A Critical Topic for Black History Month: How Far Should Supplier Diversity Programs Go?

February is Black History Month, a time of remembrance for the contributions that African Americans have made as well as their plight and struggle to overcome slavery and later organized discrimination throughout much of the country's history. Black History Month is not a new concept. In fact, according to Wikipedia, it had it "beginnings in 1926 in the United States, when historian Carter G. Woodson and the Association for the Study of Negro Life and History announced the second week of February to be 'Negro History Week'. This week was chosen because it marked the birthday of both Abraham Lincoln and Frederick Douglass."

In the spirit of Black History Month, I thought it might be interesting and engaging to start a discussion among Spend Matters readers on the topic of how far supplier diversity programs should go to promote equal opportunity. What is the line between preference and discrimination? Are there certain places where clear examples of past discrimination should result in an extra level of preferential treatment today (e.g., Federal, state or local contracts)? How should we measure and report on the results of programs?

I've often found that supplier diversity is one of those topics where the majority of procurement practitioners will strongly support in principle, but when it comes down to actual program design and contract award preference, that all of a sudden can become more of a taboo subject. With this in mind, and in the spirit of Black History Month, I would challenge your organization to have a discussion around the following types of questions involving supplier diversity programs.

As a start, ask yourself whether supplier diversity programs should:

  1. Give preference to diverse suppliers in new contracts in a quantifiable manner -- generally? For example, a diverse supplier's higher offer price in response to an RFP might be weighted less than a similar offer from a competing supplier (which would knock them out of contention) compared with a third supplier that came in at a lower amount.
  2. Mandate that a certain amount of new contract awards (in %) terms go to diverse suppliers?
  3. Track diversity information that goes beyond standard National Minority Supplier Development Council (NMSDC) or similar requirements (e.g., percentage of employees or contractors who are minorities, women)?
  4. Focus on targeting diverse supplier recruitment in certain categories vs. others (this is fundamentally great question to ask, at least in our view, because minority job creation for low-wage jobs to serve a particular account in a blue collar services industry -- e.g., janitorial work -- is different than in skilled manufacturing, where wages are higher and a true supplier diversity "trickle-down" effect is likely to occur)?
  5. Require tier one suppliers in specific categories to award a certain percentage of business to diverse suppliers on the sub-tier level (vs. suggest/indicate diversity award goals)?
  6. Hold diverse suppliers to different standards of accountability in terms of performance and quality, at least for a certain period of time (e.g., "warnings" that would not be given to other suppliers)?
  7. Invest greater overall percentages in supplier development programs (vs. the general pool of suppliers) that target diverse suppliers? Such programs might focus on lean cost take out initiatives, working capital/early payment programs, training, demand aggregation (for raw materials), etc.
  8. Require quantifiable "payback" or ROI mechanisms for supplier diversity (e.g., measuring market-share in specific markets, government contracts won/maintained, etc.)?
  9. Focus on a global scale with localized and decentralized metrics but with central oversight and accountability (e.g., tracking indigenous workers in facilities in certain countries in Latin America, Australia)?
  10. Be integrated as a standard part of a supplier management/vendor management approach and process without stand-alone technology or resources? Such a model could take the form as having a common supplier management toolset for onboarding, enablement, supplier performance management, risk management, etc. for both diverse and non-diverse suppliers (but that could flag diverse suppliers as required).

Supplier diversity programs that simply beat to the rhythm of the status "check-the-reporting-box" quo are not only likely to minimize their potential -- they're also likely to potentially harm internal relationships with business stakeholders and external suppliers (diverse or otherwise). Let's make it our one corporate takeaway during Black History Month to ask some of the hard questions of supplier diversity and what we could be doing better. A truly open discussion can benefit all parties!

- Jason Busch

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