The lateral plantar nerve innervates the plantar skin covering the lateral half of the fourth toe and the entire fifth toe. This nerve also provides motor innervation to many of the deep muscles in the foot. Both references concluded that the optimal insertion site is in close proximity to many neurovascular structures. They recommend doing a careful dissection of the heel to avoid damage to any structure(s). The structure that Flock et al found to be at risk specifically was the nerve to the abductor digiti quinti, which is a branch of the lateral plantar nerve.
Flock TJ, Ishikawa S, Hecht PJ, Wapner KL. Heel anatomy for retrograde tibiotalocalcaneal roddings: a roentgenographic and anatomic analysis. Foot Ankle Int. 1997 Apr;18(4):233-5.
PMID:9127114 (Link to Abstract)
Pochatko DJ, Smith JW, Phillips RA, Prince BD, Hedrick MR. Anatomic structures at risk: combined subtalar and ankle arthrodesis with a retrograde intramedullary rod.Foot Ankle Int. 1995 Sep;16(9):542-7.
PMID:8563921 (Link to Abstract)