The Due Diligence Nobody Talks About: Assessing People, Not Just Numbers

 

**By Scott Gelbard, Founder — SGI Global Partners / Managing Partner — Peak Ventures**

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Every serious business transaction comes with a due diligence process. Financial statements, legal documentation, tax records, customer contracts, IP filings, compliance history — the checklist is long and the lawyers are thorough. Good advisors earn their fees making sure nothing material slips through.

But in 25 years of advising on deals, partnerships, and cross-border transactions, I have watched more of them fail — or underdeliver — because of something that never appeared on the due diligence checklist: the people behind the business.

Not their résumés. Not their track records on paper. The actual human beings — how they make decisions under pressure, how they treat their teams, what they do when something goes wrong, what they truly believe the business is worth and why. Numbers tell you what has happened. People tell you what is about to happen.

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**Why Human Due Diligence Gets Skipped**

It gets skipped for a few reasons, none of them good.

The first is that it is uncomfortable. Asking hard questions about a founder's decision-making style or how the senior leadership team functions under stress feels personal. Many advisors and acquirers avoid it because they do not want to appear presumptuous or damage rapport with the counterparty. This is a mistake. Discomfort in diligence is far cheaper than misalignment after close.

The second reason is that it is harder to quantify. A balance sheet is clean. A management team's cohesion is not. There is no standard metric for founder integrity or organizational culture. And so it often gets treated as a soft consideration — noted, not measured, and ultimately deprioritized in favor of the things that can be modeled in a spreadsheet.

The third reason is speed. In competitive deal environments, acquirers feel pressure to move quickly. Thorough people assessment takes time and requires skill. When the clock is ticking, it is often the first thing cut.

All three are understandable. None are acceptable.

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**What Human Due Diligence Actually Looks Like**

The goal is not to psychoanalyze the management team. It is to develop a grounded, evidence-based picture of the humans who have built and currently operate the business — because those humans will determine what happens next.

The most important thing I look for is **consistency between stated values and observable behavior**. What does the founder say the culture is? What do the employees — especially mid-level ones who have no particular reason to manage up — actually describe? What does the attrition data look like? How are disputes with customers or vendors typically resolved? How did the leadership team respond to the last major setback the business faced?

I also look hard at **decision-making patterns under pressure**. The years a business navigated well are less revealing than the years it navigated badly. What happened during the 2020 disruption? How did the company handle a significant customer loss or a failed product launch? What decisions were made, who made them, and how was the team communicated with? Pressure reveals character in ways that smooth sailing never does.

A third dimension is **what the principals actually want**. This sounds obvious, but it is routinely underdiscovered. A founder who says they want to sell but emotionally cannot let go will complicate every integration milestone. A management team that expects to run the combined entity autonomously will clash with an acquirer who expects tight operational integration. These misalignments are discoverable in advance — through direct, honest conversations — but only if someone takes the time to have them.

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**The Reference Call Paradox**

Reference checks have a well-known problem: most people only offer references who will say positive things. This is understood and worked around in hiring — you call the references and then you call someone who knows the candidate but is *not* on the list.

The same logic applies in transaction diligence, and almost nobody uses it. I routinely call former employees, former partners, and even former customers who are not named references. Not to litigate the past, but to get a more complete picture. The contrast between what the formal reference says and what an unlisted contact says is often the most useful data in the entire diligence process.

This requires relationship depth and some audacity. It also requires tact — you are not conducting an investigation, you are conducting an assessment. The distinction matters in how you frame your questions.

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**The Deals That Surprised Me — And Why**

Some of the transactions I have been closest to that exceeded expectations had modest financial profiles on paper but exceptional management teams. The numbers suggested steady, not spectacular. The people delivered spectacular.

Conversely, some of the deals I have watched struggle had excellent financials and poor alignment at the human level. The numbers looked great right up until the founder became obstructive post-close, or the retained management team disengaged because they felt their culture had been steamrolled.

I am not arguing that financials do not matter. They obviously do. I am arguing that they are incomplete without the human picture — and that most diligence processes underweight the human picture in ways that are predictable and preventable.

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**Building It Into Your Process**

If you are involved in M&A, partnership formation, or significant vendor or strategic relationships, build human diligence into your standard process. Assign it the same rigor and structured methodology you apply to financial and legal review.

Define the questions you want answered. Identify multiple information sources — both named and unlisted. Give it time on the calendar. Review the findings the same way you review the financial model.

The businesses that consistently make good deals are not the ones with the best financial models. They are the ones who best understand who they are partnering with. That understanding starts long before the close — and it is entirely within your control to develop it.

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*Scott Gelbard is the Founder of SGI Global Partners Inc., a boutique family office and strategic advisory firm, and Managing Partner of Peak Ventures, an international business consulting firm. With 25+ years of experience across North America, Europe, and Asia, he advises founders, family offices, and executive teams on strategy, growth, and cross-border expansion. Connect at sgiglobalpartners.com.*