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8 steps to continued supplier diversity success

Supplier Diversity
19th Jan 2023 | 6 Mins
8 steps to continued supplier diversity success

It has been a year or so and you successfully implemented Phase I of your supplier diversity program. It's quite possible the newness has worn off and people are back to business as usual. This is where Phase II of the implementation strategy comes into play. The steps detailed below are needed to keep your supplier diversity program top-of-mind and with continued success.

Measure performance and effectiveness

If you want to gain the benefits of a supplier diversity program, it is necessary to have the tools to evaluate and improve progress. Most organizations measure performance and effectiveness by the diversity of total spend, followed by the number of suppliers engaged. The development of suppliers and the impact on communities are also measures of value for organizations.

Other ways to measure performance include market share, revenue impact, deals won, and deals lost. An economic impact analysis examines the effect of supplier diversity on the economy in a specified area and this type of measurement has been growing in popularity. Companies love this report because they can see firsthand the impact their diversity dollars have at the local level.

Tracking performance and effectiveness are the keys to executive buy-in so it is important to choose the approach that makes the most sense for your organization. It is also important to regularly review and assess your progress to improve your efforts.

Create a self-assessment certification

A self-assessment certification is a process by which companies can assess a supplier’s eligibility as a diverse supplier. Many companies create their own self-assessment certification because it is a more cost-effective way to verify supplier diversity compared to third-party certifications, which typically require additional fees or resources.

Self-assessment certifications are in the form of a questionnaire that asks suppliers to provide information about their business. The certification also includes questions related to criteria that have been established for certification, such as ethnicity, gender, veteran status, disability, etc.

Keep in mind that these certifications are not as rigorous as third-party certifications, so you may want to consider supplementing your self-assessment process with other methods for verifying diversity.

Scale 1st time bidder process

Cost-effective, time-efficient, and equitable, scaling the first-time bidder process gives diverse suppliers a fair advantage to compete and win business. Some companies streamline the bidder process and offer user-friendly options such as prerecorded videos and regular orientation, and that’s a great start, but not enough. Supplier Diversity Quarterly explains that inclusion in bidding falls short because some smaller suppliers may not have the historical data or insurance to meet the qualifications. The article recommends simplifying the bid application and submission process by reviewing lengthy RFP requirements and including diverse definitions in the award criteria. Companies can go even further by offering support if the supplier doesn’t have the resources to complete lengthy RFPs.

Scaling the first-time bidder process also has advantages for companies as well. It improves competition by increasing the pool of suppliers, leading to potentially better prices and higher quality products or services. It has been found to also improve innovation by gaining access to a greater variety of ideas and offerings. It helps meet regulatory requirements such as engaging with a certain percentage of small businesses or diverse suppliers.

Foster partnerships

By its very nature, supplier diversity encourages partnerships. The most common forms are with trade associations and diversity organizations like the National Minority Supplier Development Council (NMSDC). Many companies have been known to offer mentorship to help diverse suppliers grow and develop their capabilities. Some have been known to organize employee resource groups (ERGs), groups of employees within a business who are dedicated to promoting diversity within the organization.

However, there are other ways suppliers can form partnerships. Some companies encourage their Tier 1 suppliers to partner with Tier 2 suppliers bid on a project together. Some suppliers even form joint ventures, businesses created by two or more parties with shared ownership, returns, and risks.

These partnerships in all its forms have had a positive impact on companies in all industries. According to McKinsey, companies with a supplier diversity program realize an 8.5 percent annual procurement cost savings. Other organization see 3 to 7 percent in savings.

Appoint Departmental Champions

A supplier diversity departmental champion is a person responsible for promoting and supporting the organization's supplier diversity efforts. This person may be a member of the procurement or sourcing team or a manager or executive in another department. The recent trend has been to appoint an organization’s diversity, equity, and inclusion manager as champions.

The champion’s role is to work with other departments and teams to identify opportunities to engage with diverse suppliers. They may also work with the organization's supplier diversity program to set goals and targets for diverse spend and track progress towards these goals.

In addition to these specific responsibilities, a departmental champion may also serve as a mentor or advisor to diverse suppliers, helping them navigate the organization's procurement processes and providing guidance on how to position themselves for success. They may also work with employee resource groups (ERGs) and other internal groups to promote diversity and inclusion within the organization.

Launch a Supplier Diversity Advisory Council

Launching an advisory council can be an effective way for an organization to promote and support its supplier diversity efforts. Doing so brings together a group of individuals committed to promoting and supporting the organization's supplier diversity efforts. This can help to drive progress and ensure that the organization's program is effective and successful.

The most productive councils work with other departments and teams to clarify the goals such as setting targets for diverse spend, identifying areas where the organization can engage with diverse suppliers, and establishing a process for evaluating the effectiveness of the council.

While the council is composed of employees from a variety of department and levels, it also includes diverse suppliers, thus ensuring a diverse and representative perspective. When all facets of the supply chain serve on the council, everyone is aware of the program’s progress through regular communication.

Establish Performance Incentives

One of the primary goals of a supplier diversity program is to increase the percentage of an organization's purchasing budget that is allocated to diverse suppliers. Performance incentives can be used to encourage procurement teams and individual buyers to seek out and engage with diverse suppliers, which can help to drive progress towards this goal.

Financial incentives are one of the most effective tools available to executives to motivate employees, according to McKinsey. In fact, companies that implemented financial incentives linked to transformation outcomes increased their total shareholder returns (TSR) almost fivefold compared with a company without such programs.

The benefits of performance incentives are not just financial. Supplier retention, collaboration between departments and teams, innovation, and commitment are additional ways it can be used to drive progress towards corporate diversity.

Adopt a Rewards & Recognition Process

Adopting a rewards and recognition process is another effective way to motivate employees and encourage the successful continuance of a supplier diversity program.

After identifying the behaviors and outcomes that your organization wants to recognize, determine the rewards and frequency that it will be offered. It does not have to be monetary. Other options are added vacation time, recognition at company-wide events, written or verbal praise, peer-to-peer, and leader-to team member recognition.

Be sure to communicate the rewards and recognition process clearly so employees understand what needs to be done to be eligible. Setting clear criteria for successful outcomes and behaviors and giving direction on the submittal process are ways to mitigate confusion and frustration.

As with all things, regularly monitor and review the process to ensure it is effective and driving the desired behaviors and outcomes. One suggestion could involve collecting employee feedback and making adjustments to the process as needed.

By adopting a rewards and recognition process, an organization can motivate and engage its employees, and encourage the adoption of behaviors and outcomes that align with its business goals.

With these eight best practices in place, your organization has the potential to exceed its goals.

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