Supplier Diversity Culture watercolor image

Just like families, every corporation and organization has its own unique set of personality traits that evolve over time. That’s what we mean by a corporate culture.

Intuitively, it makes perfect sense that the beliefs and behaviors of the people a company hires will have a major impact on the ways employees and management interact. It also stands to reason that an organization’s general cultural “style” will affect its interactions with outside suppliers, vendors, customers, and other stakeholders.

In fact, common sense has been confirmed by scientific studies: An organization’s culture not only shapes its buying behavior, but also influences its ability to adapt to changing market demographics. The research strongly indicates that companies and nonprofits whose cultures promote diversity will have more effective supplier diversity programs.

Support for Diversity Isn’t Enough

Supplier diversity is a particularly serious issue in the U.S. today – especially in the science, technology, engineering, or mathematics (STEM) fields. A relative lack of diversity deprives too many companies of the unique perspectives that just might solve many of the problems they are trying to solve. And because STEM industries are so crucial to the U.S. economy, that could cause serious harm to our ability to compete globally.

One caveat: Long-term studies show that having a corporate culture that is strongly supportive of diversity is not enough to guarantee a diverse, well-functioning supply chain. To be truly successful, organizations also must:

  • Work hard to understand and then explain the nuances of their culture to minority- and women-owned suppliers, and
  • Share honest feedback with diverse suppliers to develop long-term, constructive relationships.

Because there’s so much at stake, many leading-edge corporations and nonprofits are taking practical steps to ensure the long-term success of their MWBE partners. These include :

  1. Using quarterly reporting, annual procurement goals, and internal training to reinforce diversity as a cultural priority.
  2. Involving every level of the organization. At Wells Fargo, diversity starts with the board of directors, the CEO, and senior management and is monitored throughout entire company. At PSEG, internal goals are developed at the executive level, measured, and linked to performance reviews and pay increases.
  3. Establishing diversity task forces throughout the supply chain. These interdepartmental teams not only review all spending with diverse suppliers, but help expand awareness throughout the company.

If your procurement managers work in a culture where all kinds of people are valued and made to feel comfortable, they are almost certain to reflect those values in their dealings outside the company. Conversely, if your internal environment rewards conformity and devalues collaboration with people of diverse backgrounds, that attitude will be reflected in all your relationships with minority suppliers.

As we’ve pointed out before, supplier diversity isn’t just about feeling good or polishing your brand. It can help your company grow and thrive. According to a Hackett Group study, procurement organizations that embrace supplier diversity generate a return on investment up to 133% higher than organizations that don’t tackle the hard work of culture change. Clearly, the cultural rewards of an inclusive supply chain extend far beyond the procurement process, into the very heart of an organization.

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STAY TUNED! In the next post, we’ll discuss how to avoid missing out on the unique opportunities provided by a diverse supplier base.

 

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