The Comprehensive Guide to Human Due Diligence: Unveiling the Human Side of Business (2024)

In the intricate world of business, due diligence is a term that's frequently used, but one aspect that doesn't get as much spotlight is human due diligence. This process involves an exhaustive investigation into an individual's background, including their legal, social, and personal history. In this comprehensive guide, we will delve deeper into the importance of human due diligence, how it has evolved over time, and why it's more crucial than ever in today's business landscape.

What is Human Due Diligence?

Human due diligence is the process of evaluating an individual's background to assess potential risks and liabilities. This process is crucial in various scenarios, such as hiring new employees, forming partnerships, or investing in businesses. It involves examining various aspects of an individual's life, including:

Legal: This includes checking for criminal history, legal filings, civil litigations, bankruptcy records, industry sanctions, global watchlists, corporate filings, and tax liens. These checks help identify any potential legal issues that could pose a risk to the business. For instance, a person with a history of fraud could potentially bring legal and financial risks to your business. Similarly, someone with a history of bankruptcy might not be the best fit for a financial role within your organization.

Social: Social media platforms like Facebook, Instagram, Twitter, LinkedIn, and YouTube, along with press coverage, can provide insights into an individual's public persona and reputation. This can help businesses understand how an individual might fit into their corporate culture or public image. For example, an individual's social media posts might reveal their values, interests, and behaviors, which can give you an idea of how they would interact with colleagues, clients, and the public.

Personal: This involves verifying an individual's employment history, education history, business relationships, and political affiliation. These checks can provide a comprehensive view of an individual's personal and professional background. For instance, verifying an individual's employment history can help you understand their career progression, skills, and experiences, which can be valuable in assessing their suitability for a role.

The Evolution of Human Due Diligence

In the past, firms relied heavily on face-to-face interactions, blind trust, word of mouth, and weeks of research to gather information about potential partners or employees. Risk consulting firms and background checks were often employed, but these methods were time-consuming and not always comprehensive.

For instance, face-to-face interactions, while valuable, only provide a limited view of an individual. They rely heavily on personal impressions, which can be influenced by biases. Similarly, word of mouth is subjective and can be influenced by personal relationships and opinions.

Background checks conducted by risk consulting firms were often limited to criminal records and credit checks. They did not provide a comprehensive view of an individual's background, such as their social media activity, employment history, or business relationships.

Today, the process of human due diligence has become much more streamlined and efficient. Thanks to advancements in technology, businesses can now access a wealth of information about individuals at the click of a button. This has made the process faster, more accurate, and more comprehensive, allowing businesses to make informed decisions quickly.

For instance, online databases allow businesses to conduct comprehensive legal checks, including criminal records, legal filings, civil litigations, bankruptcy records, and more. Social media platforms provide insights into an individual's public persona and reputation. Online employment and education verification services allow businesses to verify an individual's employment and education history quickly and accurately.

The Importance of Human Due Diligence

Human due diligence is crucial for several reasons:

1. Risk Mitigation: By conducting thorough background checks, businesses can identify potential red flags and mitigate risks before they become problematic. Certainly, identifying individuals with a history of fraud or bankruptcy can significantly help businesses make informed decisions and avoid potential legal and financial risks. For example, if a potential business partner or employee has a history of fraudulent activities, this could indicate a pattern of dishonest behavior, which could potentially harm the business in the future. By identifying this risk early, businesses can decide whether to proceed with the partnership or employment, or to seek other options.
2. Similarly, if an individual has a history of bankruptcy, this could suggest financial instability or poor financial management. If the individual is being considered for a role that involves financial decision-making, this could pose a risk to the business. By identifying this risk during the human due diligence process, businesses can assess whether the individual is suitable for the role or whether additional financial controls need to be put in place.
3. Reputation Management: Understanding an individual's public persona can help businesses maintain their reputation and avoid potential public relations issues. For instance, an individual's social media posts might reveal controversial opinions or inappropriate behavior that could harm the business's reputation if they were to become associated with the business. By conducting social media checks as part of the human due diligence process, businesses can identify potential reputation risks and take steps to manage them.
4. Cultural Fit: By understanding an individual's personal and professional background, businesses can assess whether they would be a good fit for their corporate culture. For example, an individual's employment history can provide insights into their work style, values, and attitudes, which can help businesses determine whether they would align with the business's culture and values. This can help businesses build a cohesive and productive team.
5. Legal Compliance: Conducting human due diligence can help businesses ensure they are complying with legal requirements, such as anti-money laundering and anti-bribery laws. For instance, checking an individual's legal history can help businesses identify any past legal issues that could potentially lead to legal compliance issues in the future. Similarly, checking an individual's business relationships can help businesses identify any potential conflicts of interest that could breach anti-bribery laws.

In conclusion, human due diligence is a crucial aspect of business operations that should not be overlooked. By conducting thorough background checks, businesses can mitigate risks, protect their reputation, ensure a good cultural fit, and comply with legal requirements. As technology continues to advance, the process of human due diligence will only become more efficient and comprehensive, making it an invaluable tool for businesses.