Before we deep-dive into this topic, here are a few questions you need to ask yourself with respect to your company’s supplier diversity initiatives:
- What drives your company to support a supplier diversity initiative?
- Have these drivers changed in the past few years? If yes, have you tweaked your internal messaging accordingly?
- How has supplier diversity gained more visibility since the recent events and increased focus on #BlackLivesMatter?
You can find all these answers in here.
We hope you have a basic knowledge of supplier diversity and its importance for your company. If not, don’t worry, this blog will help you get up to speed. Let’s start by discussing these key points to develop a sustainable supplier diversity program.
- Data-based Influence
- Tying Supplier Diversity to the Overall Business Strategy
- Top Drivers of Supplier Diversity
- Strategies to Secure Support and Gain Influence
One of the biggest questions on your mind may be:
How does one effectively influence people across the organization to help build and maintain a sustainable supplier diversity function?
Answer: Influencing people across an organization at varying levels and responsibilities, using data. As W. Edwards Deming rightly put: “Without data, you would be just another person with an opinion". More often than not, data-based strategies are more widely adopted and executed.
With changing times, leadership around the globe is making commitments around supplier diversity that are unprecedented. So, now is the time to use that increased interest to build additional support and credibility and strengthen your business case. Though there are various ways of influencing your colleagues, such as Quid-pro-quo; Positional; Character-based; and Intrinsic, it is the intrinsic influencing that is the most effective as it influences others by providing data to let them form their conclusion. This type of influence showcases you as a subject matter expert in your area. This empowers the stakeholder to make their own decisions and evaluate the data. It creates a more confident and secure stakeholder, who can also be an evangelist for you throughout the company.
Simply put, no one can argue against data!
Tying Supplier Diversity to the Overall Business Strategy
Before tying supplier diversity with your business strategy, you need to know -
- What are the current priorities of your company?
- How does supplier diversity contribute to those goals?
Supplier Diversity should be positioned as an enabler of core company business strategies and a strong business case should tie the two together.
Here are a few ways supplier diversity can be being a business enabler, but you should identify how it supports your unique business priorities for your company. According to this Forbes article, supplier diversity will help businesses, small and large, recover from the pandemic.
Also, diverse small businesses help Fortune 1000 companies by:
- Producing innovative products/services for them to use or sell.
- Increasing competition, resulting in better prices and service levels.
- Enabling them to serve emerging and untapped markets.
- Highlighting their commitment to diversity and inclusion, and a shared and durable prosperity.
- Helping them be flexible, agile, and resilient.
Here are a few tips to keep in mind:
- You should know your spend baseline and be able to talk about it at any given moment. At any time, the CXOs (CPO, CEO, CFO) could ask you - what is our percentage of spend? And you should always be prepared to answer it. Leaders are increasingly being asked how they are performing in this space and they should be armed with timely and accurate data to answer at any given moment.
- Another data point you should know is who your top suppliers are and what you spend with them.
- Beyond that, where are they located and what business units or commodity buckets are they servicing inside the organization.
- Do you know their performance levels and do you know if you should get involved? (are they at risk of attrition?).
- Also, perform an opportunity analysis, you need to understand where the upcoming opportunities are and map those to diverse rich categories if you can. This ensures your preparedness for the upcoming opportunities.
- And the last data point is, numbers around the economic impact of your spend. How are your diversity dollars impacting not only your supplies but your suppliers’ employees and the community where those suppliers live and work.
Top Drivers of Supplier Diversity
- Brand Protection and Brand Enhancement
- Business Enablement
- Social Responsibility
If your company has paid little less attention to diversity and inclusion up until now, then, it is time to put a plan quickly in place. The current environment finds companies being scrutinized more and more for their diversity practices.
This scrutiny has organizations putting new strategies in place to protect their valuable brand equity that they have taken so long to create and to demonstrate how they are valuing the importance of diversity inclusion in the eyes of the customer.
They are responding to and making commitments like never before, and supplier diversity is a very big part of this story.
The last way that supplier diversity can contribute to the company is social responsibility Companies are responsible for the economic and social environment that they work in. They should be actively providing opportunities for all types of vendors and this should now become an integral part of the supplier diversity business chain.
Another notable Supplier Diversity driver is your competition. Fairly or unfairly, you are often evaluated by how well or poorly you perform compared to the person next to you. Companies want to know where they land in their industry and how they are performing when compared to their competitors. So, spend some time finding out what your competition is doing in this space and build goals based on where you want to fall.
Diverse suppliers can also bring additional innovation to the table.
We have an example of this from a CVM Solutions client. They were evaluating their purchases of pallets. This was typically f a sole-sourced area for our client. They were able to bring a diverse supplier into the mix. The diverse supplier consolidated all of their packaging needs, they provided better service and greater insights for our client while saving them a substantial amount of money (by the way, this diverse supplier, grew from a very small company to a 50-million-dollar company in a very short period).
Diverse suppliers are also oftentimes more responsive and are more focused on customer service. They often have a smaller and simpler team that can respond quickly. We have all had the experience of large companies who have us wait in the queue with their automated system leading to ineffective solutions. Diverse suppliers more often provide the in-person service that finds solutions more quickly and effectively.
Supplier Diversity Contributes to Your Revenue
There are several ways in which supplier diversity contributes to revenue and you can b make quantifiable and shareable measurements in the space to support your business case.
Revenue Protection: protecting your revenue through supplier diversity can be quantified by summing the value of all of the contracts with supplier diversity reporting requirements from your customers. You can state that number as the amount that could be at risk if you do not comply with your customer’s requests for your supplier diversity reporting and participation
Revenue Generation: Large companies are exceedingly asking questions around supplier diversity in the RFP process and while evaluating potential vendors. They often want to know that if your company is a recipient to the opportunity at hand, that your values align with theirs’. You can partner with your sales team to provide robust information for them so that they can differentiate your company from others during the sales process. For example, a current CVM healthcare client often bids on insurance contracts at city or state levels. The supplier diversity department can provide those sales teams figures on how much the company already spends in those communities with diverse suppliers to strengthen the RFP response and differentiate your company from your competition.
Strategies to Secure Support and Gain Influence
One effective strategy to understand where you can build support inside your company is to map your stakeholders based on influence and engagement. Here’s a look at how to do this:
In the upper right quadrant, is the Partner. Some traits of Partners are:
- Also known as the sponsor, the Partner is the ideal stakeholder.
- Usually invested in the outcome of your program.
- Believes in your mission.
- May have indirect responsibilities for supplier diversity.
- Has a lot of influence inside the organization.
- Can make the right connections for you.
- Often holds the leadership position. Example: CPO or a CEO and hence, is your most valuable stakeholder.
In the upper left quadrant are the Prospects. Some traits of Prospects are:
- Prospects have a lot of influence but might not engage on a day-to-day basis with you.
- Who can say “jump” and everyone jumps.
- Have the authority to get things done in the organization.
In the bottom right, we have the Evangelists. Some traits of Evangelists are:
- These are the worker bees and are essential for an effective support network. An example here could be a sourcing - category manager.
- Help you extend your reach.
- Evangelists will need data from you to share your message and create more stakeholders in your organization. You want them to be engaged and they can find and bring in new suppliers, but they might not have a lot of influence beyond their role in the company.
And then in the bottom left are the Skeptics. Some traits of Skeptics are:
- We all have them in every organization.
- Typically, the only way to motivate this kind of stakeholder is by providing a lot of data consistently.
- They are very difficult to engage and when they do, they probably be worth the time. The key to this chart is to understand that it is not a one-time exercise. You should constantly work on providing customized messages for each type of stakeholder, to move them into one of the more valued quadrants.