff and managers and changes to manuals, documents, policies and procedures throughout the HR system. Though significant changes potentially might be too expensive for a small business to implement all at once, an overhaul could improve your practices and reduce exposure to employee-related lawsuits.