What is a skills inventory and why is it important?

By Indeed Editorial Team

Published 4 August 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Knowing employees' skills is an important part of business management, as it allows managers to utilise the workforce effectively. A skills inventory is a resource for evaluating, collating and tracking the abilities of each employee so an organisation can delegate tasks to the most suitable people and build strong teams. Understanding what this resource is and how to create one can help you manage and utilise staff efficiently. In this article, we explain what an inventory of employee skills is, why it's important and how you can create one.

What is a skills inventory?

A skills inventory is an audit that an organisation undertakes to compile the current abilities of its workforce and compare them to the major skills it requires to operate effectively. The inventory collates essential skills and determines how competent each employee is with them so employers can evaluate whether the current workforce can achieve the organisation's goals. Companies of all sizes and types use skills inventories to assist them in making strategic decisions.

Related: What are hard skills and how do they differ from soft skills?

Why is a skills inventory important?

Skills inventories are a key part of workforce management. An inventory of employee skills equips a business with essential information about what its workforce can achieve. Here are some ways such an inventory can be beneficial:

Learn about the staff

Creating an inventory of skills allows you to determine what employees are capable of. This type of audit often uncovers skills you may not have been aware of, which is important if the business is considering hiring new employees or filling open positions internally. The inventory process provides managers with the opportunity to get to know employees better and strengthen working relationships.

Identify skills gaps

Skills inventories enable businesses to compare the existing skills of their employees with the skill set they require for expansion. For example, if a retailer wants to start an e-commerce store and there are no existing employees with e-commerce or digital marketing skills, they have a gap between their existing skills and the skills they require to run an online store. By identifying this skills gap, the retailer can make strategic decisions about hiring new employees or training existing ones.

Related: Functional skills: definition, importance and examples

Delegate tasks to the right employees

You can use an audit of employee skills to ensure that each person works on tasks that suit their skill set. Managers and team leaders can search the inventory for employees with the skills they require for a project, aiding planning and strategy. Better task assignments can help to increase productivity and outcomes across the organisation.

Identify training opportunities

Employers can use skills inventories to find skills deficits and address them by investing in targeted training. This is especially important if there are basic industry skills they lack in their workforce. Businesses can upskill their workforce with in-house training or send employees to training sessions.

Acquire new talent

With an inventory of skills, hiring managers and recruiters can look for candidates who have skills that the company lacks. Understanding the skills gap enables employers to create job descriptions that are highly specific and more likely to target the right types of candidates. This is important if a company is expanding quickly and requires candidates to fill new roles.

Execute long-term strategies

Skills inventories help leaders to form long-term business strategies and determine the direction, values and objectives of the company. With knowledge of employees' skills, executives and managers can build a workforce that aligns with the long-term goals of the business. This can involve training, acquiring new talent and redeploying employees.

Related: 19 practical skills to learn to grow your skill set

Build a productive workforce

Businesses can develop a more agile workforce that can quickly respond to specific commercial opportunities or events in the market. They may assemble teams of employees outside of conventional departments and roles. Anyone who has a useful skill can contribute to company goals and objectives, providing the productivity that the business requires to complete tasks and projects quickly.

Fill vacant roles

Employers increasingly recognise the importance of succession planning as part of talent management. Skills inventories can help to identify employees with the potential to fill leadership and other strategic roles when they become vacant. This helps organisations to achieve smooth transitions that maintain productivity through staff changes.

Develop employees' careers

Skills inventories can enhance the workplace culture and get staff and management thinking about career development. Line managers can use skills audits to guide employee appraisals and help staff to identify ways in which they can gain new skills and experience. Managers and human resources personnel can advise new hires on the skills they require to advance in the company.

Related: Important workplace social skills

How to create skills inventories

Skills inventories are a valuable resource for establishing a capable workforce. Collating employees' skills makes it easy to assign the best employee to a task. Here are five steps for creating an inventory of employee skills:

1. Identify the organisation's desired skills

List the skills that the organisation expects employees to have. Consider the organisation's projects and objectives and note as many skills as possible across multiple departments. The more comprehensive the list is, the more effective it can be. Try to be as specific as possible. For example, list specific coding languages rather than computer programming skills.

2. Organise skills according to competency

Arrange the skills you're auditing by degrees of competency. For each skill, rate employees as beginner, intermediate or expert. This can help you to distinguish between employees according to their level of expertise so that when you need someone who is proficient with a skill, you can narrow your choices to the most competent people.

3. Choose a method for tracking

Establish a systematic method of recording and tracking skills that suits the organisation's size and complexity. The system should allow the business to organise, search for and update skills easily. Smaller businesses can build an inventory using a simple spreadsheet, but larger businesses may require dedicated database software to track their results efficiently and answer specific search queries.

4. Collect skills information from employees

Acquiring comprehensive skills information from each employee is a significant undertaking and often requires delegation to managers or the HR department. Arrange meetings for acquiring skills information from employees or develop self-assessment questionnaires or skills assessment tests that employees can complete. Here are some examples of questions to ask employees:

  • What are your technical skills?

  • Do you have experience in using this skill?

  • Have you had recent training in new skills?

  • What's your level of proficiency in this skill?

  • Can you list your previous and current certifications?

  • What was your area of focus or interest in your academic studies?

  • Have you taken any educational courses?

  • Do you possess skills you feel would be valuable to this company that we're not currently using?

  • What training or experience do you require to become competent in this skill?

  • Can you list your skills and your level of experience in using them?

  • Are there any skills you want to improve?

  • Are there any skills you feel we could provide more training on?

Related: 6 examples of self-appraisal comments by employees

5. Record all skills data in a competency management system

A competency management system is a software application that you can use to record employee skills data. Managers can enter data directly into the program or add information from other sources. The digital inventory can identify, analyse and manage the skills data for decision-making and workforce planning.

5. Regularly update your skills inventories

Over time, the needs of a business and the skills of its employees change, so it's important to update the inventory of skills regularly to ensure that it accurately reflects the current skill set of employees. With an effective system for obtaining employee data, organisations can ensure that information on employees' skills is always available. The best times to update skills inventories are before starting a large project or hiring new employees.

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