5 step process to improve supplier diversity in your IT organization
When procurement leaders are tasked with planning their annual goals and objectives, supplier diversity milestones are often at the bottom of the priority list. This is especially true in the IT category. In the past, achieving IT supplier diversity goals appear as a daunting task, as there are very few diverse suppliers that occupy the arena.
Let us break down the myth that surrounds IT Procurement and Supplier Diversity with these 5 steps that you can take to reach and surpass your SD objectives.
To begin, we must align on the definition. A Supplier Diversity Program is defined as a “proactive business program which encourages the use of minority-owned, women-owned, veteran-owned, LGBT-owned, service disabled veteran-owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns as suppliers.”
So how can you bring this to life in your IT organization?
- 1. Evaluate your IT Spend
The first step may be the most obvious. To make improvements, you need a starting point. Begin by building a cohesive database of all current IT spend. Start with the easily identifiable areas. These would be your Tier I suppliers. Tier I suppliers consist of suppliers that have an active contract in place. Develop an accurate depiction of each supplier profile to capture which suppliers are diverse. You may be surprised by who this includes. Contact your Tier I IT suppliers with a list of questions that will help you build a supplier portfolio and segment each supplier into the relevant category. For the purposes of this exercise, the main objective is to build a supplier diversity database that is easily accessible with visible spend data.
Next, dig deeper. Administer a survey to these suppliers that allows you to capture Tier II suppliers' diversity status. Often, this is an area that is overlooked. Tier II includes suppliers of your Tier I suppliers. Organizations are adopting the methodology that Tier II supplier spend should be included in the overall performance metrics of the SD program. Without these Tier II suppliers, Tier I activity comes to a halt. It can be argued that Tier II suppliers are just as important to the business as the suppliers that they support (Tier I). By incorporating this next level, your SD spend can potentially drastically improve as you unlock more data. In the IT world, this could be expansive.
- 2. Once identified, set a goal
Now that you have a general snapshot of SD spend, assign a goal that your organization should achieve. This goal should be attainable, but not easily. Consider developing multiple goals/milestones that push your organization to new heights. First, a near-reach goal. This is a goal that should be easily attainable within the year and not require much effort. Consider 5% of the total. Then a target goal. This goal should require some effort, but is still attainable with the proper procedures in place. Perhaps 10%. Lastly, a stretch goal. This goal is possible, but not entirely likely without valiant effort and many champions pushing the cause. 15-20%.
Utilized benchmarks in your industry to set these percentages. Research what other similar companies have established as their supplier diversity spend goals. Solicit feedback from department heads and leaders in the organization to determine what is truly feasible.
- 3. Make a plan and prepare
Now that you have data and objectives in place, plan your execution. Consider including supplier diversity requirements in all relevant performance goals. If possible, make it a requirement that procurement professionals involve diverse suppliers in their sourcing initiatives as often as possible.
Consult with your senior management to capture a holistic view of what the organization can act upon. This will allow you to gather champions of the cause and improve employee involvement in your initiatives. From there, you can develop a cross-function team or council to guide/influence the plan as you develop synergy throughout the organization.
- 4. Execute/support the sourcing teams
Once you have the support, ensure that you put the cross-functional team in place and make progress on putting the plan into action. The team’s function is to carry out the plan with your facilitation. To do this, you should provide a web-based database that contains supplier information and resources. You want to make including diverse suppliers in upcoming opportunities as easy as possible for your procurement professionals.
The goal here is to improve ease of use with your newly established SD program. Making change hard for the end-user only complicates the process and stifles your ability to reach your SD goals.
In addition, consider mentoring diverse suppliers and providing education and training. This could include RFP coaching, improving on key supplier scorecard metrics, and providing funding for growth and expansion, allowing the diverse supplier to improve the overall service and offering to your organization. This is a win/win scenario for all involved.
By establishing the proper supplier diversity infrastructure in the procurement organization, you increase awareness throughout the company while building the right partnerships that contribute to the bottom line, effectively improving profits and efficiency.
Another helpful action to the teams you support would be to recommend and qualify diverse suppliers to the sourcing team. Once again, make their job easier, not harder, when introducing new requirements.
Lastly, be sure to monitor new and existing business, contracts, and bidding opportunities for diverse supplier participation. This ongoing supplier management will ensure that you continue to bolster and expand the supplier diversity program.
- 5. Metrics and continuous improvement/marketing
Finally, you can marvel at the success story you created. Design, install and maintain metrics to measure and report the performance of diverse suppliers throughout the process. Monitor progress toward meeting goals and objectives, measuring success, and recommend directional changes or actions. Develop communications plans, marketing tools, and rewards/recognition systems to promote supplier diversity. Plan, organize, conduct, and participate in organization-sponsored diversity presentations and events.