What Leaders Don’t Know About Supplier Diversity

Did you make your goals for 2023? Do they include supplier diversity measures?

At year’s end, leaders tend to focus only on results. Then they sharpen their pencils to calculate growth for the next year.

But valuing growth often drives the wrong behaviors, especially given current supply chain and staffing shortages — and that the challenges of global political unrest, lack of raw materials, rising fuel and energy costs and inflation are far from being over.

Therefore, it’s time to refocus and recalibrate how success is defined by building long-range plans acknowledging factors outside your control. Rather than rewarding short-term wins, set your sights on the future. During the planning process, identify interdependencies, encourage internal collaboration and set realistic expectations.

Interdependencies. The expression “it takes a village” applies to supplier diversity professionals, whose focus is increasing engagement with diverse suppliers. Since they do not own the supplier relationships, they accomplish results through the power of influence. In times of boom markets, it is realistic to increase spend across all segments. However, when times are tough, supplier diversity can be viewed as a luxury, a nice-to-have program.

There are two main reasons for this misconception. First, companies forget to measure or message the connection between supplier diversity and company performance. Second, goal setting is often unrealistically based on past performance. Fixing these disconnects is hard work and takes collaboration.

Start by listening to concerns, then factor in external market condition. Next establish a shared vision. Be open; recognize that maintaining current performance can be a large accomplishment. Consider whether you selected the correct measures for your organization. While most supplier diversity programs measure dollars spent with diverse suppliers, it might be easier to grow programs by focusing on increasing the number of suppliers.

Each measure drives a different behavior. Increasing spend can be accomplished by doing more with the same vendors. Growing the number of vendors pushes your colleagues to meet and engage new diverse suppliers.

Change your measures. Companies that focus on increasing the number of diverse suppliers they use expand their reach. This metric focuses on forging new relationships, starting slowly with small contracts, finding suppliers with the right capabilities, and positioning them to build their capacities. It shifts the focus away from immediate growth and allows relationships to grow gradually. Managing the percent of diverse suppliers lets companies responsibly scale spend during economic downturns.

Measures should be specific and actionable, for example, adding two qualified diverse suppliers for each upcoming bid. This begins changing behaviors.

Share successes. Acknowledge colleagues who have taken time to build relationships with diverse suppliers. Including diverse suppliers in bids gives them the opportunity to compete. It is a reminder that the incumbent’s relationship with your company is not guaranteed.

Competition is good. It can improve the quality of the goods/services, introduce innovative new approaches or drive down pricing. While the diverse supplier may not win the contract, participating in the bid can open doors, positioning them for Tier-2 opportunities.

Use storytelling to share these successes. This may require developing a way to collect these stories with a mechanism to reward/recognize the effort. People enjoy receiving praise, it encourages them to continue building relationships with diverse suppliers and inspires others. The power of positive reinforcement and public recognition can create the momentum to carry your supplier diversity program forward.

Rather than driving only continual growth, take a moment to listen, recognize the challenges your colleagues face and keep your expectations realistic. Celebrate small successes along the way.

Thank others for their support, as a little praise goes a long way. It can position supplier diversity as a team people want to support.

(Image credit: Getty Images/Iconic Bestiary)