The Debt That Never Appears on the Balance Sheet

Why Some Organisations Can Sustain Growth While Others Collapse Under It

When Koninklijke Paardekooper Group filed for suspension of payments in August 2025 and was declared bankrupt shortly afterwards, almost everyone pointed to the financial balance sheet. A series of acquisitions financed with substantial debt. Interest rate exposure that had not been adequately hedged. Real estate that was sold and leased back to enable further expansion. All of these are valid explanations.

And yet, that balance sheet tells only half the story.

Anyone who reads the post-mortem analyses will recognise a second type of debt. Acquired companies proved difficult to integrate. The rapidly expanding organisation became increasingly difficult to manage. Problems in procurement, inventory management and decision-making accumulated. Every line item on the financial balance sheet was once a decision. Someone decided not to fix the interest rate. Someone decided to continue acquiring businesses while integration was already under pressure. The quality of those decisions is recorded nowhere. That is the debt that ultimately proved fatal for Paardekooper — and the one that never appeared on any balance sheet.

Every Growing Organisation Borrows — Even Without a Bank

For decades, the software industry has used the concept of technical debt. Developers sometimes consciously choose speed over perfection. The software functions, but beneath the surface, compromises accumulate that will eventually need to be addressed — often at a much higher cost. Entrepreneur and Stanford lecturer Steve Blank translated this principle to organisations: organizational debt consists of all the postponed decisions regarding leadership, structure, governance and decision-making that temporarily accelerate growth but gradually reduce an organisation's ability to adapt.

This debt is not inherently negative. No scale-up starts with a perfect organisational model. Roles overlap, governance evolves only when the organisation requires it, and founders wear multiple hats for as long as possible. That flexibility enables rapid growth. However, there is one crucial difference compared to financial leverage: financial debt appears in every board pack. Organisational debt is rarely visible — until the bill comes due.

Paardekooper is far from the only example. VanMoof experienced years of explosive growth before struggling with operational control and execution. Northvolt encountered similar challenges after attempting to scale too many initiatives simultaneously. In neither case was capital the primary problem.

What Once Created Growth Eventually Becomes the Constraint

Just as financial debt comes with interest payments, organisational debt has its own cost. Decisions take longer because roles become unclear. Departments develop their own realities. Key individuals become indispensable. Meetings replace decision-making. Harvard professor Larry Greiner described this mechanism as early as 1972: organisations grow through successive phases, each ending in a predictable crisis. What made the previous phase successful becomes the limiting factor in the next. Professionalisation is no longer optional; it becomes a necessary refinancing of the organisation itself.

The risk deepens when organisations respond by launching even more initiatives. In the Harvard Business Review, Bruch and Menges described the acceleration trap: organisations that consistently initiate more change than they can absorb gradually consume the very decision-making capacity they need to make those initiatives successful. It is not the strategy that fails — the organisation simply becomes overloaded.

Harvard professor Amy Edmondson demonstrated that teams in which people feel safe to speak up about mistakes and risks learn faster and consistently perform better. The opposite is equally true: organisations lacking psychological safety make poorer decisions, especially when it matters most. The information that should have reached senior leadership about integration issues, rising inventories and overstretched decision-making apparently remained invisible within Paardekooper for far too long.

What Success Looks Like

Consider Constellation Software. The Canadian company has completed hundreds of acquisitions without sacrificing execution capability — not because every deal was financially perfect, but because it consistently invests in leadership, autonomy, culture and clear governance. Acquired companies continue to operate independently. The organisational debt of the target company is not accumulated but deliberately contained. The human dimension is not viewed as "soft"; it is considered a prerequisite for creating financial value.

Closer to home, Visma demonstrates the same principle. Between 2018 and today, the Norwegian software group expanded in the Benelux from a single company with 200 employees to nearly 4,000 employees across 38 companies. "The key difference is that Visma organises itself around the companies, rather than the other way around," says Benelux Area Director John Reynders. Both organisations ask the same question that many acquirers overlook: How well does this organisation make decisions when we are not involved?

Bringing the Second Balance Sheet into View

Creating this second balance sheet is not limited to mergers and acquisitions. Whether you are an entrepreneur opening a new location, a management team leading a transformation, or a scale-up entering its next phase of growth, it pays to first understand the organisation's true capacity to absorb change.

Yet nowhere is this second balance sheet more critical than during mergers and acquisitions. No investor acquires a company without understanding its financial liabilities in detail. Informal power structures, leadership quality, dependence on key individuals and cultural differences, however, rarely appear in the data room. Meanwhile, the Harvard Business Review estimates that 70 to 90 percent of acquisitions fail to realise their intended value — and the underlying cause is rarely financial analysis. More often, it lies in the human and organisational execution that follows.

At HUMA Advisory, we call this Human Due Diligence: a structured assessment of an organisation's organisational debt and decision-making capacity before investments are made, integrations begin or growth accelerates. Not as an HR exercise, but as a strategic due diligence process. Because ultimately, neither strategy nor financing determines whether an organisation succeeds. The decisive question is whether the organisation has the capacity to sustain the growth it pursues.

The question, therefore, is not whether your organisation needs Human Due Diligence. The real question is how much value you are willing to put at risk without making that second balance sheet visible.

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Curious about what appears on your organisation's second balance sheet? Get in touch with HUMA Advisory or complete our Growth Stage Assessment.