Does Supplier Diversity Reporting Encourage the Wrong Metrics?

As part of CVM Supply World's road show series this spring, I've had the chance to talk to a handful of supplier diversity practitioners. While the events have focused primarily on the traditional enterprise procurement sector from a content perspective, a number of supplier diversity program leads are turning up because of CVM's strong ties to the supplier diversity community. And what I've learned from some is enlightening -- at least as it pertains to how diversity programs should be structured versus how they are today.

First, quantity appears to clearly be the wrong metric. Focusing on the percent of spend and number of diverse suppliers rather than other metrics forces companies to drive up diversity numbers at the expense of quality (which benefits no one -- especially shareholders). Consider the all-too-familiar case of a distributor or last-mile provider who happens to be diversity owned (and takes title to goods or subcontracts services that otherwise could have been handled in a direct delivery manner). This type of situation does nothing but drive up the cost for companies and add another layer of complexity which can detract from actual supplier performance. I believe that the only reason we see this sort of thing -- other than Jesse Jackson style shakedowns -- is because companies are desperate to pump up their diversity numbers. Not because it's good business.

In addition, supplier diversity reporting encourages companies to focus on supplier identification, working with as many suppliers as possible, rather than narrowing their focus and investing in supplier development programs that improve their diverse supplier community. In my view, companies should -- in an ideal world -- shift their thinking to working with fewer diversity suppliers and investing more in developing the relationships by reallocating headcount away from supplier identification and management to on-the-ground supplier development (e.g., lean, Six Sigma resources). But as long as reporting guidelines continue to focus on quantity over quality, most companies will continue to pay lip service to developing their small, entrepreneurial supply base and instead look for ways to pump up their numbers.

- Jason Busch

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