It’s easy for a business to give someone a title and proclaim a commitment to supplier diversity. However, there is a big difference between having a supplier diversity program and having a program that works. Simply put, the difference is in action — not just words.
According to Reginald Williams, CEO of Atlanta-based Procurement Resources Inc., there are a number of different elements that identify a company that “gets it” and is effective in supplier diversity. Penetration and ability to demonstrate successfully doing business with minorities and women is a telltale sign. Johnson Controls Inc. is a prime example, Williams explained. “Johnson Controls has invested heavily in supplier diversity and its diverse suppliers. They have also assisted MWBEs in forming joint ventures, so that they have the capacity and scale required to compete for Johnson Controls contract opportunities,” he said. Investing in development is a means that creates capacity to scale. That required capacity is the number one challenge corporations face today, and companies like Johnson Controls address it well.
Another example is Cummins Inc., which not only encourages joint ventures and strategic alliances, but also splits contracts, so that MWBEs can compete for realistic portions. “Instead of saying there is a $390 million deal, and there are no minorities large enough, Cummins will break out $50 million and set it aside for diverse firms,” Williams said. “Not all companies are this proactive. While many will accurately state that minority- and women-owned companies lack capacity, they offer no solution. It is easy to point out the problem, but companies are only advocates when they also identify solutions.”
Another sign of businesses that are committed to supplier diversity is the willingness to help MWBEs address the common challenge of access to capital. It may be a matter of having enough money to finance the project or — in the case of construction — having the bonding capabilities to take on work without additional risk to the customer, Williams explained. “This access to capital is a huge hurdle for small businesses to overcome. Fortunately, some companies are making great strides in helping MWBEs through expedited payments to small businesses or being proactive with bonding,” he said. “Kaiser Permanente has taken the lead here by establishing bond criteria that reasonably address the level of risk. Most companies have a standard $2 million bond requirement. However, if a contractor isn’t doing anything that justifies the bonding requirement, KP is establishing bonds based on scope and risk involved in the actual work.”
One challenge that is much more difficult to address occurs when businesses operate within unique areas where there are limited suppliers globally. For example, utilities like Dominion® spend a large percentage on products from a select few organizations. “In these instances, second-tier engagement is crucial. However, this level of commitment requires communication, monitoring and reporting in order to be effective,” Williams said. “As these companies work with their prime suppliers, they need to clarify that diverse inclusion is an added value that is highly prized.”
The extent to which companies engage contractors and suppliers in their core business processes is also a key indicator of those that understand the value of supplier diversity, Williams explained. “It is easy for a large company to hire diverse firms for janitorial, maintenance and landscaping, but when a company like Chrysler hires a minority to make a plastic component that goes into the steering mechanism of its cars, that is a different story,” he said. “When working with someone at the business process level, it demonstrates that you are making an investment. This hiring of diverse firms to manufacture standard components is a distinguishing quality. Those making this commitment include IBM, Johnson Controls, AT&T and Pacific Gas & Electric Co.”
Williams told Minority Business News that there are three key qualities any firm can embrace that will set the stage for success.
The first pillar is building collaborative engagement into the process. “Supplier diversity advisory councils are instrumental here. They serve as cross-functional teams designed to allow the company to begin the process of collaborative engagement,” he said. “Every large company has silos with individual leaders. These individuals need to act as advocates and champions in order for supplier diversity to take hold. Unless supplier diversity professionals align their mission with procurement, they will forever be at odds with procurement. It will lack confidence in supplier diversity.
The second pillar is an accountability process. The performance review process is instrumental here, Williams explained. “Supplier diversity needs to be included as a key indicator or benchmark for performance, or it will not be embraced,” he said. “Unfortunately, the vast majority of companies do not have a process of holding staff accountable for carrying out the mission. If supplier diversity is not a core element in determining best value, then supplier diversity has no value.”
Rewards and recognition are the third component. “People do what they hope will serve as an advantage to their careers. Companies who say they have a supplier diversity pro- gram, yet fail to recognize and reward accomplishments, lack a built-in incentive,” Williams said. “When you reward and recognize people, you support their resolve and confirm that what they are doing is a priority. Everyone likes appreciation.”
“Success in supplier diversity comes when a firm is able to engage a minority-, women- or veteran-owned firm as an instrumental component of expanding its ability to reach customers and/or reduce, eliminate or avoid costs,” Williams said. “There also needs to be economic spillover in diverse communities. Supplier diversity is not about making a minority owner rich; it’s about leveraging the minority business to reach others in the community.”