This paper presents the analysis of microstructural mechanisms observed during both localized and diffuse failures in granular media, highlighting similarities and differences in their characteristics. Two-dimensional DEM (Discrete Element Method) granular assemblies with medium dense and dense packings were subjected to different biaxial loading paths to induce either a localized or diffuse failure mode. A cluster based analysis is proposed to investigate interactions of particles at the mesoscale through the calculation of the second-order work from microscopic variables. It is shown that such analysis of clusters together with second order work facilitates precise shear band pattern recognition during localized failure. The evolution of such clusters in terms of their spatial distribution, size and number of particles involved, as well as the role played by strong and weak phases, describes the nature of the failure at every stage during loading. Such microstructural descriptors can predict the propensity of the specimen to fail either according to a diffuse or a localized mode.