10 minutes
Things to keep in mind as you build a supplier diversity program
As credit unions commit to cultures of diversity, equity and inclusion, an area of focus should be supplier diversity.
“You can always tell which companies are really committed to the cause,” says Tana Harris, founder/president of crane and heavy equipment operations firm Harris Hoisting. “You can see through their hired executive staff that they push diversity and inclusion. They promote women (in their careers), (and do the same for) small-business owners and internal staff. They exceed their supplier (diversity) goals. They try to bring you (the small business) on board.”
As a small-business owner competing against large contracting firms, Harris has found opportunities through supplier diversity programs to make connections, get a “hit the ground running” education in business administration and, most importantly, find work. The most successful ones are a part of comprehensive diversity, equity and inclusion practices, both internally and externally.
Since the inception of the Minority Business Development Agency through a presidential order in 1969 and the founding of the National Minority Supplier Development Council in 1972, businesses have been inspired and encouraged to create an equitable playing field in the procurement of goods and services for their organizations by hiring and promoting diverse suppliers.
A diverse supplier is typically a small business owned by one to four people, at least 51% of whom are from a designated diverse background, including women, minorities, LGBTQ+ and veterans. (While diverse owners tend to promote diversity in the company’s ranks, if it is important for a credit union to work with suppliers that employ a diverse workforce, it is a good idea to ask for information about that in any request for proposals.)
A supplier diversity program’s intent is to maintain a supply chain inclusive of these diverse businesses, individuals or groups.
Hiring local, diverse small businesses benefit your CU and its community in many ways. First and foremost, it will widen your pool of local qualified suppliers and promote competition in the supply base. Greater competition leads to an improvement in the quality of work and creates more jobs, according to statistics from Small Business Trends.
In addition, potential members and employees, especially millennials and members of Generation Z, want to align with organizations committed to uplifting communities. Having a reputation as an equitable organization can also lead to exciting business development opportunities like increasing your pool of members (especially if you offer business banking), beginning new select employee group relationships, and even establishing educational components to your program that could open the door to partnerships with local and/or national business organizations. The educational opportunities could include teaching CU employees about implicit bias that might impact supplier decisions, teaching members about how to start a business, and teaching suppliers about how to better run their businesses.
CUs across the nation are pledging a greater commitment to DEI and taking a comprehensive look at supplier practices. Here are a few things to keep in mind for building and sustaining an equitable, honest and effective supplier diversity program.
Commit to the Principles, Not the Program
CUs are known for their work in the community and seeking out the right thing to do. Supplier diversity certainly falls into the category of “the right thing to do” and upholds CU values.
When planning and developing your program, keep your core values/principles at the forefront. If your core values are integrity, accountability and boldness, your supplier diversity program must reflect and uphold them. Your program has integrity when its processes are equitable and transparent. Your program is accountable when you have consistent audits to ensure target demographics are being served. Your program is bold when it seeks creative ways to support small businesses and the community.
An equitable, inclusive supplier diversity program can only be realized by an organization that is itself equitable and inclusive. Before you begin any external program, you must look internally and ask yourself some tough questions. If your CU is community-chartered, is your membership a representation of the diversity of your community? What about your leadership team? Do you have an established DEI program for internal hiring and career growth? Answering well may necessitate a deep dive into your data and your culture with an eye for addressing inherent biases.
Make your core values part of your program’s messaging from its inception. Cecil Plummer, president of the Western Regional Minority Supplier Development Council says, “It all starts at the top. The CEO [should] issue a written and video statement [outlining the program values and goals] and ensuring that CEO direct reports all have spend goals and incentives is critical.”
Presentation vs. Representation
As stated earlier, not all supplier diversity programs are the same. There is a difference between programs that exist to check a proverbial DEI box as a marketing strategy or for compliance and those devoted to representation and growth. “It’s not a question of will it work or if it is worth it to the businesses. The real question is: Is there the will to make it work?” Plummer says.
Organizations across North America are signing pledges and posting on social media their commitment to diversity and equity. But pledges and posts will quickly reveal themselves as hollow gestures unless there is tangible and quantifiable action behind them. This is especially true in the case of supplier diversity.
“Companies want to give interviews [about their supplier diversity programs] and make sure they are hitting the [news]papers/social media with [information] on how they are helping small businesses. But once the article is published, you never hear from them again,” Harris says. It can seem as though the organization only wanted media coverage and had lost sight of the bigger idea: uplifting diverse businesses.
Whether or not your CU has an internal DEI plan, it should take some actions to shape its supplier diversity program as truly representative of your local community and its needs.
1. Crunch the numbers. The more analytical your organization can be to identify greater efficiencies and opportunities in your procurement process, the better you will be positioned for diverse procurement. This includes not only a holistic review of your current administrative processes with vendors and suppliers, but also value-based propositions for your program. Goal-setting is perhaps the most relevant way to stay on track and be consistent with your values. “Executives should cascade those goals down by department or business verticals, initiating policies requiring diverse supplier outreach and inclusion in all contracting opportunities over $10,000, for example,” Plummer advises.
2. Hire a supplier diversity manager who reports to the chief procurement officer. Recruit senior-level program champions to support your supplier diversity manager. Ultimately, your program’s decision-makers should be representative of and relatable to program participants. When bidding on a project for an organization and seeing decision-makers that are like her, Harris says, “I get excited and hopeful. I know that there’s a possibility of having me there because this is the norm for them. I can actually see it.”
3. Evaluate and revise your current outreach efforts when advertising a new bid. How will you advertise your requests for proposals to attract diverse respondents? What resources will you use? Who can you partner with to help get the word out? You can formally verify a business’ eligibility through certifications. Some of the more well-known certifications are MBE (minority-owned business enterprise), WBE (women-owned business enterprise), LGBTBE (LGBT business enterprise) and DVBE (disabled-veteran business enterprise). These certificates are vetted and distributed through a number of government agencies. Often, the agencies who administer the certifications have extensive databases for public consumption. Mine these databases to create a greater network of diverse suppliers you can reach out to directly.
4. Expand your budget to support a technical assistance/mentoring program that can help small businesses bid on your projects and increase their capacities. Paul Pendergast of Pendergast Consulting Group, a San Francisco area-based consultancy that helps transit agencies develop equitable programming, advises, “Once you do identify a firm, it’s important to provide as much technical assistance as possible. Groom and develop your vendor pool as well.” Team up with your local chamber of commerce or a nonprofit business organization that can help provide such guidance as marketing and branding assistance, certification support and networking opportunities.
5. Create an annual report that re-establishes your supplier diversity guidelines and compliance standards. Evaluate program data to assess key performance indicators, goal attainment and any needs to refresh the messaging and communications around your program. If your program is not hitting its annual goals and not reflecting organizational values, it may be time for an overhaul.
Redefine Your Bottom Line
According to The Hackett Group, “Corporate sustainability made the top 10 list of procurement priorities for the first time in 2021, representing a broader focus on corporate social responsibility and an acknowledgement that sustainability generates business value through reduced costs, risk management and improved brand value.”
A supplier diversity program will require your organization to refocus its efforts in many ways, including how you approach your bottom line. Rather than the emphasis being placed on immediate cost-savings to your organization, diverse procurement is about looking to the future and how today’s actions and decisions will affect the future of your community.
Small subcontractor businesses like the one Harris owns and runs cannot match the low bids of larger competitors and find this an impediment to bidding.
“Being a micro business, I’d like to see organizations include the much smaller companies,” she says. “Give us a seat at the table when you’re speaking to the larger contractors as well. They compare my costs against the larger companies’ cost, and I cannot meet them. Come [to the bid meetings] knowing that a smaller company is going to have a different quote. Have a realistic expectation. If I’m constantly trying to meet their costs, I’m never going to make a profit that will allow me to grow into a larger firm.”
The Hackett Group also reports that “total spend by organizations with diverse suppliers has grown to as much as 15% (of all net purchases made to outside suppliers) over the past few years.” The companies that are revising and increasing their diverse procurement budgets are putting their money where their mouth is and showing their commitment through measurable actions. They are redefining their bottom lines by thinking in terms of their diverse spend, as opposed to their budget line items.
Now, Where to Begin …
Starting a supplier diversity program is no easy task and at times may seem overwhelming, but the benefits for your organization and local community will make all the hard work worth it. There are already major efforts underway in the credit union industry to create opportunity for diverse suppliers.
Reference points abound. Here are a few to get you started:
- $1.6 billion Self-Help Credit Union, Durham, North Carolina, has done a phenomenal job of clearly outlining its supplier diversity policies and opportunities.
- $5.1 billion Veridian Credit Union, Waterloo, Iowa, has made it simple for diverse small businesses to register as potential vendors through its website.
- Nonprofits like the National Minority Supplier Development Council and its regional affiliates are a treasure trove of information and offer unparalleled certification assistance.
Uphold the values of your credit union by considering a supplier diversity program today. cues icon
A professional consultant specializing in program development and project execution in the areas of business development, community relations, supplier diversity and employee engagement, Lara Brecher is founder/president of Brecher Consulting. She lives in the San Francisco Bay area with her husband, two little girls and a couple of very energetic kittens.
