(Note – although I originally authored this piece for DiversityPLUS magazine in 2008, the messages are still relevant.  Slightly updated for 2011)

 

Thanks to the efforts of the National Minority Supplier Development Council (NMSDC), several forward-thinking large corporations, and other likeminded organizations, corporate minority supplier diversity programs are pervasive in 2011. While these programs have taken years to develop and flourish, a growing number of corporations now enjoy the significant benefits of supplier diversity programs, and their impact on the corporate bottom line.

Despite the apparent gains made in this area, corporate supplier diversity managers – those charged with the responsibility for administering corporate minority- and woman-owned business development programs – are regularly called upon to justify such initiatives to senior management. Seasoned supplier diversity managers are experienced in the exercise of routinely dusting off, refreshing and presenting the business case for their programs.

Successful minority- and woman-owned business development programs are about far more than compliance and corporate altruism, and an effective business case must address a message broader than a simple “…it is the right thing to do.”

A comprehensive and compelling supplier diversity business case must encompass, at a minimum, three core factors:

Factor # 1 Address a broad base of internal stakeholders

Supplier diversity programs and policies potentially impact several groups in an organization, and each group may view the value proposition in a different way. The proof points that have resonance with one particular business group may mean absolutely nothing to another group. For example, I have heard many supplier diversity managers say something along the lines of “…small woman- and minority-owned business enterprises are more flexible and agile than large businesses, and they help cut supply chain costs…”

This message may be very compelling to cost optimization-focused supply chain executives – but will mean absolutely nothing to a senior marketing or sales VP that is driven by the need to increase sales, expand into international markets, increase sales in existing accounts, etc.

In selling the business case, a supplier diversity manager must prioritize and craft the messaging in a targeted way. In doing so, it is important to appreciate the fact that supplier diversity programs impact stakeholders well outside the four walls of the procurement organization.

FOR EXAMPLE :

Public Sector Sales Executives  will be particularly interested in the extent to which supplier diversity programs help to support compliance requirements of their primary customer base.  For example, the U.S. Federal government has well established diverse spend targets, and many states and municipalities have adopted similar requirements.

Product Marketing Image and Brand Management will see value in weaving the corporation’s supplier diversity accomplishments into marketing campaigns targeted at ethnic minorities or women.

These are simply a couple of examples. Following similar reasoning, the message can be effectively tailored to align with the strategic priorities of numerous other internal stakeholder groups, including Enterprise & Consumer Sales, HR Diversity and Inclusion, Corporate Social Responsibility / Corporate Affairs, Government Affairs, etc.

The stronger the list of executive stakeholders and the better understood the value proposition, the higher the likelihood of securing the resources and funding to continually grow and expand the program.

Factor # 2 –  Align with corporate objectives and values:

An effective business case very clearly positions the value of supplier diversity in the context of key corporate objectives. A good business case must articulate how supplier diversity policies and procedures are executed in a manner consistent with overall corporate culture, mission, and values.

For example, at HP we operate in accordance with a set of corporate objectives that were drafted early in the corporation’s history and have remained largely unchanged since the 1950s. One of HP’s key objectives reads: “Good citizenship is good business. We live up to our responsibility to society by being an economic, intellectual and social asset to each country and community in which we do business.” In keeping with this objective, HP’s supplier diversity business case highlights the intellectual, economic and social value of utilizing under-represented businesses on a global level.

When working to align with corporate objectives and values,be conscious of the need to balance the messaging. While it is important to conform to “soft” corporate social values, avoid positioning supplier diversity as purely a philanthropy, compliance, or CSR-led program.

Factor # 3 – Articulate the economic value of the program.

At the most fundamental level, corporations exist to serve a core objective of delivering shareholder value. Every initiative that the corporation undertakes, even those falling under a corporate social responsibility (CSR) umbrella, must deliver some measurable Return on Investment (ROI).

An effective and compelling supplier diversity business case should be focused on the extent to which the program impacts the procurement bottom line and supports incremental revenue. Use consistent metrics to quantify the impact of supplier diversity on sales.

It is often said that if you can’t measure it, you can’t manage it. The corporate supplier diversity program should incorporate current metrics which clearly deliver the message that supplier diversity supports and enables existing revenue streams and can contribute incremental new revenue.

Certainly, this messaging must be customized significantly to address a specific sales model and customer base.

  • Examples of possible metrics include:
  • Total $$$ in proposals supported
  • Win ratio based on proposal input
  • Total $$$ in corporate accounts supported by 2nd Tier Reporting

 

CONCLUSION

Whether seeking funding for a new program; working to expand an existing program into international geographies; or simply  lobbying against program budget cuts – corporate supplier diversity managers are routinely called upon to justify their programs.  A comprehensive and effective business case can be an important tool to assist a supplier diversity manager in advocating for and presenting the value of diverse business development programs.

 

 

 

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8 Comments

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  1. Raj says:

    Brian,

    Have you been able to measure economic impact on under represented businesses from your spend with these groups?

    can you really measure sales revenue from the targeted groups as a result of SD efforts?

    1. Julia says:

      Deep thoghut! Thanks for contributing.

  2. Jeff Jones says:

    Hello Raj,

    Yes, you can measure sales revenue from the targeted groups as a result of SD efforts. The sales people who have customers that required supplier diversity spend can tell you the revenue earned on that customer. Even if they don’t give you the names of the customers they can use codes like “customer 1; Customer 2” Where I have seen diversity coordinators get hung up in this area is thinking that supplier diversity had to be a deciding factor in the cusotmer negotiation – it does not. You only need to know that it was a requirement. All you need to do is find the customers that your company does business with right now and determine how many have a diverse spend requirement. After that it is a matter of documenting a process to help your teams win.

  3. Great points, Jeff ! Thanks for sharing

    1. Umeth says:

      Diversity is usually rerefred to when speaking of people of different color. How ever diversity is also can be variable among religions or people with disabilities. There are stigma’s out there in society regarding mental illness, autoimmune disease and other illness. One expects though Mayo seeks diversity regarding mental illness even though some of the public may refer to it as goofy behavior. I was stunned when I heard the Mayo physician in clinic evaluation in front of the patient refer to the patient with autoimmune encephalopathy as Goofy. Not once but twice stated so you get goofy and then predisone takes it away? Did he just say she was goofy? Twice? Reading over this physician’s publications I could not find anywhere in which he rerefred to autoimmune related encephalopathy as Goofy as a description. Autoimmune encephalopathy brings with it seizure, psychosis, suicide, coma sleep, and in some untreated cases death. Now easily treated with predisone almost immediately reverses all the encephalopathy very possibly saving the person’s life. When the chair of this department was questioned as to the subordinates word goofy, he remained silent. While Mayo Rochester can advance promises of diversity among people with brain illness, some there may not have wholly internalized this concept by holding onto old social stigmas. Yet where no action is taken to correct such stigma’s, one wonders the extent the institution has internalized such beliefs.

  4. Tandalea M says:

    Thanks so much for this! It was exactly what I was looking for to help with presenting to our stakeholders!

    1. Luciene says:

      Now that’s sblute! Great to hear from you.

  5. Sang says:

    It is true that an educated cmseoutr should be the Best Customer for a company, but I wonder if the cmseoutr simply becomes more educated over time, as the company provides differentiating services and benefits. If the company is too overt about education, then it may be perceived as preaching or over-selling. Education is only desired as a consumer benefit when the cmseoutr wants it to start. As a company meets a greater share of cmseoutr needs, beyond just a transaction, that cmseoutr will feel closer and closer to the company. That feeling of cmseoutr intimacy is the REAL education, one to be treasured and nurtured over time.

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