Revolutionizing HR Due Diligence with Data-Driven People Analytics

Discover how data-driven people analytics is revolutionizing HR due diligence in private equity transactions, enhancing decision-making, and driving value creation.

From Gut Feel to Data-Driven Decisions

Traditional HR due diligence often relies on qualitative assessments such as management interviews, cultural observations, and experience-based judgments. While these methods have their merits, they can miss critical insights hidden in workforce data. Transitioning to a data-driven approach allows private equity firms to bring the same rigor to human capital assessment as they do to financial and operational due diligence.

People analytics enables the systematic analysis of workforce data, providing PE investors with the ability to:

• Quantify talent quality and measure actual performance and potential.
• Predict retention risk and identify flight risks before they materialize.
• Uncover hidden costs and spot workforce inefficiencies and optimization opportunities.
• Validate management claims with hard data.
• Accelerate integration by prioritizing decisions and sequencing actions based on data.

By replacing anecdotes with evidence and quantifying risks and opportunities, people analytics allows for faster, more confident decisions and creates defensible documentation for investment committees.

Key Analytical Domains in People Analytics

People analytics in due diligence involves the application of statistical analysis, predictive modeling, and data visualization to workforce data. Key analytical domains include:

• Workforce Composition Analysis: Examines demographics, skills inventory, and organizational design metrics.
• Talent Quality Assessment: Analyzes performance distributions, identifies high performers, and detects capability gaps.
• Retention Risk Modeling: Predicts flight risk and analyzes turnover costs.
• Compensation Analytics: Conducts pay equity analysis, market benchmarking, and cost optimization.
• Organizational Efficiency: Measures span of control, layers, and productivity metrics.
• Predictive Modeling: Includes scenario planning and integration impact forecasting.

These domains provide a comprehensive view of the talent landscape and allow PE firms to make informed decisions during M&A evaluations.

Quantifying Talent Quality and Retention Risks

Quantifying talent quality and retention risks is crucial for mitigating acquisition risks and driving value creation. By moving beyond resumes and subjective judgments, PE firms can measure actual performance and potential through data-driven assessments. Key metrics include:

• Performance Distribution: Evaluates the percentage of employees in each rating category and trends over time.
• High-Performer Identification: Identifies top performers by analyzing demographics and retention rates.
• Retention Risk Modeling: Predicts flight risk using variables such as tenure, compensation, performance rating, and manager quality.

By identifying high-risk employees and quantifying retention risks, PE firms can proactively target retention efforts, design effective retention packages, and align compensation strategies to market benchmarks.

Real-World Impact: Case Studies in People Analytics

People analytics can have a significant impact on deal valuation and integration priorities. Consider the following case studies:

SaaS Company Acquisition:

• Challenge: Management claimed world-class engineering talent.
• Analysis: People analytics revealed 80% of engineers rated "meets expectations," 35% annual attrition among senior engineers, and salaries at the 40th percentile.
• Impact: Valuation adjustment of $5M for talent investment required, $1.2M budget for critical engineers' retention packages, and priority on engineering leadership replacement and compensation overhaul.

Identifying Hidden Organizational Inefficiency:

• Challenge: Target company claimed a lean organizational structure.
• Analysis: Span of control analysis showed an average of 3.2 direct reports per manager and 8 organizational layers from CEO to front-line.
• Impact: Identified delayering opportunity to eliminate 2 layers, resulting in $6M annual cost savings and a $30M valuation adjustment.

Best Practices for Implementing People Analytics in Due Diligence

Implementing people analytics effectively requires a structured approach. Best practices include:

• Starting with Business Questions: Focus on specific talent risks that could derail the investment thesis and use data to answer these questions.
• Triangulating Quantitative and Qualitative Data: Combine data analysis with interviews to get a holistic view of the workforce.
• Visualizing for Impact: Use data visualizations to communicate insights effectively to investment committees.
• Benchmarking Against Industry: Contextualize data by comparing it to industry benchmarks to identify red flags and opportunities.
• Documenting Assumptions and Limitations: Acknowledge data gaps and limitations to build credibility and transparency.

By following these best practices, PE firms can leverage data-driven insights to make informed decisions and drive value creation.

Leveraging 29Bison's Expertise in People Analytics

At 29Bison, we combine deep HR expertise with data science capabilities to deliver insights-driven due diligence that goes beyond traditional assessments. Our approach includes:

• Rapid Data Extraction and Validation: Clean and analyze messy HR data in days, not weeks.
• Proprietary Benchmarking: Access to industry-specific compensation and turnover databases.
• Predictive Modeling: Flight risk scoring, retention ROI analysis, and integration scenario planning.
• Executive Dashboards: Visual, compelling presentations for investment committees.
• Integration Analytics: Data-driven organizational design, talent optimization, and synergy quantification.

Our services, such as HR Due Diligence, HR Integration and Post-Transaction Support, and Fractional HR Operating Partner, are designed to support PE firms in maximizing investment value through human capital improvements.

Explore our Ultimate Guide, HR Due Diligence Checklist, HR Questionnaires, Cultural Due Diligence and Compensation and Benefits Harmonization blog posts for more insights on leveraging people analytics in HR due diligence. Partner with 29Bison for people analytics-powered HR due diligence and ensure your next deal is a success.

Why 29Bison?

Choosing the right partner for HR due diligence and integration is critical to the success of any transaction, and 29Bison offers unmatched expertise and support in navigating these complexities. With a people-first approach, we go beyond traditional due diligence to address not only workforce-related risks but also opportunities that drive long-term value creation. Our comprehensive HR due diligence services uncover hidden risks, optimize workforce strategies, and identify synergies that align with your strategic objectives. Post-transaction, we provide tailored HR integration solutions designed to foster a seamless transition, retain key talent, and build a cohesive organizational culture that supports sustainable growth. And finally, 29Bison’s Fractional HR Operating Partner service provides private equity firms with strategic, high-impact HR leadership, driving value creation, talent optimization, and seamless workforce integration across portfolio companies,

At 29Bison, we’re more than human capital consultants—we’re partners invested in helping you achieve your vision by maximizing the potential of your most valuable asset: your people. Let us help you turn challenges into opportunities and create a solid foundation for success. Reach out today to learn how we can support your HR diligence and integration needs.