Supplier Diversity Is Not Black and White — Or Is It?

Last weekend, I had the chance to catch up with an old friend and group purchasing organization expert (GPO), Keven Gray (formerly of Corporate United). For those who know Keven, he's one of the most fun loving guys in the business. But he also knows quite a thing or two not only about leveraged contracts -- perhaps his most passionate focus -- but also various other facets of the Spend Management world. Somehow between chasing our kids around the house, we got on the subject of supplier diversity, and I thought Keven raised a number of points worth debating on these pages.

In Keven's experience, supplier diversity professionals often overstep the bounds of their roles by in fact engaging in active discrimination based on the types of suppliers they want to recruit and award business. In one example Keven noted, he told the story about how he has been in several meetings with black supplier diversity professionals that refused to even consider looking at an impeccably qualified diversity supplier owned and managed by a Native American organization (which was a registered and qualified as a diversity supplier by multiple certifying authorities). Keven took the cold shoulder approach of these supplier diversity professionals as nothing more than racially motivated discrimination (or racial favoritism, as the case may be). In other words, these professionals had planned to award business to only one type of minority supplier -- and if the skin color of another business did not match the profile, then they were not eligible in their eyes.

Beyond the "jury nullification" paradigm above, Keven suggested to me that diversity supply for indirect materials and services is fraught with non-value add contract awards. Keven offers up an example of a meeting he attended where a large national Office Products customer introduced a minority paper (copy/computer/etc) company to the awarded National Office Products Distributor just previous to implementation of the national contract. The deal: The local minority paper supplier would pickup paper from the national office products supplier's local warehouse, deliver it to the customer's headquarters (only) add 10% to the RFP bid price and bill the client. Not only would they bill the client for the paper delivered locally, but they would handle the billing nationally with the 10% adder. As this company used more than $2.5 million in paper annually, this little non-value added addition cost the buying organization over a quarter of a million dollars a year. Of the 8 people at the meeting representing the Supplier, the National Office Products Distributor and the Small Diversity Paper Supplier, not one blinked an eye at the plan, heartily concluding it was an efficient way to add to the customer's Diversity spend initiative.

Behaviors like this are in marked contrast to the overall goals of supplier diversity which seek to embrace small business, minority- and women-owned suppliers that fall into a range of categories in a sustainable manner, creating lasting value for both the company and suppliers alike. But from a free market angle, what do these examples suggest for the future of diversity contracting? As a libertarian looking at this situation, I believe that individuals and companies have every right to discriminate. For example, I believe that it's the right of blacks to favor blacks over other minorities (or any group to favor another group for that matter). It's also the choice of companies to make stupid contracting decisions that waste shareholder dollars through non-value added activities. But it's also the right of consumers and shareholders to vote with their feet and chose not to do business with -- or invest in -- companies that practice discriminatory or wasteful behavior as part of their supplier diversity initiatives.

- Jason Busch

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