The Hidden Landmines in Human Due Diligence

Human due diligence (HDD) is a minefield, and even the best firms sometimes miss a step.

Here's a data-driven look at where risk consulting firms often falter:

1. Data Overdose: While 85% of M&A professionals emphasize the importance of financial data, only 45% prioritize cultural fit. But remember, numbers don't capture the nuances of human dynamics.

2. Culture Blindness: A report by McKinsey found that 95% of executives believe cultural fit is critical to the success of integration. Yet, many firms gloss over it, leading to 30% of M&A failures attributed to cultural clashes.

3. Leadership Oversights: Harvard Business Review highlighted that 60% of executives believe leadership issues in M&A are under-addressed. Ignoring leadership dynamics is like ignoring the captain of a ship during a storm.

4. Superficial Background Checks: A mere LinkedIn glance won't cut it. In 2019, 15% of companies discovered a significant issue post-acquisition that a thorough background check would have identified.

5. Undervaluing Soft Skills: Gallup's research indicates that teams with high managerial emotional intelligence have 19% higher sales. Yet, these skills often go unnoticed in HDD.

6. Generic Approaches: Every company is unique. A Bain & Company study found that tailored M&A strategies are 6.5 times more likely to succeed than generic ones.

7. Post-M&A Neglect: A KPMG study revealed that 83% of M&A deals fail to boost shareholder returns, primarily due to neglecting post-deal integration, especially on the human front.

8. Bypassing Employees: Employees hold a wealth of insights. Yet, a Deloitte survey found that only 40% of companies engaged employees effectively during M&A processes.

9. Static Assessments: The business world is dynamic. A PwC report emphasized the need for ongoing risk assessments, with 70% of successful M&A companies conducting regular post-deal check-ins.

10. Communication Breakdowns: A study by Towers Watson showed that 49% of employees from acquired firms felt they received insufficient communication about the change.

Human Due Diligence isn't just about understanding the present; it's about anticipating the future. With the stakes this high and data this clear, investment firms can't afford to overlook the human element. It's not just about avoiding pitfalls; it's about paving the way for success.