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Diverse Suppliers Can Lead to Diverse Talent

If companies want to recruit diverse employees, they should diversify their suppliers. Experts say organizations can increase their recruiting reach by doing business with companies owned by women, minorities and veterans.

Organizations that focus on supplier diversity will have access to a “pool of employment candidates who are more savvy and selective in determining which organizations they will consider for career options based on a perceived commitment to diversity and inclusion within an organization,” wrote James Threalkill, national diversity director at Skanska USA, in an e-mail to SHRM Online.

It’s not just customers that organizations have to keep in mind while doing business. Many prospective candidates are also watching what they say and do.

Jill Houghton is executive director of the U.S. Business Leadership Network (USBLN), a national, nonprofit, nonpartisan business-to-business organization promoting workplaces, marketplaces and supply chains where people with disabilities are included. In 2010, USBLN launched the Disability Supplier Diversity Program, providing certification, education and linkage between disability-owned suppliers, Houghton told SHRM Online in an e-mail.

“Supplier diversity is a critical and necessary component of diversity and inclusion that strengthens the supply chain and provides a more robust platform for the utilization and development of supplier talent,” she said.

For example, companies interested in recruiting and hiring veterans can gain a competitive advantage by including veteran-owned small businesses (VOSBs) in their supplier diversity programs, said Lisa Rosser, owner of The value of a Veteran, an organization that teaches organizations how to recruit and retain military veterans. “This can be a differentiator when it comes to marketing your company to prospective military applicants,” she said in a January 2012 blog posting.

Who’s in Charge of Supplier Diversity?

HR can create its own role in helping create supplier diversity.

Stan Kimer, president and owner at Total Engagement Consulting, and retired director, sales operations, global business services for IBM, said that supplier diversity is often a procurement function. However, “there should be a tight link between the HR side and the supplier diversity program,” he added. “For the most part corporations understand the importance of connecting the two.”

According to a survey published December 2011 by the Institute for Supply Management (ISM), 65 percent of respondents said their organization had a supplier diversity program in place. Ninety percent of the 380 participants worked in their organization’s purchasing department.

As to who is in charge of supplier diversity, ISM found the following:

  • 66 percent of respondents said procurement or supply management was responsible for supplier diversity.
  • 19 percent said the diversity department or supplier diversity department was in charge of the program.

Making the Business Case for Supplier Diversity

Aside from recruiting top diverse talent, experts say there are other significant business reasons to focus on supplier diversity.

“Every company has vendors and suppliers and they have choices when they put things out to bid,” said Jennifer Brown, president and owner of a New York City-based leadership and diversity consultancy. Customer-facing businesses have “a tighter value proposition to diversify their supplier base,” she told SHRM Online. “They need to do right by the customer base that is asking questions about their supplier practices.”

“All companies should have some kind of [supplier diversity] program—and promote it—because for companies of any size to be competitive and to get the best suppliers they need to have the broadest view,” Kimer said.

In the U.S., federal and state government agencies—and those doing business with the government—might be obligated by their contracts to demonstrate they use contractors and subcontractors from disadvantaged groups, Kimer noted. “One reason why women-owned, minority-owned and veteran-owned businesses will always be a bit ahead is because there are federal requirements,” Kimer said.

Absent such requirements, “an organization benefits from competitive pricing when it expands its scope of procurement opportunities to include diverse suppliers,” Threalkill wrote.

“Some companies care about this and really prioritize this,” Brown told SHRM Online. “They know it’s good for innovation and good for the economy because they are investing in small and growing companies.”

When organizations “broaden the net” they will have more suppliers to choose from, Kimer added, “and the odds are that you will get more bids.”

This could lead to more cost-effective purchasing options, he noted.

“It makes good economic sense to invite all diverse suppliers to the table,” Houghton said. For example, there are an estimated 54.4 million people with disabilities in the U.S. and approximately 15 percent of those are self-employed, she noted. “When you add the number of veteran- and service-disabled veteran-owned firms in our nation, one can see the great potential that will be left untapped without efforts to engage with these suppliers,” she wrote.

Innovation is another bonus diverse suppliers provide, Kimer added, because diverse business owners bring a different perspective.

Respondents to the ISM survey provided a variety of reasons for having such a supplier diversity program:

  • Our organization thinks it’s the right thing to do (77 percent).
  • Federal reporting regulations (61 percent).
  • To drive more supplier competition (42 percent).
  • Diverse suppliers live where we operate and are our potential future customers (42 percent).

Six out of 10 ISM survey respondents offered another reason for supplier diversity: “Our customers are diverse, so we need to be too.”

Starting a Supplier Diversity Program

“There are a couple of key things to think about before starting a program,” Patricia Richards, director of disability supplier diversity program for the USBLN, wrote SHRM Online in an e-mail:

  • Will the program have the support of the CEO or a senior executive? “Without this high-level visibility and connectivity the program will not be effective,” she wrote.
  • Is there a business case rationale for the program? Defining the “why” in a way that connects the program to the core business of the company is critical, according to Richards. “It must go beyond the ‘nice thing to do.’”
  • Are there enough resources available to launch and sustain the program? “If the business rationale/value proposition is firmly in place, the supplier diversity program should demand the same investments in resources as other key initiatives,” she noted.
  • Where will the program be housed to drive expected outcomes and be successful? “Each corporation must determine what works best … with every internal business unit charged with accountability and producing results,” Richards wrote.
  • Are you aligning the program for success with key outreach organizations? In addition to USBLN, Richards mentioned the Women’s Enterprise National Council, National Gay and Lesbian Chamber of Commerce and National Minority Supplier Development Council.”

Finding Diverse Suppliers

“Traditionally supplier diversity programs have focused on minority- and women-owned firms—and veterans to some extent,” said Houghton. “A growing number of corporations are expanding their efforts in the LGBT (lesbian, gay, bisexual, transgender) and disability supplier communities.”

Finding and working with such businesses can be challenging.

“You’ve got diverse suppliers in your company that you might not be aware of,” Brown noted. “Part of this is ferreting out who is already your supply chain.”

In addition, organizations can attract new and diverse suppliers by hosting “how to do business” seminars and networking expos, Threalkill noted. For example, Skanska designed a training program to prepare diverse suppliers for contracting opportunities on the construction of the Metlife Stadium for the NFL. “After completion of the training program, a diverse supplier was awarded $1 million stadium contract on the night of the program’s graduation ceremony,” he wrote.

Employee Impact

One way organizations can connect their supplier diversity efforts to the employment brand is through employee resource groups (ERGs), experts noted. ERG members can identify diverse vendors and bring them to the organization’s attention as well as encourage such vendors to approach the company for business opportunities.

“Trying to get in and get your first piece of business with a large firm can be arduous,” explained Brown, who advises the ERG Subcommittee of the National Gay & Lesbian Chamber of Commerce's (NGLCC’s) Corporate Advisory Council. “Some diverse companies don’t have the bandwidth to do this.”

“As a woman-owned business I didn’t have the same kind of support network that a man would have had,” she added. Brown said some businesses have to “get really creative even about coming into being” and that can lead to a different business approach.

The payoffs for organizations can be significant, whether a leader’s focus is procurement, diversity or HR.

“When employees know their company is reaching a diverse range of suppliers it can impact productivity, engagement, and recruitment,” Kimer said. “They can see you really are walking the walk with your diversity initiative.”

Rebecca R. Hastings, SPHR, is an online editor/manager for SHRM.

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