What is a Performance Gap? Definition and Tips to Close It

Every organization's ultimate goal is to maintain optimal performance to strengthen its place in this overly competitive market. However, potential performance gaps can significantly disrupt productivity and hinder organizational growth. 

According to the new McKinsey research, disengagement and performance gaps for employees can cost a median-size company $1.1 billion in lost value over 5 years. This reflects the importance of addressing performance gaps timely to prevent stalling success. 

But, what exactly is a performance gap, and how to identify performance gaps among your employees? More importantly, can you effectively address it to boost employee engagement and hit your targets? This guide covers some common causes of employee performance gaps, along with actionable strategies to overcome these gaps. Let’s dive into the details!

What is a Performance Gap?

Source: Stacey Barr

Performance gap refers to the difference between the current level of performance of individual employees, teams, or organizations and the desired level of performance. 

In other words, it’s the situation when employees fail to perform their best because they lack the necessary skill set. Underperforming employees lead to missed opportunities, customer dissatisfaction, reduced productivity, and a massive hit on sales revenue. 

Apart from the matter of revenue and profit loss, it indicates deeper challenges that, if left unaddressed, can hinder long-term organizational growth. Therefore, understanding what’s causing these gaps is crucial for organizations to unlock their full potential. 

Businesses can effectively bridge this gap by identifying and addressing the root cause of underperforming employees through a gap analysis.

5 Common Causes of Performance Gaps

The performance gap is the result of underlying problems within the organization. Understanding the root cause can help you develop targeted solutions to fill these gaps. Here are some common causes of performance gaps: 

‍Source: edstellar

1. Skills Gap Among Employees 

The evolving market dynamics and technological advancements are reshaping the skills needed to stay competitive. 

No matter how dedicated your employees are, they might lack the evolving expertise required to meet these demands. For example, a sales team accustomed to traditional sales methods may find it challenging to incorporate a digital sales strategy into their workflow. This is why you must identify the skills gap early in the process and implement targeted learning strategies to prevent further losses.

Enhancing employee performance benefits not only employees but also the organization as a whole. According to LinkedIn Learning Report 2024, 7 in 10 people find learning improves their connection to their organization, boosting their overall productivity. 

2. Unclear Objectives and Expectations

‍Source: Faster Capital

Lack of clarity regarding an organization’s objectives and expectations is one of the most common causes of underperforming employees. Without a clear roadmap, your employees are more likely to be misled, resulting in a performance gap and reduced productivity. 

In a survey of 18,665 US employees, only 47% reported knowing what is expected of them. This ambiguity not only disrupts organizational efficiency but also leads to revenue loss. 

Clear communication can help align employees with the organization’s objectives and set realistic expectations. To enhance productivity and close the performance gap, set SMART goals (specific, measurable, ambitious, relevant, and time-bound) for your employees.

3. Lack of Resources 

Employees can’t efficiently utilize their skill sets without adequate tools and resources. Outdated technology, low-speed broadband, and improperly working systems can make tasks unnecessarily challenging, contributing to a wide performance gap. 

These issues must be resolved at the organizational level by looping in the stakeholders and decision-makers to prioritize infrastructure upgrades. Additionally, to prevent one issue from transforming into another, make sure employees are properly trained before introducing a new technology.   

4. Personal Challenges 

Personal problems, such as health issues, mental health struggles, or conflicts with peers, can significantly impact an employee’s ability to focus and perform. Organizations that fail to acknowledge their employee’s personal challenges may risk losing valuable talent.

To counter this issue, consider investing time and resources into counseling the employee. A few moments of empathy and support can make a huge difference, fostering a sense of belonging and motivation among employees. 

Tip: Listen intently and help them improve by offering some time off or enrolling them in an Employee Assessment Program (EAP).  

5. Lack of Employee Motivation

Disengaged and unmotivated employees are less likely to care about meeting deadlines or performing their best. This lack of motivation may stem from inadequate recognition, the absence of constructive feedback, or a toxic workplace, which contributes to poor productivity and engagement.

Regardless of the root cause, it’s essential to have a highly motivated and engaging team, as they can lead to  21% higher profitability. You can make this happen by fostering a positive work environment, offering frequent feedback, recognizing employee efforts, and incentivizing high achievers. Such an approach is highly effective when it comes to boosting motivation and closing the performance gap. 

Performance Gap Examples 

Here are a few hypothetical examples of performance gaps in appraisals that you may encounter routinely: 

‍Source: Info Diagram

Example No One - Sales Performance Gap 

A sales team is asked to close 10 deals monthly, but only manages to close 8. After conducting a gap analysis, you find a performance gap in the pitching process. It includes:

• Not following up on the leads, resulting in missed sales opportunities.
• Inexperienced salespeople discussing the pricing too soon. 
• Poor listening skills prevent the prospects from giving away their pain points.
• Inadequate product knowledge leaves the customers dissatisfied.  

Example No Two - Service Performance Gap

A business marketed 24/7 customer service but failed to respond to its customers within the deadline. Performance gap analysis shows staff shortage, leading to long wait times and frustrated customers. Other common performance gaps include:

• Failure to deliver on time because of poor management. 
• Generic marketing without considering customer preferences.
• Inconsistent customer service caused by lack of training. 

10 Proven Tips to Close Performance Gaps

Once you've identified the performance gap, you must adopt a structured approach to close it. Here are 10 steps to bridge the gap and achieve sustainable growth: 

‍Source: Edstellar

1. Identify the Root Causes of Performance Gap

The first step in closing a performance gap is understanding why it exists. Conduct surveys, interviews, and focus groups to gather insights on the potential causes of underperformance affecting productivity. For example, is the gap due to lack of skills, unclear goals, or limited resources? 

You can review your organization’s record to identify a pattern in the performance drop. Additionally, a performance gap analysis using the 5 whys, benchmark, fishbone diagram, or fault tree analysis method also helps identify the root cause of the performance gap. 

2. Conduct Skills Gap Analysis 

Research indicates that 25% of skill sets for jobs have changed since 2015, reflecting the continuously evolving nature of the market, and highlighting the need for skills gap analysis. A comprehensive skills gap analysis offers insights into your employees’ current skills vs. the required skill set needed to stay competitive. 

It reveals exactly where an individual or organization is lacking, allowing you to implement a targeted training course to close the skills gap. You can use AI tools for employee skills assessment to align employee skills with your company’s objectives, amplifying the growth. 

3. Conduct Training Needs Analysis

Before you create a training course to close the performance gap, it is essential to conduct a training analysis to figure out your employees’ expectations. 

A training needs analysis questionnaire assists in tailoring the course content according to the specific needs and aligns them with the organization’s objectives. Whether the focus is on technical knowledge, leadership skills, or effective communication, personalizing training programs ensures the content is both relevant and effective.

BONUS TIP: Conduct a training needs analysis using eLearning assessments, quizzes, and surveys to gain feedback. Invest in an LMS that allows you to create AI assessments and is integrated with the best automated grading system. It also offers detailed feedback, which bridges the performance gap systematically. 

‍Source: AI HR

4. Review Current Learning Resources

If you already have a training course for your employees, review the existing training content to assess its shortcomings. This allows you to update the content based on performance gaps rather than developing a new course from scratch. It also offers a broader perspective on the areas that require improvement and helps you avoid repeating past mistakes. 

5. Determine Performance Goals

When your employees don’t know what is expected of them, they fail to provide measurable performance. This is why clear communication between you and your employees to establish performance goals is necessary to bridge the performance gap. Often, the issue is unclear performance goals rather than capability. By setting clear, measurable goals, you can establish a roadmap that eliminates communication barriers. 

PRO TIP: To narrow the communication gap, practice advanced communication skills, such as active listening. Put yourself in your employees’ shoes to better understand their perspectives and build trust for long-term collaboration.

6. Boost Employee Engagement

‍Source: usercontent.one

Employee engagement is a critical factor in bridging performance gaps. Fostering a positive work environment with regular feedback, career-development opportunities, and team-building activities keeps employees engaged, resulting in increased productivity. When employees feel valued, productivity and dedication soar, driving better results. 

7. Employee Recognition and Appreciation 

Acknowledging employees’ efforts boosts their morale, motivating them to work harder. 81% of the employees feel more motivated to perform better when their boss appreciates and recognizes their efforts. Appreciating your employees through verbal praise and monetary incentives also cultivates a positive work culture. It shows employees their work is valued, encouraging them to sustain their performance. 

8. One-on-one Meetings and Feedback

Regular meetings allow managers to identify employees' strengths and weaknesses and monitor their performances. By reviewing the performance metrics and providing constructive feedback, you can strengthen the organization-employee relationship, resulting in a resilient workforce. 

9. Establish an Inclusive Environment

Inclusivity is the foundation of a productive workplace where every employee feels valued. Diversity and inclusiveness establish an organizational culture that empowers all employees and encourages them to perform their best. Employees don’t only need organizational appreciation. They also need peer support to excel and outperform, which is only possible in an inclusive environment.  

10. Track and Assess Performance Metrics

Regularly reviewing metrics helps organizations measure the impact of training, implement strategies, and identify areas requiring further improvement. You can monitor progress through several metrics, including employee retention rate, task completion rate, subjective appraisal by manager, and customer satisfaction score (CSAT). 

Build Market Competitive Workforce 

Bridging the performance gap is a continuous process that requires commitment and dedication from both the organization and the employees. By identifying the root cause, addressing the skills gap, and conducting tailored training programs, companies can boost employee productivity and unlock their full potential. 

Coursebox is here to help you close this gap and build a market-competitive workforce that drives results. It allows you to design training courses tailored to your employees’ needs, with features like instant grading and feedback to enhance learning outcomes. 

With custom quizzes and assessments through Coursebox, you can assess knowledge retention and track employee progress without any hassle. 

FAQs

What do you mean by performance gap analysis?

Performance gap analysis is a systematic process of identifying and assessing the difference between current performance and desired performance. It helps organizations understand what’s causing the gap and effectively close it by implementing targeted strategies.  

What is the job performance gap?

Job performance gap refers to the difference between an employee’s current performance and the level of performance expected in their role. This gap could be due to a lack of skills or knowledge, limited resources, personal issues, or lack of motivation. If it is not identified and closed early, it could lead to a significant reduction in revenue and profits. 

What is an example of a performance expectation gap?

A sales team consistently failing to close the required 10 monthly sales, only closing 6–7 deals instead, is a good example of a performance gap. It shows a performance expectations gap where the sales team is not providing the desired performance. 

What do you mean by service performance gap? 

The service performance gap refers to the difference between the customer's expectations and the delivered services. It occurs when businesses fail to provide the promised services, resulting in dissatisfied customers.