Can data can bring greater objectivity to Management Due Diligence?

Management due diligence provides independent scrutiny on the present leadership and executive management team of a given business. But can a more data-led approach bring greater objectivity, and deliver additional insight to potential investors, than the traditional, hands-on approach?

Typically, Management Due Diligence is performed via in-depth interviews and tailored psychometric testing of a senior leadership team, alongside time consuming referencing and gap analysis. All of which takes a very hands-on and personal approach and can be somewhat disruptive to the management team in question.

How our work differs to traditional MDD

Here at Rowan we prefer to take the approach of Leadership Due Diligence, bringing an alternative proposition through additional, data-driven leadership analysis.

We use the Leadership Dynamics product suite – including the PACE behavioural analysis tool – to look at the structure, experience and behaviours of your SLT. We can also demonstrate ‘what good looks like’ by arm’s-length reviews and benchmarking against your successful peers within the same domain, or those that have previously been on the same successful journey in your space.

The output of the process is our enhanced Leadership Capital Analysis, including a ‘leadership bridge’ that identifies actionable recommendations to optimise, and where necessary add to, the leadership team.

This enables business owners and investors, to approach a transaction with the maximum amount of confidence and certainty around the management team.

Traditional pre-deal Management Due Diligence has been criticised for being too subjective and not well-enough connected to the value creation plan that the SME is looking to deliver at that stage in the business journey.

These processes usually consist of interviews, generic personality profiling and the opinions and experience of the assessor. It can be a lengthy and intrusive process, sometimes with limited actionable recommendations once it’s completed.

Utilising the Leadership Dynamics platform

Rowan’s access to the proprietary Leadership Dynamics platform enhances traditional Management Due Diligence by bringing objectivity to the process for investors, and delivering a detailed and actionable plan for the SME owner/founder.

Our Leadership Dynamics tool takes a data-led approach to leadership evaluation by benchmarking against 7,000 high-growth leadership teams. Additionally we run our PACE behavioural analysis on every member of your senior leadership team, to ensure you know whether your team is fit for investment, how it would act in a variety of business scenarios and how its members complement each other.

It can also analyse what structural or people changes are needed to align the business to its unique value creation plan post-investment.

What happens when the Leadership Due Diligence process is complete?

Once our analysis is complete, we deliver an optimisation thesis. This includes a ‘Leadership Bridge’, with specific, actionable steps, derived from the data-driven insights that the Leadership Dynamics suite has afforded us. Each and every piece of Leadership Due Diligence that we complete is bespoke to the business and the leadership team in question. 

The analysis makes recommendations around the entire leadership team, optimising that team for the particular phase of the journey that the business is on. It is interesting to note, repeating the Leadership Due Diligence work on the exact same team in the same business at a later stage in their growth journey can deliver a different set of recommendations. 

The strength of the Leadership Dynamics platform is that the recommendations that it delivers are unique to the business in the here and now, delivering insights and analysis into the optimal team for the exact stage of the growth journey.