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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Extend the principles of diversity and inclusion to your company's suppliers Many people are familiar with the importance of ensuring and advancing inclusion, equity, and diversity amongst their employees and managers. But do your efforts include supplier diversity--an equally as important and essential part of any holistic diversity effort? In Supplier Diversity For Dummies, nationally recognized small business strategist and economic inclusion and supplier diversity expert Kathey Porter delivers an empowering and informative guide to implementing this integral part of any robust inclusion initiative: supplier diversity. You'll understand the relevance of supplier diversity and why it's important to encourage equal opportunity for diverse suppliers and businesses owned and managed by underrepresented groups. In this book, you'll also find: * The answers to your most pressing questions about how to build a coherent and sustainable supplier diversity program * Ways to contribute more fully to your company's diversity and inclusion functions * Strategies to position supplier diversity as a central function in your organization Perfect for company buyers, purchasing and procurement professionals, material management executives, strategic souring professionals and supplier diversity practitioners, Supplier Diversity For Dummies is a must-read resource for supply chain professionals, diversity and inclusion leaders and anyone looking to increase their proficiency in supplier diversity, improve supply chain inclusivity and increase their social impact.
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Seitenzahl: 417
Veröffentlichungsjahr: 2022
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Supplier Diversity For Dummies®
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Supplier Diversity For Dummies®
To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Supplier Diversity For Dummies Cheat Sheet” in the Search box.
Table of Contents
Cover
Title Page
Copyright
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Part 1: Getting Started with Supplier Diversity
Chapter 1: Understanding the Growing Demand for Supplier Diversity
Breaking Down What Supplier Diversity Is and Isn’t
Investigating Whether Supplier Diversity Is Still Necessary
Examining External Drivers Redefining Supplier Diversity
Recognizing Why Organizations Are Recommitting to Supplier Diversity
Chapter 2: Understanding the Foundation of Supplier Diversity
Looking at Where It All Began
Examining the Evolution of Supplier Diversity
Pondering the Future of Supplier Diversity
Chapter 3: Supplier Diversity Management: A New Way of Thinking
Defining Supplier Diversity Management
Perusing Supplier Diversity Management as a Process
Introducing the Supplier Diversity Management (SDM) Model
Getting Started with SDM
Chapter 4: Distinguishing between Supplier Diversity and DEI
Surveying the Programs’ Similar Names and Mission
Diving into Their Different Audiences, Tactics, and Results
Becoming Collaborative Partners
Perusing the Pitfalls of Combining Supplier Diversity and DEI
Chapter 5: Digging into Supplier Diversity within the Organization
Understanding the Role of the Supplier Diversity Professional
Surveying How Supplier Diversity Fits into the Organization
Getting Involved in the Procurement Process — From Beginning to End
Anticipating Potential Conflicts and Identifying Resolutions
Part 2: Developing Internal (Organizational) Supplier Diversity Efforts
Chapter 6: Gauging Your Organization’s Diversity Climate
Surveying Supplier Diversity and Organizational Change Management
Examining Your Organizational 4 P’s
Understanding the “Who-What-How” of Your Organizational Spend
Assessing Your Organization’s Vendor Relationship Management (VRM)
Understanding Strategic Sourcing as Part of Your Readiness Assessment
Determining the Right Leadership Structure for Your Efforts
Chapter 7: Making the Case for Supplier Diversity
Aligning Supplier Diversity to Organizational Strategic Goals
Finding Value-Creating Opportunities
Communicating Value
Selling Your Supplier Diversity Story to Stakeholders
Chapter 8: Building Support for Supplier Diversity Programs
Seeing How Supplier Diversity Touches Many Stakeholders
Finding Allies throughout Departments in Your Organization
Developing an In-Reach Program
Aligning Programs to Collaborator Objectives: Solving WIIFT
Chapter 9: Identifying Common Barriers to Supplier Diversity
Identifying Common Organizational Barriers
Pinpointing Practitioner Barriers
Overcoming Barriers to Build a Successful Program
Chapter 10: Creating an Effective Supplier Diversity Plan
Starting Out with the Principles of Supplier Diversity Planning
Eyeing Your Vision Statement
Clarifying Your Mission
Locking in Your O.A.R.
Putting the Plan Together
Part 3: Supplier Development and Supplier Diversity
Chapter 11: Creating an Environment that Puts Diverse Businesses First
Becoming the Champion for Diverse Businesses within Your Organization
Fostering a Culture of Trust, Respect, and Transparency in Relationships
Chapter 12: Building Capacity
Getting a Handle on Capacity Building
Covering Capacity Building Tasks
Evaluating the Capacity of Businesses within Your Organization
Developing to Build Capacity
Part 4: Examining External (Community) Supplier Diversity Efforts
Chapter 13: Highlighting the Stages of Supplier Diversity Programs
Determining Your Program Stage and Dealing with Common Challenges
Identifying the Right Activities for Each Stage
Chapter 14: Cultivating Community Partners to Drive Supplier Diversity
Building Allies and Alliances through Collaborations and Partnerships
Planning for Engagement
Finding the Right Community Partners: Local, State, Regional, and National
Creating and Using Supplier Diversity Councils to Drive Efforts
Part 5: Using Technology and Compliance to Enhance Supplier Diversity
Chapter 15: Telling the World About Your Supplier Diversity Efforts
Understanding Why Communication Is Crucial in Supplier Diversity
Developing a Supplier Diversity Communication Plan
Chapter 16: Establishing Supplier Diversity Metrics, Benchmarks, and KPIs
Understanding the Importance of Metrics, Benchmarks, and KPIs
Establishing Metrics, Benchmarks, and KPIs
Seeing How Software Can Help You Manage Your Program
Using Metrics to Tell Your Story
Chapter 17: Understanding Tier 2/Subcontracting Spend
Tracing the History of Subcontracting
Stepping through the Levels: Tier 1, Tier 2, and Beyond
Managing Subcontractors and Tiered Procurement
Influencing Your Prime Vendors to Use Diverse Suppliers
Knowing the Importance of Tracking and Utilizing Tier 2 Data
Chapter 18: Getting a Grip on Goal Setting in Supplier Diversity
Aligning Supplier Diversity Goals with Procurement Strategies
Setting Goals with a Disparity Study
Setting Goals without a Disparity Study
Meeting Utilization Goals versus Adding Value
Chapter 19: Tracking, Measuring, and Reporting Metrics in Supplier Diversity: It’s All in the Numbers
Tracking Diverse Spend
Measuring the Impact/Success of Supplier Diversity Efforts
Being Aware of Problems in Reporting
Reporting What Matters: Creating an At-a-Glance Dashboard
Reporting to Senior Leaders and the Community
Part 6: Building a Career in Supplier Diversity
Chapter 20: Becoming a Supplier Diversity Professional
Understanding Job Titles and Job Descriptions
Looking at Department Structures and Job Functions
Supplier Diversity by Any Other Name: Examining Industry Terminology
Landing a Job in Supplier Diversity
Chapter 21: Supplier Diversity Certifications and Continuing Education
Checking Out Certification Programs
Staying Current with Continuing Education
Digging into Degrees, Diplomas, and Other Education Options
Part 7: The Part of Tens
Chapter 22: Nearly Ten Ways to Become an Effective Supplier Diversity Leader
Be the Champion within Your Organization
Be an Influencer
Be an Advocate
Be a Collaborator
Know How Your Organization Works
Know What to Ask For
Know the Needs of Your Business Community
Focus on Impact, Not Activities
Focus on Driving Results
Chapter 23: Ten (Plus One) Ways to Create a World-Class Supplier Diversity Program
Connect Program Deliverables to Organizational Goals
Develop Your 4 P’s to Be Small and Diverse Business-Centric
Focus on Connecting Businesses to Opportunities
Establish Your Place in Your Community’s Entrepreneurial Ecosystem
Become Self-Sustaining: From Limiting to Limitless
Invest in Analytics to Help Manage Your Program
Cultivate a Supplier Development Program Using M.O.D.E.
Don’t Be Afraid to Try New Programs
Put a Compliance Program in Place
Get Your Prime/Tier 1 Partners Involved
Get out from Behind That Desk
Chapter 24: Ten Myths about Supplier Diversity
Supplier Diversity Will Increase How Much We Pay for Things
Supplier Diversity Doesn’t Add Value Because It Doesn’t Generate Revenue
Supplier Diversity Is Just a Feel-Good Initiative
Supplier Diversity Is Too Confusing
Supplier Diversity Doesn’t Impact Our Bottom Line
Supplier Diversity and DEI Are Close Enough
Our Name Alone Will Deliver Program Results
Anybody Can Lead This Effort — Any Body
We’re Too Busy to Devote Energy to Supplier Diversity
Supplier Diversity Will Lower Our Standards
Index
About the Author
Advertisement Page
Connect with Dummies
End User License Agreement
List of Tables
Chapter 6
TABLE 6-1 Comparing Leadership Structures
Chapter 10
TABLE 10-1 Sample Objectives
TABLE 10-2 Sample KPIs
Chapter 11
TABLE 11-1 Levels of Supplier Diversity Transparency
Chapter 16
TABLE 16-1 Common Supplier Diversity Metrics
TABLE 16-2 Generating Meaningful Supplier Diversity Benchmarks
TABLE 16-3 KPIs for Supplier Diversity Objectives
TABLE 16-4 Sample Metric Comparison Report
TABLE 16-5 Metrics for the Story You Want to Tell
List of Illustrations
Chapter 1
FIGURE 1-1: Supplier diversity title frequency.
Chapter 2
FIGURE 2-1: Evolution of supplier diversity.
Chapter 3
FIGURE 3-1: The supplier diversity management process.
FIGURE 3-2: Supplier diversity interconnectivity.
FIGURE 3-3: Supplier diversity management model.
Chapter 4
FIGURE 4-1: Differences in measuring results.
Chapter 5
FIGURE 5-1: The Seven Hats of the Supplier Diversity Professional.
FIGURE 5-2: Supplier Diversity Procurement Relationship Model.
Chapter 6
FIGURE 6-1: OCM in supplier diversity.
FIGURE 6-2: Common procurement category segments.
Chapter 7
FIGURE 7-1: Supplier Diversity value creation opportunity model.
FIGURE 7-2: Communicating value by local/state government, federal government, ...
FIGURE 7-3: Supplier diversity messaging alignment.
Chapter 8
FIGURE 8-1: Supplier diversity ecosystem model.
Chapter 10
FIGURE 10-1: The principles of supplier diversity planning.
FIGURE 10-2 A comprehensive supplier diversity plan.
Chapter 11
FIGURE 11-1: A win-win chart.
Chapter 12
FIGURE 12-1: Vendor capacity building evaluation template.
Chapter 13
FIGURE 13-1: Stages of supplier diversity programs
Chapter 14
FIGURE 14-1: Managing stakeholder engagement using Mendelow’s Matrix.
Chapter 17
FIGURE 17-1: Procurement tiers.
Chapter 20
FIGURE 20-1: Supplier diversity careers framework.
Guide
Cover
Title Page
Copyright
Table of Contents
Begin Reading
Index
About the Author
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Introduction
Welcome to Supplier Diversity For Dummies. As I embarked on this project, the timing for this book couldn’t have been more perfect given the predictions about entrepreneurship, demographic growth, and the workplace of the future. It has been an honor to write the first-ever book of this type in this series. I’m Kathey K. Porter, MBA, MSE, CPSD, and I’ve held a variety of leadership roles in supplier diversity and now as a supplier diversity consultant with a minority-, woman-, and veteran-owned business. My experiences (both professional and personal) have prepared me to create this work, and I’m excited to be able to share with you what I’ve learned along the way.
About This Book
Supplier Diversity For Dummies is your one-stop resource guide to get a comprehensive understanding of what supplier diversity is all about, how it contributes to an organization’s success, what your role is as a leader, and how to implement supplier diversity in every area of your organization. In this book, I explain everything from the common terminology to the continued evolution of supplier diversity to how outside factors influence your organizational policies. I also cover strategies for tasks like these:
Assessing your organization’s current culture and cultivating and sustaining inclusion and equity programs
Making the business case for supplier diversity and addressing the obstacles to supplier diversity
Aligning supplier diversity with your organization’s strategic priorities and creating a supplier diversity strategic plan
Measuring the success of your supplier diversity efforts
Fostering partnerships with the community to drive supplier diversity efforts
Throughout this book, I share from my experience, proven strategies, and results achieved as a supplier diversity leader across a number of industries, including government and higher education, an advocate with leading agencies, and a consultant to several global organizations. I also bring a personal perspective as an entrepreneur who frequently utilizes these programs. I’m also happy to share insights from other leading professionals and historians in this space.
This book answers questions, explains misnomers, and addresses concerns that I receive from supplier diversity and procurement leaders across the country. True to the For Dummies form, it demystifies supplier diversity to make it practical, understandable, accessible, and implementable. My hope is that it speaks to everyone with an interest in supplier diversity, from seasoned professionals to new practitioners to stakeholders responsible for leading this effort to senior leaders at the top. In other words, leaders at all levels can benefit from this book.
I want to quickly point out a few things to help you better navigate and use this book:
Important terms and key words are in
italics
and are followed with a quick definition or explanation.
Keywords and action steps in lists appear in
bold.
Sidebars (look for the shaded boxes) feature content that’s interesting and informative but not essential to your understanding of a topic. If you’re wanting to get in and out quickly, you can safely skip them.
Foolish Assumptions
Generally, I know it’s not a good idea to make assumptions. But for this book, I’ve made a few to better serve your needs:
You’re working at an organization in a manager or leader role.
You recognize that the world of work is changing, and you want to better understand it.
You have little or no knowledge and experience in leading supplier diversity initiatives and want to pick up the fundamentals.
You may be uneasy about supplier diversity and curious about how it can help your organization.
You want to develop into a more effective and impactful supplier diversity leader.
Icons Used in This Book
Throughout this book, you find icons that help you navigate the information. Here’s a rundown of what they mean:
This icon alerts you to helpful hints. Tips can help you save time and avoid frustration.
This icon reminds you of important information you should read carefully.
This icon flags actions and ideas that may cause you problems. Often, warnings accompany common mistakes or misconceptions people have about supplier diversity.
This icon highlights information that goes a bit beyond need-to-know but is still helpful and interesting. You can skip this stuff if you’re pressed for time and just want the absolute basics.
Beyond the Book
This book contains lots of ideas, strategies, checklists, tools, resources, references, best practices, and other sources that give you more than enough to work with. But there’s more! It includes an online Cheat Sheet that provides guidance and tips for spotting and dealing with common supplier diversity barriers, a list of questions to determine your organizational readiness, and ways to gain internal and external stakeholder support. To access this handy Cheat Sheet, go to www.dummies.com and type Supplier Diversity For Dummies Cheat Sheet in the search box.
Additionally, if you, your team, or members of your organization need supplier diversity training, coaching, a keynote speaker, or consulting on any of the processes I share in this book, or want to obtain a certificate in supplier diversity, you can access information and a number of free resources at www.sdti.co.
Where to Go from Here
Like supplier diversity, this book isn’t linear. Feel free to use the table of contents as a guide to move around to get exactly what you need. Part 1 gets you off to a great start and sets the foundation for really understanding supplier diversity. Part 2 looks at your internal environment. Part 3 discusses your suppliers and developing a program that’s supplier-centric. Part 4 examines the external environment and your community. Part 5 talks about technology and analytics and the role they play in today’s supplier diversity programs. Part 6 looks at how to build or expand a career in supplier diversity.
This book isn’t designed to be an exhaustive or definitive work on supplier diversity. And I don’t expect you to become an expert on all things supplier diversity in order to become an effective practitioner. Supplier diversity is a process and a journey, and you won’t get to the Billion Dollar Roundtable overnight. Hopefully, though, you’ll be able to sharpen your skills and apply what you read here so that you can help your organization and the diverse businesses you work with. Focus on being that champion that everyone wants to support because they believe in the mission behind supplier diversity and the value it brings to the organization and the community.
Part 1
Getting Started with Supplier Diversity
IN THIS PART …
Examine the growing demand for supplier diversity.
Discover the basis and history of supplier diversity.
Explain supplier diversity management (SDM).
Recognize the differences between supplier diversity and diversity, equity, and inclusion (DEI).
Understand the supplier diversity structure within your organization.
Chapter 1
Understanding the Growing Demand for Supplier Diversity
IN THIS CHAPTER
Getting crystal clear on the nature of supplier diversity
Identifying the continued need for supplier diversity
Eyeing how external factors are changing the field
Exploring companies’ renewed investment in supplier diversity
Supplier diversity is a proactive business strategy that encourages buying from businesses that identify as belonging to a specific socioeconomic, historically disadvantaged, or underutilized demographic as suppliers, vendors, and contractors. The Small Business Administration, commonly called the SBA, classifies businesses in a number of categories. The most common are minority-owned or disadvantaged, women-owned, veteran-owned, and service-disabled-veteran owned. Corporations have expanded their definitions to also include LGBTQ to be more reflective of their local communities.
Supplier diversity has continued to progress from legislation to stabilize social unrest during the late 1960s to an economic imperative and a bona-fide management strategy. Supplier diversity programs recognize that when an organization buys products and services from suppliers that have been historically underutilized, it helps nurture and transform its own supply chain. Supplier diversity also gives organizations access to agile businesses with timely business solutions that allow them to gain a competitive advantage in the marketplace.
In this chapter, I cover what supplier diversity is (and isn’t) and why it’s still needed. I also identify some of the factors redefining supplier diversity and why organizations are recommitting to it.
Breaking Down What Supplier Diversity Is and Isn’t
Throughout my career as a supplier diversity professional, I’ve worked in a number of industries and have been housed in a variety of departments: economic development, procurement, business operations, and community relations. I’ve had a range of supervisors, including those who knew nothing about supplier diversity, which gave me the freedom and flexibility to do a number of things. I’ve had supervisors who thought they knew supplier diversity, which created an epic battle to execute anything. Then I had those who understood and embraced the mission, which led to a real group effort.
Organizations have any number of reasons why departments end up where they do on the org chart. Sometimes they make perfect sense, and sometimes — well, I’ll just say they don’t ask me for my input. Inevitably, where supplier diversity ends up says a lot about the value the organization places on it and determines how you’re able to behave in the role. Ultimately, this positioning affects what you’re doing and the results you’re able to deliver. For example, I’ve found myself involved in things that were really outside my scope, some that expanded my view of supplier diversity and how it touches the community.
Through my experience and my conversations with supplier diversity colleagues, I know that where supplier diversity sits in the organization must be intentional. It sets the tone for how the program operates; how it interfaces with others throughout the organization; how it establishes influence; how it carries out tasks; and how it interacts with the community, stakeholders, and senior leaders. Additionally, it unconsciously sways how others view the role, which can lead to confusion about what supplier diversity actually is. The following sections dive into the true functions of supplier diversity as well as those it doesn’t actually cover.
What it is
So, what exactly is supplier diversity? It’s
A procurement function:
Supplier diversity ensures that any business has an opportunity to do business with the organization regardless of race, gender, sexual orientation, and so on. It does so by developing policies, processes, and procedures that make the procurement process inclusive, fair, and equitable.
A business and management strategy:
Supplier diversity is a strategy that supports the economic development of diverse communities who are customers and consumers by giving them opportunities to sell to the organization. It’s a management strategy that allows organizations to progressively transform a company’s supply chain and gain a competitive advantage by doing business with diverse businesses.
An economic driver and entrepreneurial resource:
Supplier diversity provides support, education, and mentorship to small and diverse businesses. When an economic gap exists, whether through lack of work prospects or access to business opportunities, the entire community suffers. This scenario creates a drag on social services and leads to the overuse of other community resources. Organizations, especially those that are large economic engines in the community, have a duty to look at their resources, step in, and create solutions. The access to resources supplier diversity gives entrepreneurs helps drive business growth and create economic stability for the entire community.
What it’s not
Here’s what supplier diversity isn’t:
A diversity and inclusion/HR function:
Supplier diversity doesn’t focus on hiring and retaining a diverse workforce, creating employee resource groups, or cultivating an inclusive work culture (I discuss this difference in greater detail in
Chapter 4
).
A philanthropic function:
As a procurement and business function, supplier diversity doesn’t award contracts or enter into contractual agreements with businesses based on need or hardship. It involves a competitive process that businesses must be qualified for and able to perform.
An external community relations or PR function:
Yes, supplier diversity is community-facing thanks to its close relationship with the small and diverse business community, but it’s not a “voice” of the entire organization, nor does it act as a general spokesperson for all things happening.
A set-aside or affirmative action program:
Supplier diversity creates a pathway for small and diverse businesses to get a foot in the door. It encourages the utilization of small and diverse vendors but doesn’t “set aside” contracts for one particular group or advocate that contracts be awarded based solely on how businesses may identify.
Remember:
This distinction is especially relevant in the public sector, where public dollars are being spent. In fact, the federal government is the only entity that can legally set aside contracts for vendors based on their identification as part of a specific socioeconomic demographic.
A catchall for other functions:
Supplier diversity isn’t a job description that captures multiple, traditionally stand-alone functions into one position, and it’s not an add-on “get to it when you have time” job.
Although supplier diversity is a frequent collaborator with many departments and relies on internal relationships to advance its mission, keeping these points in mind helps programs avoid spending time on tasks that aren’t productive or don’t always contribute to the set goals. For example, although production and marketing often work together, having someone from production make marketing decisions for the organization may not be a good idea.
Investigating Whether Supplier Diversity Is Still Necessary
Every few years, this question pops up for debate as society (and a few detractors) try to move beyond the conversation of race- and gender-based initiatives and quotas and focus solely on qualifications, merit, and so on. The assumption is that the legislation, hours of training, and countless programs people have endured over the years have done their jobs. Now, everyone has equal access to anything they choose: jobs, housing, healthcare, business, you name it. This argument implies that the playing field is now equal and fair and assumes that humans no longer harbor implicit biases, prejudices, or favoritisms. If this description sounds like your organization, congratulations — you did it! If not, keep reading.
As Chapter 2 explains, the motives behind supplier diversity have shifted from complying with federal law (we have to) to doing the right thing (we want to) to creating a business case (we need to). Arguably, these shifts likely came because someone brought up the question of whether it was still necessary.
The United States has definitely come a long way since the affirmative action legislation of the 1960s, but any progress that’s been made validates that these types of initiatives work and that there’s really no such thing as “we’ve made it.” If anyone working in diversity will tell you one thing, it’s that supplier diversity isn’t a destination but rather a continual process that requires a long-term commitment to change.
One argument in favor of the ongoing need for supplier diversity is the continued economic disparity that exists between diverse business owners and non-diverse business owners, whether it’s lack of access to capital or networks, lack of resources, or any other number of issues that derail business growth.
Take, for example, the impact the COVID-19 pandemic has had on diverse businesses. Of course, entrepreneurs across the board took a tremendous beating, but COVID-19’s effect on minority-owned small businesses in the United States was much more dire and extreme, according to an article by McKinsey & Company. It noted that of all vulnerable small businesses, minority-owned businesses were the most at risk and that many were in financially precarious positions even before COVID-19 lockdowns began. The pandemic disproportionately impacted minority-owned small businesses for two critical reasons:
These outfits tend to face underlying and systemic issues that make running and scaling successfully more difficult.
They’re more likely to be concentrated in industries most immediately affected by the pandemic, making them more susceptible to disruption.
Their vulnerability was compounded because many minority-owned businesses lacked emergency funding. A large percentage of minority businesses weren’t able to take advantage of relief funds from the government because they didn’t have the commercial banking relationships that larger companies had. (Many banks focused on their larger, long-term clients with established credit relationships.) The Center for Responsible Lending, a nonprofit group that combats abusive lending practices, estimates that nearly 90 percent of minority-owned businesses had little chance of receiving a Paycheck Protection Program (PPP) loan through a mainstream bank or credit union.
The Center for Responsible lending further broke down its estimates by demographic; here are the rough numbers:
95 percent of Black-owned businesses
91 percent of Latino-owned businesses
91 percent of Native Hawaiian or Pacific Islander-owned businesses
75 percent of Asian-owned businesses
Looking at reasons supplier diversity is still necessary
Obviously, as a supplier diversity consultant and author, I have definite opinions around this subject. However, this section isn’t a declaration on how I feel. My leanings are based on factual and anecdotal observations that support the need for supplier diversity.
When goals are attached to projects, utilization improves.Goals in this context are percentages established on projects administered by public agencies — that is, local/state governments, higher education institutions, K-12 schools, and the federal government. Conducting disparity studies can help justify the utilization of goals. A disparity study is an analysis that examines whether differences exist between the percentage of dollars that minority- and women-owned businesses received in contracts during a specific period and the percentage of dollars that those businesses would be expected to receive based on their availability to perform those contracts. It may also look at other factors, such as legal considerations around creating programs for these businesses, conditions in the local marketplace for these businesses, contracting practices, and business assistance programs currently in place.
Based on the results of such a study, organizations can establish goals, usually on their subcontracting opportunities, with the hopes of improving the utilization of diverse businesses. For example, a project can have a goal of 30 percent, which means that a prime contractor (a contractor who has a direct contract with an organization) must ensure that at least 30 percent of the total contract value will be spent with small or diverse businesses. If it can’t do so, it must provide a valid reason. In my experience, prime vendors often overindex on the utilization of small and diverse business spend when a goal is attached — that is, they spend more than 30 percent (or whatever the goal is) because they want to maintain a good relationship with a client and to report this number for future project pursuits. With a robust program, a prime vendor may be penalized for not meeting goals and risk winning future contract opportunities with a client.
When tracking, compliance, and reporting measures are in place, utilization improves.
Accountability measures such as project tracking, contract compliance, and reporting let project teams and supplier diversity monitor the progress of a project in somewhat real time and take action if the prime contractor looks like it’s not going to be able to fulfill a goal. This approach is a more collaborative one where supplier diversity can provide support to help connect the prime contractor to small and diverse businesses.
When organizations or individuals think their livelihood may be in jeopardy, they change their behavior.
This concept is a relatively new one that many organizations are embracing. According to supplier.io, many of the Top 50 Companies for Diversity (as recognized by
DiversityInc
magazine) are placing more emphasis on achieving diversity/supplier diversity goals and tying executive compensation to the effort. This move not only provides additional incentive to hit supplier diversity goals but also reinforces the importance of diversity as a core value in the company.
Considering what supplier diversity needs to do to stay relevant
If supplier diversity is to continue to evolve, maintain its relevancy, and usher in a new era of supplier diversity, some pointed actions need to occur:
Continued investment in current and pipeline professionals:
As supplier diversity evolves, so must the professional profile of its leaders. Organizations have to have a clear understanding of the function when drafting job descriptions and hiring (as I note earlier in the chapter, this position isn’t a catchall). Today, certification and training programs offer professionals an opportunity to build their skills in this area to ensure that they’re prepared to hit the ground running and not necessarily learning on the job. I discuss building a career in supplier diversity in
Part 6
.
Development of industry standards:
People have long complained that the industry can be fragmented because of different standards and requirements across industries. For a long time, supplier diversity took its cues from the federal government. But as corporate supplier diversity grew, those programs began establishing their own standards, which sometimes creates confusion for the small and diverse businesses (and even industry professionals). It has also created a bit of a chasm between professionals that work in public supplier diversity and private (corporate) supplier diversity. The industry has to work together to create standards that help uplift the entire industry, an act that would likely go a long way in crafting a message that makes gaining buy-in at the organizational level easier.
Proactive mindset shifts from senior leadership:
Like anything, priorities shift. New leaders have different ideas for where the organization should focus its energies. As much as you may want everyone to be proactive and progressive, they just aren’t. This area is one of the reasons supplier diversity is a continual process that requires constant work on culture and change management. So much so that everyone, even a leader, will have to get with the program, or they may find themselves a poor culture fit.
A strategic focus with key performance indicators (KPIs) that align with big-picture goals:
Supplier diversity has to shift its narrative to one focused on strategy. Some organizations still likely treat this initiative as a charity or philanthropic effort rather than a true strategic management function. Supplier diversity has to develop those KPIs that align with the organizational goals to demonstrate the value that it brings in achieving them.
Reputation management:
Supplier diversity can sometimes be a mixed bag of results in a mixed bag of perceptions. I’ve seen programs that are wildly successful and those that are just treading water. Unfortunately, the latter programs/leaders are the ones that give the impression that all supplier diversity does is “help landscaping and janitorial companies.” Supplier diversity has always done a good job of building positive relationships and converting them into advocates and allies. It has to continue to influence this decision making to earn its seat at the table and level up how people perceive supplier diversity.
An emphasis on conviction, compliance, and courage: I saw this three C’s idea for another industry but thought it was very applicable. Supplier diversity must lead with conviction to communicate why it’s doing what it is and why that’s important for the organization. It has to educate on compliance — the processes that are there to protect the organization and not expose it or the program to risk. Finally, supplier diversity has to have courage to continue to push for change so that it can add value and create impact that shapes the community.
Measurement of economic impact:
Externally, supplier diversity has to be able to tell its story of the economic impact it adds to the small and diverse businesses, the organization, and the community at large.
Examining External Drivers Redefining Supplier Diversity
As I discuss in Chapter 2, the groundwork for supplier diversity as it exists today began in the 1960s. In its early days, corporations’ motives for taking on supplier diversity may have been a little self-serving, in that they were likely more concerned about preserving their standing in the eyes of the government and maintaining their own contracts than with helping small and diverse businesses succeed. It wasn’t until the 1990s (the Right Thing to Do Era) that organizations really began to dissect their efforts and view supplier diversity as a strategic component to their overall operations. In fact, using Google Ngram, Figure 1-1 illustrates how frequently the term supplier diversity has been used in book titles, which directly coincides with key periods in its existence.
FIGURE 1-1: Supplier diversity title frequency.
Supplier diversity is once again experiencing a resurgence in organizations. In the following sections, I take a look at some of the societal factors driving this resurgence.
Growth of minority entrepreneurship
The desire to achieve the American Dream allows entrepreneurship to experience explosive growth with minority populations. Supplier diversity as a strategy makes business-to-business (B2B) and business to government (B2G) contracting a viable and achievable path for many entrepreneurs. The federal government alone is required to set aside at least 23 percent of its total spending specifically for small and diverse businesses.
According to research released by the U.S. Department of Commerce’s Minority Business Development Agency (MBDA), in collaboration with the U.S. Census Bureau (Census), the following list highlights recent growth trends for minority business:
In 2017, the nation’s minority nonemployer firms (firms with no employees; using primarily 1099 contractors) generated over $279.3 billion in receipts.
The number of minority nonemployer firms grew by 16.7 percent to 8.169 million between 2014 and 2017, nearly four times the 4.2 percent growth in the number of non-minority nonemployer firms.
Of the 8.169 million minority nonemployer firms in 2017,
3.635 million (44.5 percent) were Hispanic-owned (By official definition, the owner of a Hispanic-owned firm may be of any race.)
2.951 million (36.1 percent) were Black or African American-owned
1.960 million (24.0 percent) were Asian-owned
84,500 (1.0 percent) were American Indian or Alaska Native-owned
38,500 (0.5 percent) were Native Hawaiian and Other Pacific Islander-owned
Minority women-owned nonemployer firms totaled 3.779 million (46.3 percent of total minority nonemployer firms), with receipts totaling over $83.7 billion.
Minority veteran-owned nonemployer firms were 312,000 (3.8 percent of total minority nonemployer firms), with receipts totaling over $9.3 billion.
Demographic shifts: The changing face of the majority
According to census figures, by 2042, racial minorities (those that identify as part of a race other than non-Hispanic, single-race whites) are poised to become the new majority, making up more than half the U.S. population. By 2050, 54 percent of the population will be minorities. In a country whose history has been shaped by the boundaries among racial groups, this projected demographic shift is undoubtedly important. Additionally, U.S. society is increasingly represented by a cross-section of generations, including seniors and millennials (typically defined as those born between 1981 and 1997).
But what does it mean for the supply chain? As diverse populations increase, so does their spending power and influence. Gone are the days when companies told you what to think, do, and buy with no questions asked. Today’s buyers are very savvy. They’re looking for connections to the brands they buy from, whether that connection is in the organization’s principles and beliefs or its leadership. These buyers want to know that organizations stand for something that makes society better. And if that’s something that they value and believe in, that’s even better.
Forrester, a leading consumer research and consulting firm, refers to them as the values-based consumer. Customers are becoming more aware of — and sensitive to — social issues and using this to make purchasing decisions.
Social activism/economic inclusion
Activism has always played a part in the causes agencies and corporations take on. Though internal stakeholders can champion a cause, true activism starts from the outside, usually in an area that people feel the organization isn’t supporting or being responsive enough to.
Supplier diversity got its start based on calls for economic inclusion within the Black community. It has expanded over the years to include women-, LGBTQ, and veteran-owned businesses. Because of their positions in the community — often as large employers and major economic engines — organizations are realizing they have the power (and a responsibility) to address economic disparities through their supply chains and how they purchase the goods and services needed to run their organizations. In addition to being responsive to the needs of the community, they’re finding that it also makes business sense.
Accountability to secondary stakeholders
Stakeholders are individuals or groups that have an interest in the organization and, whether directly or indirectly, are impacted by its actions. Stakeholders can be broken into two different groups: primary and secondary. Organizations have a different responsibility to each group.
Primary stakeholders are employees, suppliers, boards of directors, owners, shareholders, and customers. Secondary stakeholders are external groups such as government and regulatory agencies, trade and labor unions, political and social groups, the media, and so on. They drive supplier diversity in the external environment. In this age of cancel culture, they can wield tremendous influence, both positively and negatively, on the actions that the organization takes. They indirectly affect the organization by taking actions that either support the organization’s efforts or make success difficult.
In some communities, supplier diversity can be an emotional and highly charged subject. When I was a practitioner, usually once or twice a year, I’d get a call from a reporter wanting to know for an article how much we were spending with small and diverse businesses. It usually came after a politician announced “increasing opportunities for small and diverse businesses” as part of their platform.
This usually created a frenzy about who would respond and what exactly should be shared (going on the record can be tricky). If the results were good, it would be nothing more than an informative article. If the results weren’t so good, it usually created a firestorm in the community resulting in meetings with community leaders pushing for reforms for increased opportunities, an overhaul of the program, or even the removal of the supplier diversity leader. These stakeholders hold organizations accountable to their commitment to create opportunities for small and diverse businesses and push them when they feel their actions aren’t enough or results aren’t being achieved.
That’s how external stakeholders can drive change. Sometimes public outcry is needed before the organization takes action. Also, this interaction forms the basis for a long-term collaborative relationship. External stakeholders know what businesses in the community need. Internal stakeholders know what resources are available and how to navigate internally to get it done.
Recognizing Why Organizations Are Recommitting to Supplier Diversity
As the new law of the land, the diversity-related executive orders of the late 1960s and early 1970s were based on the government’s desire to do something to address systemic economic disparities within the Black community. (See Chapter 2 for more on these orders.) Arguably, supplier diversity didn’t always live up to its expectations for any number of reasons, whether it was lack of total commitment by the organization; little or no compliance, oversight, and enforcement; or just the vagueness regarding exactly what to do. Today, society is still facing calls for change to address the same economic disparities.
But companies have a chance to get it right. Many organizations are doubling down on supplier diversity efforts and strengthening the commitment to developing impactful programs that focus on the whole system of supplier diversity management (SDM) and deliver on the promise of economic inclusion. The following sections explore a few of the internal reasons organizations are recommitting to supplier diversity.
Complex business challenges/strategic advantage
If there was a mantra for running a business, it would be “stay prepared for the unexpected.” So many elements are involved, and things can change at the drop of a hat. As markets move faster and grow increasingly complex, organizations are looking for efficiency and innovation in every aspect of the business, including their supply chain.
Organizations are realizing that having a diverse supplier pool makes good business sense. The gains they can receive — whether through price competitiveness or access to industry expertise and know-how, not to mention the intrinsic value in community goodwill — are all things that provide organizations with the strategic advantage needed in order to remain competitive in the 21st century. Supplier diversity isn’t just the right thing to do but an economic imperative.
Increased focus on collaboration in the supply chain
As interest increases in the supply chain, so does the interest in supplier diversity. Expanding market reach, greater customer focus, and increasing market and cost pressures are forcing many organizations to reevaluate the effectiveness of their supply chains. The disruption caused by the COVID-19 pandemic has also required supply chains to become more flexible and responsive than ever before. As many industries experience challenging transitions, supply chain partners are increasingly important to improve supply chain capabilities, efficiencies, and impact to the bottom line. As organizations become more dependent on their suppliers, collaborative planning becomes more central.
Compliance with the law
Although simply staying out of trouble was the prevailing reason for diversity measures in the beginning, it’s still a relevant goal today. The government remains the only entity that can mandate the utilization of a business based on its socioeconomic status. Though many supplier diversity practitioners’ focus is on small businesses, corporations and other public entities (local governments, higher education institutions, hospitals, and so on) have relationships with the federal government. Corporations make up a large portion of government contractors, and many smaller public institutions receive federal funding in the form of grants. Thus, each of them is required to comply with the mandate that a portion of their project be set aside for small and diverse businesses.
Accountability to primary stakeholders
Primary stakeholders have a vested interest in how the organization performs and the activities it engages in to achieve results. In short, they drive supplier diversity inside the organization. Primary stakeholders benefit when organizations are doing well, but their actions can also directly impact the organization’s success and failure.
Even with a push or outcry from secondary (external) stakeholders, nothing gets done internally without the efforts of the primary stakeholders, whether it’s the supplier diversity leader, senior leadership, or employees advocating for change. I’ve even seen organizations where supplier diversity was a personal purpose for members of the board, and they felt the organization could do more to support small and diverse businesses. Many organizations create supplier diversity councils consisting of a cross-section of internal and external stakeholders and use public input to help them shape and conceive their supplier diversity efforts. I know this may sound a bit reactive, but that’s okay.
Corporate social responsibility/stewardship
Corporate social responsibility is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they’re having on all aspects of society, including economic, social, and environmental.
As more and more organizations evaluate the impact they have on their communities and the world, businesses are taking this responsibility one step further by seeking out ways to address challenges, ultimately making the communities they’re part of better.
