Grooming & Blooming: Helping Supplier Diversity Programs Grow

Companies like Microsoft Corp. and Nielsen Holdings want to contract with diverse suppliers that can actually deliver, going beyond compliance requirements to ensure their suppliers are up to the task.

Such corporations have internal business development programs for diverse suppliers, and also use the resources of government agencies and nonprofit support groups. Many corporate diversity supplier executives also sit on nonprofit boards, participate in development workshops and even mentor their members in one-on-one “matchmaking” sessions.

But there is a limit, corporate executives said. Some diverse suppliers just aren’t ready or willing to take the steps to handle the requirements of contracting with a major organization. In such cases, there is little that leaders of corporate diversity supplier programs can do to help them.

For those suppliers that are receptive to a little help, some corporations go the extra mile.

Mentoring at Microsoft

“I do everything within reason to make these firms successful,” said Fernando Hernandez, supplier diversity director for Microsoft. “Some of the basics they have to come up with — they have to have a good, solid business before they show up. They have to have the ability to engage a company like Microsoft — they might need to have an office in close proximity or be able to travel frequently.

“If they are not ready, then I give them some suggestions and point them to nonprofits for additional help.”

Under Hernandez’s lead, Microsoft has increased its supplier diversity program from $622 million in 2006 to $2 billion in 2013, working with more than 1,400 diverse suppliers.

Promising technology startups are invited to participate in Microsoft’s Bizsparkincubator program, which offers three years of free software and support as well as visibility within the marketplace, he said. Microsoft is particularly looking for suppliers that have or can access new technologies such as natural user interface, designs that incorporate gestures and speech to enable people to more naturally use their computers and mobile devices.

“We help mentor small diverse firms so they can engage in these technologies and be successful,” Hernandez said. “This is where the greatest opportunities are for them to really yield significant revenues, helping them to scale and grow quickly.”

Other small suppliers may need more development around their core business, so each year Microsoft sends the principals of about four or five selected firms toeither the University of Washington or Dartmouth College, which have executive training programs specifically created for developing diverse business owners.

Microsoft also has partnerships with a number of community banks nationwide that offer funding to emerging businesses. It maintains about $60 million in funding across the institutions for loans at reasonable rates to the growing enterprises.

Microsoft also has invested in the Business Consortium Fund, anonprofit business development program of the National Minority Supplier Development Council, Hernandez said. The goal is to fund minority-owned businesses that are unable to obtain financing from conventional sources on reasonable terms. Corporations support the funding so that diverse suppliers can meet contractual obligations, hire new employees and help their businesses grow, Hernandez said.

Nielsen’s Regional Approach

Global information and measurement company Nielsen’s diversity supplier team is planning to increase its mentoring efforts when the New York-based company launches its Nielsen Supplier Diversity Academy during the next several months in New York; Chicago; Tampa, Florida; Cincinnati; Los Angeles; and the Baltimore and Washington, D.C., area, said Lamont Robinson, vice president of supplier diversity.

Nielsen’s employees in those markets will work at the academy on a volunteer basis to help find and develop more locally based diverse suppliers, he said. The suppliers will be mentored with the aid of Nielsen’s more established suppliers that have a national reach. The volunteer setup, with Robinson’s team visiting at different times, provides additional help, he said.

“There is not much more money to spend on these initiatives other than some travel for my team,” said Robinson, who is based in Dallas.

Nielsen has found that developing diverse suppliers boosts the region’s economy. The supplier can expand its business, hire more people, build a bigger facility using local contractors, as well as create aneconomic multiplier effect by having its employees and the firm itself spend money at other businesses in that community. “This comes back to help Nielsen by opening the door to doing more business in those communities,” he said.

The goal is to find diverse suppliers that would also want to form “strategic alliances” with Nielsen, to sell its consumerresearch services and products to retailers and other businesses in diverse communities.

But Robinson has even more ambitious plans that he believes could ultimately benefit Nielsen’s diverse supplier pipeline. He and his team, along with Nielsen academy volunteers, want to visit schools in underserved communities to talk tostudents about beingentrepreneurs. They are also hoping to get some of Nielsen’s established diverse supplier partners to come into the classrooms to share their experiences.

“I was raised on the west side of Chicago in the Rockwell Gardens housing project, and when I look back about the lack of opportunities we had, it was also about no one talking to us about entrepreneurism,” Robinson said. “If owners of diverse firms talk about their own journeys that they went through, those are powerful and impactful stories for students. Not everyone wants to work for a corporation, and many kids would want to be their own boss, and it will be great to open their eyes to more diverse entrepreneurs.”

The SBA and the mini-MBA

The U.S. Small Business Administration is not only charged with contracting with diverse suppliers, but the government agency also has a responsibility to help develop them as much as possible, said John Spears, the SBA’s director of clusters and skills initiatives.

But government can’t — and perhaps shouldn’t — provide all the resources, and that’s why it’s important to get both the private sector and nonprofits more involved, Spears said. Government and nonprofits can help by providing managerial and technical training; banks and venture capitalists can help by providing access to capital; and the private sector can help by providing access to research and development labs or universities, and contracting opportunities.

“We think it’s important for all of the players to work together, and we don’t want to be duplicative in our efforts,” he said. “Each player has their own strengths and we want to leverage those resources. What’s important is whether or not a large firm is providing those kinds of assistance.”

The SBA has a number of managerial and technical assistance tools for diverse suppliers, including the 7(j) program that provides management or technical assistance; and to 8(a) certified firms,small disadvantaged businesses, businesses operating in areas of high unemployment or low-income or firms owned by low-income individuals, Spears said.

The SBA’s district offices also offer the Emerging Leaders Initiative, a “mini-MBA” program for small-business owners “to jump start their businesses,” he said. The SBA also provides entrepreneurial development programs in business development centers for women-owned, veteran-owned and other small firms, working with affiliated counselors and volunteers.

MBDA Awards Success

Other government agencies also help develop diverse suppliers, including the Minority Business Development Agency, or MBDA, which operates 44 business centers throughout the country and Puerto Rico, saidbusiness development specialist Angela Washington.

The centers support diverse suppliers “in every phase of growth and development,” including strategic planning and securing contracts and capital to conduct both domestic and international trade business, Washington said. One of the reasons that diverse suppliers might need more business development services than non-diverse suppliers is because of the persistent “entrepreneurial opportunity gap,” she said. It also aids the U.S. economy if more diverse suppliers conduct international trade.

“Minority-owned firms have the most favorable export attributes of any sector of the U.S. economy and represent the future of export growth,” she said. “These firms are twice as likely to export their products and services and six times more likely to transact business in a language other than English.”

Like the SBA, the MBDA seeks ways to collaborate with other government agencies, trade groups, nonprofits and corporations to help diverse suppliers grow, Washington said. To encourage more corporate collaboration, the MBDA has an annual award program to recognize individuals or organizations whose business practices have had a significant effect on the growth and development of minority-owned firms.

Last year, MBDA honored Lockheed Martin Corp. for maintaining a strong Native American supplier base for more than 20 years, and  Procter & Gamble Co., which was among the first consumer product companies to link supplier diversity with minority consumer purchasing decisions.

MBDA also works with financial institutions to help break down barriers to capital, Washington said.

WBENC’s One-on-One Approach

Corporate diversity supplier program executives also work with nonprofits, by not only accessing their business development and mentoring programs, but also by getting personally involved on nonprofit boards and participating in networking events, conferences and business development workshops, said Pamela Prince-Eason, president and CEO of the Women’s Business Enterprise National Council.

“We work hand-in-hand with these corporations — learning more about their needs so that we can help prepare more WBEs to do business with them, and share their outstanding business practices with our community in events and communications,” Prince-Eason said, referring to women’s business enterprises.

The nonprofit also links corporate directors with women-owned suppliers in one-on-one matchmaking sessions to enable them to hear the suppliers’ value propositions that could help the corporations’ business objectives, she said.

Corporate executives often lead the nonprofit’s workshops, targeted to three levels of competency — basic, intermediate and advanced, Prince-Eason said. The goal is to build the women-owned suppliers’ capacity and skills so they can better meet the corporations’ complex needs. Corporations also help fund scholarships to the Tuck-WBENC Executive Education Program, sponsored by IBM.

“Thanks to the collaboration of our corporate and government members, WBEs have not only been able to bid for and attain initial business, but also to expand and grow within companies and industries,” she said.

To learn more about how developing diverse suppliers benefits companies, read the sidebar that accompanies this feature here.