What Is a Skills Inventory?

A skills inventory is an internal resource in which a company stores information on the capabilities, experience (past and present), and goals of current employees as a tool for meeting the organization’s goals and objectives. They come in many shapes and sizes, and can be as simple or complex as the company sees fit. Ideally, it should be a living document that is maintained and updated on a regular basis. Frequently it is kept in the form of a matrix and is updated based on employee movement as well as skill development.

What Are the Benefits of a Skills Inventory?

While creating a skills inventory from scratch can be a daunting process depending upon the number of employees and/or positions a company has, skills inventories offer several strategic advantages for an HR practitioner.

  • Understanding your current organizational capability. Once you get the data into a matrix of sorts,you will have an up-to-date at-a-glance visual indicator of what skills matter and how strong (or weak) your company is at them.
  • Provides an accurate gap analysis. Once you see where you stack up against important skills, you can make definitive statements about gaps that need to be shored up. This also gives leadership a bird’s eye view into how close/far they are off the mark as it relates to the skills deemed necessary to get them where they want to go.
  • Captures employee career-pathing goals. An option that can truly drive engagement is to make the next and future career goals of employees a part of the inventory. This shows employees that the company is not only interested in their goals, but also interested in helping them be achieved.
  • Business case for organizational development strategy. With the inventory, HR is in a position to think through how to beef up skill areas, determine a budget and timeline, and create a plan that is 100% linked to business goals as defined by executive leadership.  Remember, what gets measured gets done, and what gets results gets a budget.
  • Continual improvement. Maintain and update on a regular basis (at least annually) so you can ensure you are closing gaps and planning for the future, and that any new critical skills are added as obsolete ones are removed.

How Do I Create a Skills Inventory?

Here’s a quick planning process for building and using your skills inventory.

Step 1: Determine Skills to Be Included

Collaborate with executive leadership to agree on the skills most important to the company in order to achieve its goals. Categorize them into technical, leadership, and soft skills. For example, listening skills are soft skills; negotiation falls under leadership skills; and data analysis is a technical skill.

Step 2: Assess Skills

There are a number of methods that can be used to assess the skills of your current employees, including:

  • Self-assessment. Create a questionnaire that addresses the key knowledge, skills and abilities for a particular role, and ask employees to assess their own skill levels in each area. Questions can be built with a numeric quantitative rating scale (from 1-5, for example) or with a qualitative rating scale (beginner, moderate skills, fully competent, advanced skills, for example).  Results can be used as a baseline. The upside to this approach is that it begins a dialogue around capability between the employee, HR and management. The downside is the risk that employees may not rate their own skills accurately. Sometimes it can be as simple as asking an employee what they would like to focus on developing in order to be the best they can be in their role.
  • Testing. You can make the assessments fun by creating games out of them; just be sure employees are aware that their skills are being evaluated. Employees need to see the link between the games and their purpose: assessing their grasp on the knowledge, skills and abilities required for their job. It is important to make sure that tests do not have an adverse impact on any particular groups in order to be both valid and reliable.  Edit questions and/or tailor activities to remove any biases that may impact potential segments of your employee base: women, older workers, people of color, people with disabilities, etc. It is always wise to seek assistance from outside counsel if you plan to make hiring or promotional decisions based on test results alone.
  • 360-degree evaluations. This is a tool that serves to evaluate an employee’s overall capability from multiple viewpoints. Generally, the employee, a group of their peers, their manager, and any other internal employees they work with are provided with a survey that asks them to rank the employee in the different skill areas associated with the job he/she is currently performing. The process is typically very accurate when enough (generally more than five) points of view are gathered.  The downside is the time, energy and frequently the expense associated with using this tool.
  • Go Hybrid. Using a mix of any of these options may be the most expedient way of getting you the information you need.

Step 3: Build a Matrix

A matrix is a visual representation of data. For instance, you can build a spreadsheet to capture your findings. Alternatively, you can use Powerpoint to show your leadership team the results. These two methods  illustrate what the data is telling you about the skills present in your organization. Use a number scale to “grade” each skill and show how they stack up against your leadership’s expectations. For example, if you’ve used a five-point rating scale on a question about written communication skills, you can tally up and average the employee self-ratings and use that data to make training recommendations. You may consider using free templates such as these to give you a head start.

Step 4: Create a Plan to Strengthen Weak Areas

Align with executive leadership on a strategy to address weaknesses that are revealed by the skills inventory, as well as how to leverage the strengths. Drive actionable results around what the skills assessment reveals about your company’s current capability. You may find that you have key players who can be used to mentor and develop employees in certain skills. You may also find that it’s worth it to make an investment in an external expert, software, or other training options. Create a business case to explain the gain in capability and why it’s worth the dollar and/or time investment you propose.

How Can a Skills Inventory Be Used for Strategic HR Planning?

Companies need to possess the skills required to allow them to achieve their goals. Where there are recognized gaps in skills, companies can and should use S.M.A.R.T. goal setting: applying Specific, Measurable, Achievable, Relevant, and Time-based goals to help a company achieve business success through their people. Here are a few areas in which a skills inventory informs strategic thinking.

Succession Planning

When will your future leadership require backfills? Have successors been identified? How do their skills match up against those deemed to be essential?


Look for talent that excels in areas in which the company is light. You can develop recruiting plans to target current and future openings with respect to optimizing the skills inventory matrix. You may want to consider testing final candidates to assess their competency in your weaker skill sets.

Career Mapping

Employees are often motivated by career growth opportunities.  Show internal talent the growth paths open to them and the critical skill set requirements corresponding to each position. Next, work with the employee and their supervisor to get them opportunities that can help them achieve their desired professional growth. Increased retention is often a happy outcome of this approach.


A skills assessment can reveal learning needs for individuals or whole segments of a company.  Either way, you can build your approach to a training strategy by starting with the outcome: what skills do you want to build, and how will they be measured?  Use S.M.A.R.T. goal setting.