Skills Mismatch | What Is It & How to Bridge the Gap | Toggl Hire
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Skills Mismatch | What Is It & How to Bridge the Gap

Post Author - Elizabeth Thorn Elizabeth Thorn Last Updated:

According to the 2023 ManpowerGroup Talent Shortage survey, 77% of employers report difficulties in filling roles — a 17-year high that’s over twice what it was a decade ago.

The issue? The skills shortage is partly to blame, with McKinsey reporting that 87% of organizations “know they have a skills gap or will have one within the next few years.” However, even when businesses are able to find highly skilled employees, they don’t always hire for the right skills.

That’s what a skills mismatch is — it refers to a noticeable gap between the skills of the employees and the skills actually needed for the particular job. Understanding this mismatch is key to ensuring your team’s talents are used effectively and your business thrives.

TL;DR — Key Takeaways

  • Skills mismatches happen when there’s a gap between the most relevant skills employees have and the top skills needed for their jobs. This mismatch can take various forms, such as horizontal, vertical, or skills obsolescence, and has significant consequences like decreased productivity, job dissatisfaction, and economic impacts.

  • Don’t confuse the mismatch with skills gaps (specific missing skills) or skills shortages (insufficient skilled workers in an industry). Each issue has clear causes, results, and solutions, with some involving up-skilling, re-skilling, and education-industry partnerships.

  • Common causes for skills mismatches are poorly written job description ads, gaps in the hiring procedures, overemphasizing job experience over skills, and emerging technologies. You can avoid a lot of these issues by including skills assessments in the hiring process.

  • Continuous investment in employee development (onboarding programs, ongoing training, fostering a learning culture) is vital to prevent mismatches. It enhances job satisfaction and retention while also contributing to the overall health of the global economy.

What is a skills mismatch?

A skills mismatch occurs when the skills and competencies possessed by job candidates don’t align with the requirements and expectations of the position. This can happen due to various reasons, including:

  • Gaps in education

  • Inadequate training

  • Outdated skillsets

  • A rapidly evolving job market that demands new skills and aptitudes

While this might seem like a hiring issue, skills mismatches can lead to significant consequences for both employers and employees.

For the latter, it can hamper career progression, limit job opportunities, and lower prospects for personal growth and self-worth. For employers, it can result in higher recruitment costs, longer time-to-hire, reduced business productivity, and increased employee turnover.

For example, hiring managers admit that they hire the wrong person in 74% of cases. In the US, these mismatches result in an average annual cost of ~$15,000 for bad hires and ~$30,000 when a good employee decides to leave due to job dissatisfaction (e.g., they have the skills needed to succeed in a tech-focused manager-level position and their employer isn’t using those skills effectively).

Skills mismatches cost organizations billions of dollars worldwide.

More than 1.3 billion people worldwide are employed in either overqualified or underqualified positions. The global economic consequences of this mismatch were estimated to be ~$8 trillion in unrealized GDP for the world economy in 2018. These statistics underscore the importance of addressing skills mismatches in your organization to reduce turnover costs and enhance overall productivity.

Skills mismatch vs. skills gaps vs. skills shortages

While interconnected, skills mismatches, skills gaps, and skills shortages are distinct concepts. Understanding the nuances between the three can help you identify issues within your organization that are leading to skills-related issues and inefficiencies.

Skills mismatch

This happens when there’s a disconnect between the skills employees have and what’s actually needed in their current roles or in the wider job market.

  • Example: An older tech team employs experienced developers knowledgeable in languages like C++ while the industry has moved on to newer technologies like Mojo

  • Cause: Rapid technological changes, shifts in market demand, educational systems not aligned with industry needs

  • Result: Job dissatisfaction, lower productivity, negative impact on mental health

  • Solution: Up-skilling and re-skilling programs, continuous professional skills development, education-industry partnerships

Skills gap

These pop up when there’s a specific set of skills missing among employees or job seekers for certain roles.

  • Example: A marketing agency struggles to find SEO managers with the right combination of hard skills and soft skills, including strategy, analytics, and reporting

  • Cause: Rapid industry evolution, new technological advancements, inadequate training opportunities

  • Result: Unfilled positions, reduced competitiveness, decrease in company growth

  • Solution: Targeted training programs, collaboration with educational institutions, and internal mentoring

Skills shortages

This occurs when there aren’t enough people with top skills for the available jobs in a certain industry or role.

  • Example: A large hospital has an ongoing need for more nurses with qualified healthcare skills

  • Cause: Demographic changes, migration patterns, and educational systems failing to keep pace with industry demands

  • Result: Straining industry growth, increasing workloads for current staff

  • Solution: Incentivizing education in high-demand fields, immigration policies to attract skilled workers, increased investment in education and training

The differences between a skills mismatch vs. gap vs. shortage.

Different types of skill mismatches

Skills mismatches don’t always look the same, and when working to build a more satisfied, efficient workforce, understanding the three types of skill mismatches is key to improving productivity and achieving business growth.

Horizontal mismatch

A horizontal mismatch occurs when an employee possesses the required level of qualification for a particular role, but the knowledge and skills required for the job vary significantly from their formal education and training. Essentially, an employee may have the “right” credentials but not the “right” skills for a job.

For instance, an individual having a software engineering degree might not be a great fit for a customer service role. Or, a top candidate with an MBA might have the required education for a senior business analyst role but lack the necessary technical skills to achieve the results needed.

It’s important for HR professionals to be aware of horizontal mismatches because these can lead to employee dissatisfaction, higher turnover rates, and, ultimately, wasted time and resources.

Vertical mismatch

A vertical skill mismatch denotes a situation where an employee’s educational qualifications exceed the job’s requirements. This often manifests in cases where graduates find themselves in roles typically reserved for non-graduates, resulting in a lack of job satisfaction and underutilization of their skills.

Vertical mismatches are becoming increasingly common, with a third of recent graduates in the UK reporting they’re overqualified for their roles.

The repercussions of vertical mismatch are multifaceted, ranging from decreased employee engagement and productivity to reduced career growth. This makes sense, as employees in these situations are unable to grow in their careers — they’re feeling stuck and losing motivation.

Skills obsolescence

While technology has been advancing at a rapid rate since Y2K, the past year or two has seen a ridiculously rapid increase, with new technologies like generative AI and machine learning (seemingly) dominating everything from business to our personal lives.

Skills obsolescence refers to the scenario where knowledge and skills that were once relevant and sought-after in the job market become outdated, with new technological advancements rendering them irrelevant.

Companies and employees are having a hard time keeping up with rapid technological advances.

As an employer, to combat skills obsolescence, it’s important to help your employees stay “properly skilled” through regular training and development programs. Encourage cross-training and job rotation to keep employees engaged and learning.

As an employee, ongoing learning and upskilling are key to remaining competitive in the job market. Seek out opportunities to attend seminars and webinars or take online courses to stay current with the latest industry trends.

How do skills mismatches happen?

In a job market marked by constantly shifting demands, skills mismatches have become increasingly common. Understanding the roots of these mismatches is key to later addressing them within your hiring processes and internal mobility programs.

Poorly written job descriptions

The clarity and accuracy of a job description are important in attracting candidates with the right skills. Often, job ads have vague language, outdated requirements, or unrealistic expectations for the salary offered.

This matters a whole freakin’ lot, as an unclear job description can result in a mismatch between a candidate’s skills and the actual job requirements. Let’s say you post a job ad for a senior accountant with senior-level skills but are offering to pay an entry-level salary. This might lead to hundreds of overqualified candidates applying for a job they’d end up resenting (and leaving) in a few months.

Or, let’s say your company really needs a new sales development representative with standard sales skills and also other soft skills like strong negotiation and interpersonal skills. These skills are lacking in your current sales team, and hiring someone with those skills would really complete the team. If you fail to mention those soft skills in the job listing, you risk attracting a poor hire.

Top tips to enlarge those brains Top tip:

Ensure the offered compensation matches the skills and experience required for the position. This can help you avoid a vertical mismatch that might lead to disengaged or disgruntled employees

Gaps in the hiring process

Skills mismatches can also result from gaps in recruitment procedures, like insufficient screening methods, biased selection criteria, or ineffective interview methods.

These gaps can make it hard to correctly identify a candidate’s skill set, which might cause hiring managers to miss great candidates or, if they are able to identify top candidates, have their best skills overlooked in favor of less important factors.

When reviewing a resume to avoid mismatches, you should first consider which top skills on a resume you’re looking for and ensure these align with the job description.

For example, for sales roles, standard sales skills should be evident, but you should also look for interpersonal skills that indicate the candidate’s ability to complete tasks effectively and work well in a team.

Hiring for experience vs. skills

Focusing on experience rather than important skills, you’ll miss out on candidates who have less on-the-job experience but the right skills for the job. Experience matters, but it shouldn’t be more important than the actual skills needed for the job.

Someone with ten years of experience as a graphic designer at Nike might look great on paper, but perhaps they lack the interpersonal skills needed to mesh with your team. Or, they might have decent design skills but lack other hard skills needed to accomplish projects within budget using the tools your clients require.

A young, recent graduate with only a year of internship experience might possess all of those hard skills and more and, in this case, be the better choice for the role you’re hiring for.

Instead of reviewing their resume right from the start, introduce skills-based hiring as a way to filter unqualified candidates efficiently and instead focus on those who possess the most relevant soft and hard skills needed to succeed in the role. Not only does this reduce hiring bias, but it also helps improve candidate experience and quality of hire.

Skills tests are instrumental in this process, which provide real-world scenarios to accurately gauge a candidate’s abilities. Tools like Toggl Hire offer pre-built, expert-backed skills tests to help you assess leadership and management skills, technical skills, and more relevant skills from mid-senior to senior positions.

Skills-based vs Traditional hiring
Skills-based hiring can help reduce various types of skills mismatches.

Emerging technologies

Technological advancements have been happening at a neck-breaking pace. In the last couple of years (and especially over the last year), we’ve seen artificial intelligence and machine learning being adopted more widely across industries.

These innovative technologies have the potential to revolutionize entire industries and transform the way we work. However, they’re also responsible for the growing mismatch between the job market and the available talent.

This mismatch happens because the skills required for jobs are changing faster than people can learn them. Due to this increasing gap, organizations are struggling to fill critical roles, while job seekers are finding it harder to land jobs.

The World Economic Forum’s predictions of the most important skills throughout 2028.

When the World Economic Forum first published the Future of Jobs Report in 2016, companies predicted that 35% of workers’ skills would be disrupted in the following five years. In 2023, that share has risen to 44%, driven by the adoption of what they call “frontier technologies.”

It’ll be interesting to see how this issue unfolds in the future, as governments and industries begin to place restrictions on AI technology and software, but one thing’s for sure, employers should start investing in their employees’ upskilling if they want to stay ahead of the curve.

Overeducated and undereducated employees

Another dimension to skills mismatches is employees having higher qualifications than what their job requires. Conversely, undereducation also contributes to skills mismatches, particularly in regions or industries where access to quality education is limited.

Causes can range from academic inflation to global economic issues. In these situations, overeducated individuals may struggle to find jobs that match their qualifications, leading them to either settle for lower-paying roles or accept positions that don’t fully utilize their skills.

On the other hand, undereducated individuals may lack the necessary skills or education for a particular role, leading to poor job performance and an internal skills gap.

Economic downturns and recessions can exacerbate these issues. Companies facing financial strain may cut costs and reduce salaries, making it more difficult for overeducated individuals to find roles that meet their expectations.

Similarly, undereducated individuals may face hiring freezes or limited opportunities during economic downturns as the best roles go to those with more qualifications and relevant skills they haven’t had the opportunity to develop.

The gap between required skills and the skills possessed by workers due to undereducation can impact productivity, innovation, and career growth. Addressing this requires strategies like enhancing access to education, offering training opportunities, and fostering a culture of lifelong learning.

The importance of addressing skills mismatches

Understanding and bridging the skills gap, regardless of what it looks like or why it’s occurred, benefits not just individual departments within a company but extends its positive effects to the wider community and economy. Here’s why it’s crucial for, well, literally everybody.

For candidates and employees

At the individual level, skills mismatches can lead to underemployment, particularly in cases of overqualification. This situation often results in lower or insufficient wages, affecting both job and life satisfaction.

Even in developing countries, where training opportunities might be limited, overqualification is becoming a big issue. Hardworking individuals might receive training but struggle to find jobs that match their skill level at a decent, liveable wage.

Moreover, skill deficiencies greatly reduce the chances of securing a job in the first place, impacting personal growth and financial stability.

To reduce skills mismatches, candidates should focus on continuous learning and development. Regular self-assessment and feedback are important for identifying areas needing improvement.

Top tips to enlarge those brains Top tip:

Refining soft skills, like organizational skills or management skills, can help make candidates and employees more marketable, helping them perform better in culture-fit interviews. Understanding the most relevant skills to a certain career path or position can help candidates understand which skills to focus on.

Ultimately, adaptability and self-initiative in learning and taking on new challenges at work are key to matching skills with market needs.

Doing so increases employability and opens up new opportunities for career advancement, which allows candidates to showcase their capabilities and potential, leading to higher job satisfaction and better compensation.

For hiring managers

For hiring managers, skills mismatches pose challenges in productivity and competitiveness. It’s harder to implement new products, services, or technologies when the team lacks important top skills. This mismatch also leads to higher staff turnover, impacting the overall efficiency of the team.

On a purely business level, skill mismatch can directly affect any company’s bottom line. Reduced productivity and competitiveness can lead to lost profits, market opportunities, and interested investors.

This situation also makes it challenging for businesses to adapt to market changes or technological advancements, potentially leaving them behind in an increasingly competitive global market.

To address this issue, hiring managers need to regularly update hiring criteria to align with industry trends, craft clear and detailed job ads, and place emphasis on both soft and hard skills.

From a managerial perspective, it’s crucial to ensure that the particular skill of the workforce aligns with the strategic goals of the organization.

Closing the gap of mismatch directly:

  • Enhances productivity and performance
  • Helps retain employees
  • Is cost-efficient due to minimized underperformance and useless training expenses.
Top tips to enlarge those brains Top tip:

Using data analysis-based hiring tools and skills assessments in hiring will enhance the accuracy of matching candidates to job roles.

For economies

While a lack of soft skills can hurt a candidate’s chances of snagging a great job, and a team full of senior-level employees without the right project management or data analysis skills can affect productivity and decrease revenue, skills mismatches matter on a broader, global level, too.

Skills mismatches can increase unemployment rates and affect the attractiveness of countries to investors. Additionally, if skills mismatches are prevalent across various industries and countries, companies experience decreased profits, affecting the overall economic growth and development.

Addressing this is important for the economy (and we’re talking on a global scale here) because it helps people find the right jobs, which makes businesses and countries more productive and competitive.

When people have the skills that match job needs, it reduces unemployment and helps everyone adapt to new technologies. This builds a stronger economy and makes our society more stable.

9 tips for avoiding skills mismatches

Now that you (hopefully) see just how important closing the skills gap is, let’s dive into nine tips to help you avoid these mismatches and ensure your team’s skills align perfectly with their roles.

1. Identify important skills

You can’t close any skills gap or mismatch without first knowing which skills are the most important to your organization. Conducting a skills gap analysis can help identify your company’s long-term goals and the critical skills required for key roles, like a mix of hard and soft skills for roles integral to business objectives.

Once you’ve hired a great employee, use tools like self-assessments, 360-degree feedback, and skills testing to understand employees’ skill levels. Develop an action plan to address these gaps, including training programs, mentorships, or hiring.

How to conduct a skills gap analysis
Here’s an example of talent or skills gap analysis.

2. Consider the most in-demand skills

Digital literacy and tech skills are highly in demand in 2024 (and likely beyond). Skills like data analysis, coding, and understanding AI and machine learning are important hard skills in many fields, and keeping up with trends like this is essential for staying relevant.

Important soft skills such as critical thinking skills, emotional intelligence, and written and verbal communication skills are valued in a world where automation is common. These skills help solve complex problems and adapt quickly.

Sustainability and environmental skills are increasingly important these days, too. Knowledge of environmental management skills and sustainable practices is highly demanded. These skills are key for businesses adapting to new government or industry regulations and consumer needs.

3. Write a skills-based job description

As a hiring manager, shift your focus from generic qualifications to specific skills when crafting job descriptions. Use action verbs and clearly list the soft skills and hard skills required for the role.

This approach attracts candidates with the right skills and minimizes the risk of mismatches. In the skills section of the job ad, be clear about the expected proficiency level for each ability — it makes a world of difference.

How to write better job descriptions
Use these tips to write better job descriptions and avoid skills mismatches.

Avoid common errors such as omitting salary details, lengthy or vague descriptions, and excessively rigid requirements. Understand what qualified candidates with the right skills want from a position similar to the one you’re advertising for and find ways to cater to those needs and wants.

It’s not just about knowing what skills to put in the job ad, though. Creating an engaging job description is important, too. It should outline essential skills, experience, and role responsibilities while also highlighting your employer brand and other ways you invest in employees.

4. Implement skills assessments in hiring

Integrating skills assessments into your hiring process helps align your hiring process with the job requirements to get a true measure of a candidate’s job-specific skills.

Seamless integration of these assessments into your hiring workflow can significantly enhance the process, too, reducing time to hire, improving the candidate experience, and reducing costly hiring mistakes that lead to high employee turnover or attrition.

Hiring tools like Toggl Hire offer various skills assessments to help with this. You can browse the test library for pre-built tests for specific job roles or create a custom skills assessment test based on the skills that are most important for each role you need to fill.

5. Test for soft and hard skills

Soft skills examples are strong communication skills, interpersonal skills, project management skills, writing skills, and customer service skills.

Hard skills examples are computer skills, coding skill set, or search engine optimization. They’re usually job-specific abilities employees acquire through training or experience.

Soft skills vs hard skills
The difference between soft vs. hard skills.

Test for both! They’re both equally important, especially in remote positions where employees are required to work together as a team.

For example, a candidate might lack certain hard skills like computer skills but have relevant soft skills like a willingness to learn, communication skills, problem-solving skills, or active listening skills — all valuable personal skills that would make them a great asset to any team (remote or otherwise).

Methods like behavioral questions and situational judgment tests work well for assessing soft skills. For hard skills, consider coding challenges, skill-specific exams, or simulations.

6. Focus on transferable skills, too

In 2018, 60% of job roles weren’t around in 1940. Businesses now expect that 44% of job skills will change in the next 5 years. This is just one of many statistics that underscore the importance of hiring candidates with transferable skills.

Transferable skills are versatile abilities that can be applied in different jobs and situations. The most relevant of them all — problem-solving skills, communication skills, and leadership skills — are valuable across different industries with particularly mismatched skills issues.

When hiring candidates with transferrable skills, you’re able to select qualified candidates who can adapt to various challenges, switching between hard and soft skills seamlessly within different situations or even job functions.

Invest in employee training and development programs focused on boosting transferable skills to help align your team’s skills with company needs and prepare them for future roles or market changes.

7. Create professional development plans

A professional development plan is a flexible document that outlines an employee’s skills, career goals, and aspirations, offering numerous benefits for companies, including improved performance, engagement, and retention.

Develop these individualized development plans for your employees to identify skill gaps early on and set clear objectives for skill development. Performance evaluations, feedback, resources like training programs, and mentorship opportunities play a significant role in these initiatives.

Top tips to enlarge those brains Top tip:

To create an effective professional development plan, focus on these key steps:

  • Understand your team’s career goals and objectives
  • Set development goals
  • Create an actionable plan
  • Put skills on a timeline
  • Plan regular reviews
  • Thoroughly document the process

8. Optimize the onboarding process

A good onboarding process can quickly improve the skills of new hires or help you identify (early on, which is best!) mismatches or gaps in the skills they possess versus the rest of the team they’re joining.

Develop detailed onboarding programs that teach both practical skills required to succeed within the organization and the values and practices of your company. For example, if communication and critical thinking are especially important to your company,

It’s helpful to pair new hires with mentors or buddies who can help them navigate their first weeks at the company. The onboarding process should also include regular feedback and the ability to ask questions and discuss any challenges via scheduled meetings or check-ins.

You’ll want your new hires to feel valued and supported, so offering them access to online courses or in-house training sessions will help them grow their skills and fully adapt to their new roles quickly.

9. Continue to invest in your employees

If you’ve implemented the tips above, now it’s time to just keep doing what you’re doing (and more of it)!

Continuous learning and skill improvement are important in any modern workplace. Creating an environment where learning is common practice helps your company stay up-to-date while making your employees happier and more likely to stay and contribute to important business goals.

Regularly perform skills gap analyses and look for any mismatches. Implement the tips above to help avoid mismatched skills and unhappy employees.

Don’t overlook the importance of simply sitting down to chat with your team about their progress and how they fit into the company’s goals, as it makes them feel valued and part of the bigger picture.

Start hiring for the right skills

From posting a position on job search platforms to extending a job offer, the right hiring process is extremely important in preventing the mismatch of skills.

Toggl Hire’s skills testing platform helps bridge the skills gap and ensures companies hire the best candidate for the job. Test job applicants on the actual skills they need to succeed, saving time and money along the way.

Don’t let mismatches make you mad — try Toggl Hire today to get aligned. Start by browsing our skills test library to see what skills-based hiring is all about.

Elizabeth Thorn

Elizabeth is an experienced entrepreneur and content marketer. She has nine years of experience helping grow businesses and has experienced first-hand the impact of skills-based hiring in today's global, digital world.

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