Human Due Diligence and People Assessment heading image. Contains venn diagram with ROI in the middle and intersections of time, financial, and emotional investment. Subtitle says "optimizing opportunity and mitigating risk."

Human Due Diligence and People Assessment

Humans can seem unpredictable, but in the same way that dogs, cats, and colors fall into categories…people have themes and similiarities. Yes, the influence of genetics and culture yield an infinite intersection of unique personality and behavioral manifestations. At the same time, if I tell you that someone has a “Negative Nelly” personality, you instantly can picture a person who might be in that category.

One of the biggest hurdles I run into when I advocate for a more thorough critique of people, is that nice people don’t want to put others in categories. They want to believe the best and follow the Golden Rule. I talk about this extensively in the Difficult People section of my Relational Genius book; however, I believe it applies to non-difficult people as well. The idea of scrutinizing the personalities and intentions of others can feel a little dirty, so it’s easier to believe that if we treat others like us, they will act like us.

Yet, the cost of not skimping on human due diligence impacts our families, our employees, and the health of our organizations.

I posit that human due diligence and people assessment can integrate compassion with wise judgment. We can honor one’s humanity and choose not to do a business deal. We can see acknowledge the talent of a prospect and decide that she is not the best fit for our team.  

Sometimes human due diligence identifies bad actors. Sometimes everyone is trustworthy, but the extra due diligence illuminates a mismatch where perfectly good people may be a wrong fit for each other. In my experience, when the fit is wrong, nobody wins.

 

High Stakes Situations that Necessitate Human Due Diligence

To date, these are the areas in which I’ve witnessed the most expensive consequence of inadequate due diligence. As noted in the ROI diagram at the top of the page, I define expense or investment in terms of financial, time, and emotional variables.

Selling a Business

Many people are selling a business for the first time. Amid the emotion, planning, transitions, and desire to close the deal, it is easy to dismiss critical items that seem insignificant in the moment. Good intentions can shift when there is cash on the table, so ensure that your most important items are included in the letter of intent.

Buying a Business

If you are doing an asset purchase without regard to inheriting people, your main items of human due diligence will be digging underneath of the numbers presented to you. If you plan to capitalize on some of the people or processes in place, you’ll want to be aware of the culture you are purchasing. 

Board Member Selection

The nuance and complexity of boards depend both on the organizational structure and the interests of each board member. Regardless of these variations, adequate due diligence and alignment will determine whether board meetings move the company or remain a gridlock of opinions and ego.

Executive Hires

You know this, but executive hires have access to the most sensitive data of your organization. Further, they will model behavior for all of their direct reports. The biggest mistake I see on this is anchoring on experience and overt skillset without digging into leadership capabilities and character.

Business Partnerships

Many business partnerships are formed from mutual interest and friendships. While those aspects can be helpful, they don’t address critical views on finance, risk, and expectations. Maintain the good faith, but put in the time to work through potentially difficult scenarios, both in your operating agreement and in your proposed roles. A business partnership is a marriage, and the divorce can be just as expensive.

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