In finance, Gap analysis refers to a process of enhancing an organization’s fiscal performance by evaluating the cause of the gap between existing outcomes and the long-standing objectives. As such, the analysis evaluates the differences between a company’s real financial performances alongside its prospective financial performances. With respect to Gap analysis, an individual usually highlights the company’s present financial condition, its preferred financial condition, and an inclusive arrangement to fill out the gap between the two conditions. The study can offer many approaches into a company’s financial performance. The analysis is relevant for big businesses and institutions. New companies will find it particularly helpful in gaining an understanding of how to put in order and allot financial resources.
The aim of undertaking the process is to have a comprehensive perception of the risk management outline. The outline aids in recognizing the supplementary measures needed to fulfil with regulatory necessities of the selected approaches. In addition, the analysis offers a foundation for the growth of a roadmap that illustrates execution actions. Based on the above illustrations it is apparent that Gap analysis is helpful at the start of a financial project when coming up with a business case. Similarly, the analysis is necessary during the identification of the tasks required to undertake the project.
Statement of research questions
The proposed research paper will attempt to identify the importance of Gap analysis in different financial organizations. In a bid to identifying the importance, the research paper attempts to answer a number of sub-questions, which explores the effectiveness of Gap analysis. They include the narrow and the broad questions to determine the potential of Gap analysis in a given organization. Below are the research questions:
- What is the importance of Gap analysis in financial organizations?
- What level of accuracy of implementation of Gap analysis is in the financial organization?
- What organizational benefits are achieved by applying Gap analysis?
- Is Gap analysis required to be implemented along with the organizational strategy?
- What are the different methods of Gap analysis applicable in the case?
- What are the Gap analysis advantages and disadvantages when applied in a case company?
Why is this issue so important?
The importance of the Gap analysis approach to different financial organizations is worth studying because the approach is one of the most applied methods in measuring the degree of financial achievements in organizations. By studying it, it can be revealed whether a financial organization is effective in using the financial resources at its disposal as required. The rationale is based on the identification of the difference between the actual or existing level of financial performance and the potential or desired level of financial performance. Equally, through the study it will be known whether the failure to take one or more of these steps is a major factor contributing to a low probability of goal achievement. The findings obtained from this study may be used in improving the efficiency of Gap analysis approaches in different financial organizations.
A number of literature reviews have been documented on the importance of Gap analysis in finance. Ten literature reviews were utilized in the research. Their reliability had to be checked to ensure that they were scholarly. Evaluating the reliability of these sources involved a number of processes and one of them was to look at whether the article or source is peer reviewed or not.
Filling a Gap in Traditional Transaction Cost Economics asserts that Gap analysis is an economic and financial approach that is effective in examining an organization’s fiscal performance by evaluating the cause of the gap between existing outcomes and the long-standing objectives (Blomqvist, Kyläheiko, &Virolainen 2002). Similar studies such as A Gap analysis Of Professional Service Quality, Achieving Service Quality through Gap analysis and a Basic Statistical Approach, and Gap analysis: Concepts, Methods, And Recent Results have shown that Gap analysis has been used alongside a number of other approaches to improve corporate finance in management (Brown & Swartz 2009). For instance, Filling a Gap in Traditional Transaction Cost Economics suggests that managers consider filling gaps in their organizational management to ensure that the corporate goals are achievable and sustainable (Jennings, 2010). In addition, Employees’ Overestimation of Functional and Relational Service Quality illustrates that Gap analysis has extensively been used in improving employee performance with an aim of improving the overall corporate financial performance (Peiró, Martínez-Tur, & Ramos 2005).
Normally, organizations tend to apply skills, knowledge, and tools to ensure that they increase their competitiveness and achieve some specific goals (Lee, Strong, Kahn, & Wang 2008). Nevertheless, not all goals are achievable. In addition, the process of measuring the degree of success in goal achievement differs significantly (Russell & Yilmaz 2006). Gap analysis tends to go beyond the recognition of the company’s ability to use resources and invest in technology to determining its needs in terms of budget, employee issues and needs and the existing set of benefits (Jennings 2010).
Effects of the Organization-Public Relational Gap, Review of the Current Gap between Clients ’ Expectations and Perceptions, and Using Gap analysis to Improve System Acceptance indicate that there is a relationship between Gap analysis and financial and economic theories. As such, Kang asserts that Gap analysis is the most effective technique in completing some of the financial or economic tasks (Kang 2013). Similarly, Russell and Yilmaz attempt to develop one of the most effective studies in examining Gap analysis tool as a model for improving organization goal achievement and system acceptance (Russell & Yilmaz 2006). According to the study, Gap analysis is a method for assessing the distance between two states of an organization, its activity, or knowledge base. Achieving Service Quality through Gap analysis and a Basic Statistical Approach suggests that the difference between these two states of an organization is known as the gaps or the disparity between what is achievable and what it is supposed to be (Headley & Choi 2008). According to Russell and Yilmaz, Gap analysis is applicable to organizational performance, skills, knowledge and market strength, or any other measurable aspect of an organization (Russell & Yilmaz 2006).
The discrepancy has limited the volume of the existing knowledge and understanding of the effectiveness and potential of the Gap analysis tool in meeting the needs and demands of the modern organizational management (Lee, Strong, Kahn, & Wang 2008). Neshat and Dehghani notes that Gap analysis does not seek to make a clear identification or prescription of a specific implementation of organizational change or improvement (Neshat & Dehghani 2013). Nevertheless, the authors note that Gap analysis is a crucial tool that acts as a guide to strategic planning, organizational change, competitive actions, and a number of other tasks associated with renewing, redirecting, or developing the organization. Furthermore, the authors assert that the general process involved in Gap analysis is a representation of the basic modelling procedure. In this case, Gap analysis involves production of a model of the context that an organization wishes or desires to employ (Neshat & Dehghani 2013).
Some studies suggest that the benefits or impacts of Gap analysis to financial organizations has not been extensively studied (Chevalier 2010). However, State Government Promotion of Manufacturing Exports suggests that a few researchers have attempted to describe the possible and potential benefits of carrying out Gap analysis to examine the difference between the current state of an organization and the desired or potential state of performance (Kotabe & Czinkota 2012). The article asserts that Gap analysis performs an important task in achieving changes and improvements in a more rapid way and on a smaller scale than when re-engineering or restructuring techniques are applied. When focused on a specific aspect of an organization such as employee needs and financial organizational needs, Gap analysis proves to be important in revealing the areas that need additional focus and improvement. In addition, a number of scholars such as Peiró, Martínez-Tur, & Ramos have shown that Gap analysis offers a low-cost and rapid way of addressing the problems and needs in specific areas of an organization (Peiró, Martínez-Tur, & Ramos, 2005).
The proposed study will be a mixed methods research employing both qualitative and quantitative approaches to data collection and data analysis. In addition, the study will use a case approach to determine the study population. The purpose of using a mixed method approach is to ensure that the proposed research will benefit from the advantages of using both qualitative and quantitative methods and reduce the effect of the disadvantage associated with using only one of the two methods. For instance, a qualitative method has an objective of gaining an in-depth understanding of the underlying facts, reasons and factors or motivations in a given phenomenon (Kotabe & Czinkota 2012). It also seeks to provide insights into the problem under the study through generating ideas and hypothesis that may precede quantitative research. Thus, it is worth using qualitative research prior to a quantitative research. Moreover, the purpose of a qualitative research is to reveal the prevalence of trends in the existing opinions or thoughts about a phenomenon. On the other hand, it is important to use a quantitative research because it seeks to quantify data and generalize the results obtained from analyzing the data.
Thus, the proposed research will take the advantage of the strengths of the mixed method approach. For example, a mixed method approach increases the validity of the research findings because it allows the researcher to examine a given phenomenon in a number of ways, which contradicts the use of either qualitative or quantitative methods that are limited to one or a few approaches (Kotabe & Czinkota 2012). Secondly, a mixed method approach allows the researcher to use better and more effective data collection instruments than using either of the two methods. For example, it is helpful to use focus groups to inform the progress or development of a questionnaire, which is not possible when using either qualitative or quantitative methods. Thirdly, a mixed methods approach allows the researcher to develop a greater understanding of the findings. For instance, qualitative data shows that some change has occurred and the degree or amount of change that has taken place. On the other hand, qualitative data helps the researcher understand why the change has taken place (Headley & Choi 2008).
The study seeks to examine how Gap analysis is a beneficial approach to different financial organizations. As such, it will take organizations as the target populations, from which samples will be taken. In this case, the researcher will identify six financial organizations from the private sector in the UK. All the organizations will have an incorporated status and have at least 200 employees, a board of governors and at least one manager or CEO or any other equivalent office.
Specifics of the methods
Both interviews and surveys will be used in this study. Senior managers in the target financial organizations will be interviewed because they are the participants of the study. Surveys will be used to examine their approach towards Gap analysis, while interviews will be done through questionnaires to investigate their attitudes and perspectives towards Gap analysis.
For this study, the data will be collected through field research. The method entails acquiring public data from secure and reliable finance institutions, face-to-face interviews, and questionnaires. Finance organizations will provide the researchers with crucial information such as the present and the past financial reports. The sources are very efficient since they are bias free. The face-to-face interview will require a participant to question participants in person to collect their personal views. During the interview, the contributors will be asked to detail their penalties perspectives. The questions used during the interviews are open ended. Equally, questionnaires will be used to collect private information from the participants. Thus, this study will use a mixed method approach. For statistical data, SPSS will be used to develop statistical analysis techniques such as regressions and correlations.
Potential and empirical obstacles
During the research process, a number of potential problems that are likely to affect the progress and outcomes will affect the researchers. For instance, access to financial organizations identified as the study population will be a major challenge. Equally, the process of convincing managers to be part of the study is expected to be difficult. For example, most organizational leaders do not like to be involved in procedures that tend to question or investigate their work practices. Secondly, the process of recruiting senior managers to be participants of the study is expected to be relatively long because most of these individuals have tight schedules due to the nature of their work.
Conceptual and theoretical problems and difficulties
The research study is founded on the hypothesis that Gap analysis is an effective method of analyzing and measuring organizational achievement of goals and objectives. It is also hypothesized that Gap analysis is as effective as re-engineering or restructuring techniques. However, this is a major challenge because restructuring and re-engineering techniques have been deeply studied in the recent past, providing empirical evidence that they are very effective in improving management techniques in small and large organizations. Since most organizations tend to apply both re-engineering and restructuring techniques, the concept of finding gaps or differences between the current and desired or future positions is not applied in most organizations. In addition, since only a few studies have attempted to describe Gap analysis from an empirical approach, it will be difficult to compare and contrast the small volume of information available about the effectiveness and importance of this technique with those for re-engineering and restructuring that have been deeply studied. Although it is theoretically correct to argue that the concept of Gap analysis is as much effective as both re-engineering and restructuring, the evidence available from a wide range of studies to prove that the latter two techniques are some of the best approach to organizational practice is overwhelming. Therefore, this research recognizes this issue as a conceptual and theoretical problem likely to affect the results of the study.
Just like any other research, investigators will be faced with ethical issues during their studies. Therefore, they have to be watchful when tackling ethical dilemmas encountered in the field. The problem of consent has been recognized as one of the issues likely to affect the progress of the proposed research. In particular, the issue of examining corporate managers based on their knowledge of corporate leadership and practices such as Gap analysis, re-engineering and restructuring is a critical issue because managers tend to conceal information on their corporate strategies and practices because they fear to reveal corporate strategies or trade secrets.
To tackle the above and other expected ethical issues, the researchers will seek advice from the psychologists and research experts on how to tackle sensitive research concerns. In this regard, before the data collection process is undertaken in our research, permission for the study will be requested from the financial organizations and the Institute of Research Board. Equally, the research will follow the directives of the required code of ethics. As such, the research will cause no harm to the participants, safeguard the participants’ privacy, and be voluntary. During the research, participants should be informed of what is required of them before the start of the project, the length of the project, benefits accrued from the project, possible risk associated with the research, and who to consult.
My position as a researcher
Being a researcher, I will be required to take the leading role in all steps of the proposed study from proposal development through data collection to the completion of the research and presentation of results. I will act as the principal coordinator in carrying out the research. I will also take the leading role of approaching the organizations identified as well as interviewing the organizational managers. I will also provide the guidelines on ethical and legal aspects of the study.
To achieve the desired goals within the allotted time, a timeline will be utilized during the research process. Highlighted below is a timeline for the proposed project. The timeline will be appropriate when determining if a follow-up on the research is appropriate. The timeline of the proposal specifies the time when the project will begin, the duration, and holiday breaks in between the specific tasks.
Blomqvist, K, Kyläheiko, K &Virolainen, VM, 2002, ‘Filling a gap in traditional transaction cost economics: Towards transaction benefits-based analysis’, International Journal of Production Economics, vol. 79, no. 1, pp. 1-14.
Brown, S, W & Swartz, T, 2009, ‘A Gap analysis of professional service quality’, The Journal of Marketing, vol. 53, no. 2, pp. 92-98.
Chevalier, R 2010, ‘Gap analysis revisited’. Performance Improvement, vol. 49 no.7, pp. 5-7.
Headley, D,E & Choi, B 2008, ‘Achieving service quality through Gap analysis and a basic statistical approach’, Journal of Services Marketing, vol. 6, no. 1, pp. 5-14.
Jennings, M 2010, ‘Gap analysis : concepts, methods, and recent results’, Landscape ecology, vol. 15, no.1, pp. 5-20.
Kang, M 2013, ‘Effects of the organization-public relational gap between experiential and expected relationship outcomes: Relational Gap analysis’. Journal of Communication Management, vol. 17 no. 1, pp. 40-55.
Kotabe, M &Czinkota, M, R 2012, ‘State government promotion of manufacturing exports: a Gap analysis’, Journal of International Business Studies, vol. 3, no. 2, pp. 637-658.
Lee, Y, W, Strong, D,M, Kahn, B, K & Wang, R,Y 2008, ‘AIMQ: a methodology for information quality assessment’, Information & management, vol. 40, no. 2, pp.133-146.
Neshat, N., & Dehghani, M 2013. ‘Review of the current gap between clients’ expectations and perceptions of received service in national library by using Gap analysis model’. Performance Measurement and Metrics, vol. 14, no.1 pp. 45-60.
Peiró, J,M, Martínez-Tur, V & Ramos, 2005, ‘Employees’ overestimation of functional and relational service quality: A Gap analysis ’, Service Industries Journal, vol. 25, no. 6, pp. 773-788.
Russell, B. D., & Yilmaz, M. R 2006, ‘Using Gap analysis to Improve System Acceptance’, Information Systems Management, vol. 23, no. 4, pp. 37-42.