Just how well do most supplier diversity programs work? A new study by research firm The Hackett Group indicates that many companies make several key errors in managing these initiatives. To start, too few focus on developing programs that further their corporate goals. Instead, they may focus on meeting certain numbers, or gaining recognition from their customers or within their industries. Not bad goals, to be sure, but they may not provide all the value that a more comprehensive approach might. Even when the programs align with corporate objectives, management often fails to ensure alignment at the operational level.
In addition, most rely on overly simplistic measures to evaluate their programs, Hackett found. For instance, about 90 percent of organizations track their percentage of spending with diverse suppliers. However, fewer than half the study participants track the percentage of overall suppliers that is made up of diverse suppliers. Moreover, only 10 percent analyze the impact of their supplier diversity efforts on revenue or market share.
Another common mistake is failing to align program objectives with the number of diverse suppliers with whom a company works. This is key because this figure will vary with a business’ goals. For instance, B2B organizations often are best off focusing on meeting a limited number of larger contracts so that they can satisfy government regulations. Consumer-oriented companies, in contrast, may be better off developing a larger group of suppliers, and thus raising their market profile.
A 2008 study, Driving Value Through Supplier Diversity, by Censeo Consulting Group, offers several guidelines to building a strong supplier diversity program. Among the recommendations:
– Proactively follow up and talk with suppliers that are registered in the company’s supplier database to identify those candidates that are most qualified.
– When deciding which suppliers to develop, consider the potential size of spending with a given supplier, its performance history, and its willingness to grow and receptiveness to mentoring.
– Focus on several areas when developing suppliers: management and leadership training, operational management training and capacity building.