Background:

While today minorities represent approximately 28% of the population, the Census Bureau forecasts that this will increase to one-third by 2010, and fifty percent by 2050. Over this same period it is estimated that the US population will grow by 118 million, of which 92% will be minorities. Minorities are becoming better educated and the number of minorities in the ‘prime entrepreneurial age’ range (35-40) is increasing. As a result minority businesses are growing rapidly. However, they are still under-represented in the economy, accounting for only 13% of US business, 6% of gross receipts, and just 3% of total corporate purchases.

Minority business development programs encourage economic growth in the minority community - expanding their markets, leading to increased capital investment and employment opportunities, etc. In return companies that have such programs reap the benefits of the development of a larger pool of qualified suppliers and contractors, which can translate into increased competition, cost savings, higher quality, and the development of new services. Additionally, these programs can also ensure more stable sources of supply by increasing local and regional commitments, let companies take advantage of the potentially greater flexibility of small businesses, and enhance a business’ reputation as a good corporate citizen.

XX’s vision celebrates the diversity of its people and community, and views the differences among us as strengths and assets. XX also strives to be a leader in its community and to be seen as a role model for others to follow. The development of an effective supplier diversity program would be one more example of XX’s commitment to its mission, vision, and values.

Necessary elements of a Diversity Process:

• A written corporate policy clearly stating XX’s commitment to minority business development.
• Visible and articulated CEO commitment.
• A communications strategy to inform internal and external audiences of XX’s minority business development program.
• Assignment of resources to support supplier diversity efforts.
• Formal, measurable, ‘stretch’ goals defining expected levels of accomplishment.
• Establishment of accountability so that those responsible are aware of and held to expectations.
• A measurement and reporting system that allows management to monitor results in a timely fashion and respond to developments.
• Benchmarking of XX’s efforts against local, regional, and national efforts, both within and outside the healthcare industry.
• A recognition program to celebrate results.

For XX to institute a successful supplier diversity program it is vital that a supplier diversity policy statement be written to serve as a foundation upon which to build. This policy should clearly articulate XX’s commitment to the program, as well as provide direction for decision-making and procedures to operationalize such a program.

For such a policy to truly make a difference it needs to be endorsed, embraced, and supported by the CEO and top management. This support needs to be both visible and ongoing, and the policy needs to be widely disseminated to all those engaged in purchasing (and not just the Purchasing Department), all employees, and the supplier and contractor community. The advantages to XX of such a policy also need to be emphasized.

The supplier diversity program will only be successful if appropriate and sufficient resources are provided to support it. This may range from a dedicated position or positions to incremental resources to support existing personnel. However, attempting to mandate such a program without adequate resources would be a guarantee of failure.

Responsibility for XX’s supplier diversity program should be delegated to a senior manager, who will be responsible for developing a program with strategies, goals, a specific implementation plan, ongoing monitoring, and regular reporting back to the CEO. The goals should be specific, measurable, and actionable. They should be both quantitative and qualitative in nature, and be regularly benchmarked against internal, local, regional, industry, and national standards. The achievement of goals needs to be a formal part of the performance appraisal and evaluation of appropriate personnel. Finally, the successes and positive results of the program need to be celebrated and used to build on XX’s corporate culture of embracing diversity.

Possible strategies:

• Break out overall corporate goal into different commodity areas based on representation of MBE/WBE suppliers in the marketplace.
• Identification of high-potential areas to target MBE/WBE participation. Identification of low-potential areas to explore the potential for MBE/WBE growth.
• Expansion of minority supplier development efforts beyond supplies to services and outsourced services.
• Dividing large contracts into smaller contracts to enable minority businesses to participate.
• Advertising XX requirements in MBE/WBE-focused newspapers or magazines.
• Establishment of a MBE/WBE or Supplier Diversity Advisory Committee.
• An effective second-tier supplier strategy.
• Effective coordination across departments e.g. Materiels, Marketing, etc.
• Participation in the National Minority Supplier Diversity Council and the regional council.
• XX participation in minority business development fairs and activities.
• Balance between the competing interests of the various minority supplier constituencies (i.e. WBE vs. MBE).

Supplier diversity goals set for XX need to be segmented by commodity, product, service, etc. to align with the participation of MBE/WBEs in the marketplace. High-potential areas with good minority participation should be targeted for more aggressive goals, while areas with low minority participation should be targeted more for development. Supplier diversity should be encouraged beyond the acquisition of goods to the provision of contracted and outsourced services of all types.

Specific contracting strategies that can be employed to increase the potential for minority participation might include dividing large contracts into multiple smaller contracts, providing better payment terms (e.g. to help with cash flow), assistance with understanding XX’s needs and contracting process, longer-term contracts to ensure steady business, requiring suppliers and contractors to use minority businesses for part of an award, advertising XX requirements in MBE/WBE-targeted newspapers or magazines, etc.

Also key to a successful program are effective communication and outreach activities to minority suppliers. These may include XX participation in minority vendor fairs, membership and active participation in various supplier development groups, possibly a MBE/WBE Advisory Committee, and education activities to inform minority vendors of XX policy and opportunities. Outreach activities should occur through multiple forums and media to ensure that they reach the intended audience.

Finally, understanding that there are significant areas currently out of the reach of minority vendor participation, XX should consider and implement second-tier strategies. This would include encouraging/requiring primary vendors to incorporate minority supplier programs of their own, and then requiring that primary vendors report their minority vendor participation, goals, and commitments.

Note: an appropriate balance needs to be drawn between MBEs and WBEs, especially when such entities may be in competition for the same piece of business. The certification for a MBE may also be more stringent than that for a WBE – the NMSDC only certifies MBEs, while many WBEs are self-certified.

Conclusion: A truly successful supplier diversity program is one that goes beyond simply awarding contracts to minority suppliers to establishing relationships with MBE/WBEs to enable them to grow and improve their core competencies, thereby improving their business position to XX’s and the MBE/WBE’s mutual benefit. Any supplier diversity program’s success is contingent (as demonstrated by research and studies) first and foremost on the CEO ‘buy-in’ and commitment, as well as on a well-defined plan and its systematic implementation.

© SNi 05/28/03