Friday Rant: Supplier Diversity Status, as We Look at it, is a Load of Rubbish

I've become a believer over the years in the notion of fostering a diverse set of smaller suppliers. Not only as a better means of connecting with diverse communities that represent potential customers, but also because of the innovation that smaller suppliers can introduce into the procurement value equation. Granted, I do find Federal reporting for diversity an absolute waste of time and I personally think our government's only goal in procurement should be focused on lowering costs -- since any time government workers attempt to "measure value," it costs tax payers far too much in bureaucratic analysis. Yet in the private sector level, factoring diversity in sourcing, supplier development and supplier innovation initiatives makes good business sense, at least as I see it from my vantage point.

This is true even if on a short-term unit cost basis, the decision to work with a diverse supplier might appear more costly. However, I still have one huge issue with how we look at and quantify supplier diversity today. Rather than focus on what counts to us, we rely on what is really an arbitrary definition of supplier diversity based around minority, veteran and women ownership (in addition to the size of the vendor in question). The question of ownership, to me, really does not get at the heart of diversity. Stay with me here for a moment.

Consider the example of a company wanting to increase spend with a minority supplier to better serve a diverse market and show affinity toward the ultimate consumers of their product. In this case, we care nothing for the background facts behind driving spend to a "diverse" supplier with an African-American owner that might have gone to Groton or Andover before Yale and speaks with a Boston Brahmin accent rather than an American Southern dialect -- provided the supplier is still registered with the MSDC. No, by the books (and certification) this supplier is still diverse, based on the skin color of the owner, not the privileged background that he might have enjoyed. Heck, even if this supplier has employees who are 90%+ Caucasian (let's call them "Skull and Bones buddies"), they're still a minority supplier.

What we need is a new means of measuring "how diverse" a supplier is. Perhaps we still take into account skin color. But why look at the race and ethnicity of the typical employee or manager at the company, rather than the owner? Personally, if we truly care about giving back to diverse communities and driving the next generation of consumers for our products, then it would be far better to focus on how minorities are benefiting overall in a business, rather than one minority that happens to maintain ownership at the top. The benefits of this argument extend to hiring suppliers that employ the handicapped, disabled veterans, etc.

The very concept of supplier diversity is very much in the eye of the beholder -- or would that be "spend holder"? But I have little hope that companies will ever have the time to conduct the type of background analysis of their supply base that I suggest above. It's going to be up to the minority supplier development council (MSDC) and others to revisit how they define diversity if we're ever to more effectively make sure the benefits of diversity spending truly hit home as they were intended. However, the good news is that there are archetypes for this type of program. In South America and Australia, some companies look at the percentage of employees that come from an indigenous background, in measuring overall supplier performance and compliance to diversity programs.

I think most Spend Matters readers would agree that supplier diversity is a good thing. Yet we should also ask ourselves whether or not our current programs are paying simple lip service to diversity based upon some arbitrary ownership criteria centered around convenience. I highly suspect if you stop to think about what it truly means to spend with diverse suppliers, then you too will come to a similar conclusion.

I'll leave it for you to consider the point. I'm done arguing it. As for me, I have to run. I've got to call some friends to go plan my 20-year private high school reunion that's happening in 2013. I was one of those scholarship kids at a prep school that happened to be white (half Quaker/ half Jewish doesn't count for minority status, unfortunately). However, you can be sure that some of my diverse classmates (who may or may not have gotten financial aid) certainly can check a box that I won't be able to -- despite the economic status I grew up with. Makes you think, doesn't it?

Jason Busch

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