Partnering ERGs With Supplier Diversity Drives Huge Business Value

Years ago, when companies started thinking about how their newly minted employee resource groups could add value to the organization beyond their role as home-and-hearth for the formerly underrepresented, supporting recruiting was the first thing that came to mind. Years later, firms began to recognize the opportunity to further tap into the power of ERGs to support their efforts to understand new clients and penetrate different markets. Today it seems ERGs are leveraging every opportunity to bring value to their firms.

According to Bruce Perkins, my company’s senior consultant and subject matter expert in supplier diversity, however, there is one more area where ERGs can drive value to their companies. “Helping supplier diversity efforts increase the amount of spend with formally underrepresented vendors in order to meet or exceed federal, state, municipal, as well as private sector client-driven supplier diversity goals, is another huge ERG opportunity, “ said Perkins, the former leader of highly successful national supplier diversity efforts at Siemens and before that Merrill Lynch. I couldn’t agree more, which is why I encourage ERGs to partner with supplier diversity program teams.

Briefly, supplier diversity programs are designed to help their company’s purchasing department meet some very important conditions for doing business with certain private and public customers with regards to the procurement of goods and services from companies owned and operated by targeted groups. Target groups include women, African-Americans, Hispanics, small businesses, etc. The specific shape these supplier diversity programs take can differ within a specific company, based on their customers’ needs, expectations, goals and objectives. For example, some companies may have clients who want them to show a high degree of investment in female-owned enterprises. As a result, these companies may spend a great deal of their purchasing dollars with female-owned companies, and require that their vendors invest a set percentage of what they pay them with these companies. The company can then demonstrate its total support for female-owned companies by reporting both its direct spending with these organizations, as well as the dollars spent with these companies by their vendor partners.

Companies gain a bottom-line benefit from having competitive supplier diversity programs in several ways. First, they become more attractive to private organizations that see them as not only providers of the products or services they need, but also as a partner in meeting their own customer-driven supplier diversity goals. Secondly, many of these supplier diversity programs qualify companies to do huge amounts of business with federal, state and municipal governments. Finally, and not least among these benefits, procuring goods and services from the companies targeted by these programs tends to positively enhance a company’s public image.

According to Perkins, “supplier diversity efforts tend to focus on increasing the percentage of central purchasing dollars, often referred to as controllable spend, while they tend to pay less attention to the opportunities presented by spending that happens outside of that pool.” He goes on to explain how these “outside-of-the-central-pool” purchases can represent a substantial untapped opportunity for making supplier diversity programs even more competitive. For example, Perkins points out that the types of products and service purchases that live outside the central pool can include consultants hired by HR, and legal work farmed out to external firms, as well as a host of specialized products used by certain departments. This is where an opportunity exists for ERGs to have a strong bottom-line impact, specifically by partnering with supplier diversity leaders to help reach and leverage untapped pockets of purchasing. For example, ERG members can:

  • Provide supplier diversity leaders with feedback on the performance, on-time delivery, quality and service of existing suppliers supporting their departments. This can help the supplier diversity team to identify opportunities that may exist to replace non-performing suppliers with one that is part of their target group and more effective.
  • Supplier diversity teams can also share, with ERG leaders and members, the list of vendors they are trying to engage, in order to enlist them in the process of proactively finding opportunities within their respective departments and divisions with non-centralized spending.

In addition to this, ERG members can also attend internal and external trade fairs to assist the supplier diversity team in finding new vendors for the program.

The key to any successful partnership is a better understanding of what each one needs and the other offers. To give you an idea of how to do this, here are some examples of how we drive this. Basically, we facilitate discussions that among other things:

  1. Educate ERG members on the goals of supplier diversity programs.
  2. Equip ERG members with tools to help them identify spending opportunities within their departments.
  3. Educate supplier diversity and purchasing team members on the role ERGs can play and how to engage them.
  4. Educate ERG members on how to identify and secure potential vendors from their networks that can be added to the company’s list of diverse suppliers.

A well-run supplier diversity program, as noted, can provide a huge business advantage with both public and private sector clients. For example, one of the programs led by Perkins supported a $6 billion revenue stream. Supporting these efforts is just another of the many ways that ERG leaders and members can meet the goals of supporting a target community while bringing serious bottom-line results to their organization. I encourage you to take steps to connect your supplier diversity and ERG programs today!