I can’t help it. I am always thinking outside of the proverbial box and challenging the way things are.
Such was the case this weekend when I started thinking about supplier diversity. And wondering if the procurement profession has gotten it wrong for all of these years.
Let me take you on an intellectual journey here. Let’s begin by reviewing what typically constitutes “diversity spend” in an organization. Diversity spend is usually considered money spent with suppliers who are 51% or more:
- Owned, controlled and operated by an ethnic minority
- Owned, controlled and operated by a woman
- Owned, controlled and operated by a military veteran
And in the case of UPS:
- Owned, controlled and operated by a lesbian, gay man, a bi-sexual person, or individual who has had a sex change
The purpose of supplier diversity programs is to give an advantage to subsets of the population who have historically been discriminated against. A way of compensating for past social ills by swinging the pendulum in the opposite direction in the present.
But does this type of approach really help anyone? Or help as many people as it should?
Let’s think about a situation where there are two suppliers who score equally well on all non-diversity-related criteria of a procurement department’s evaluation. Supplier diversity status, then, could be a tie-breaker. In other words, if one is a “diversity supplier” and the other isn’t, then the diversity supplier wins.
How about this for a wrinkle…
Let’s say that Supplier A is owned by a woman. And Supplier B is owned by a caucasian man.
Supplier A’s workforce is 100% male. Supplier B’s workforce is 50.5% male and 49.5% female. And, in both suppliers’ locations, the ratio of men to women is 51:49.
Supplier B’s proportion of women in the workforce is actually greater than the proportion in the available labor population for the supplier. Maybe this is driven by the owner’s desire to right the wrongs of past discrimination. Who knows? But one thing is certain: Supplier B will not be judged to be the socially responsible choice simply because of the owner’s gender.
Supplier A will win. And that award will help one woman. Whereas awarding the business to Supplier B may help dozens or hundreds of women.
I could write a similar example for ethnic minorities, veterans, and members of the LGBT community. But I don’t think that I need to for you to get the point here.
I believe that the policy of determining diversity status of suppliers based on ownership, and not workforce composition, is fundamentally flawed. And we, as a profession, have been blindly following along based on “the way things have always been done.”
Is it time for a change? Is it time to get it right?