M&A Integration Should Include Supplier Diversity
Organized chaos associated with mergers and acquisitions can create the ideal environment to focus on cross-organizational disciplines like supplier diversity.
During these periods of growth and transformation, companies shift their focus optimizing processes and procedures to incorporate the new entity. What seems like confusion can become the catalyst for integrations with supplier diversity.
Supplier diversity teams manage though influence. The procurement function manages the suppliers as well as upcoming opportunities through the RFX toolbox. Reporting is often included in environmental, social and governance (ESG) standards, in support of the ‘S’ social pillar, leveraging data that resides in existing infrastructure.
Integration efforts can offer the necessary bridges into procurement, spend data and supplier onboarding processes. Through their involvement in developing the post-merger culture, supplier diversity leaders have a platform for communicating the benefits of using diverse suppliers and an opportunity to develop internal champions.
Begin with Data
During consolidation, companies need to create consolidated supplier-spend reporting. Such a focus is ideal for supplier diversity, which relies on supplier spend data. For companies who struggled when building a new supplier diversity program to embed supplier diversity indicators into existing supplier data designing consolidated reporting can be transformational. The design phase shifts supplier diversity indicators from being seen as an inconvenience and an afterthought to a reporting requirement.
Transformation efforts focus on right-sizing, producing accurate and complete reporting. The supplier diversity lead should join this conversation early as a champion for capturing and presenting supplier diversity information consistently. In addition to supplier spend, this reporting should include data on managing supplier consolidations, generating unique vendor identifiers. Extend the conversation beyond the data base structure and leverage it as an opportunity to create common definitions. That enables consistent reporting by sourcing category as well as the identification of managed spend.
Consolidations are ideal times for infusing supplier diversity processes and practices, reaching into the procurement and accounts payable realms as well.
Due to internal reporting limitations, some companies use third parties to manage their supplier diversity reporting. Mergers can create an opportunity to bring reporting in-house. Owning your data provides flexibility in creating dashboards that show the use of diverse suppliers by department and sourcing category which can be linked to contracts and other internal metrics. Such adaptations provide alignment and strengthen the program.
Opportunities for Process Integrations
Consolidations are a time to review and improve internal processes, especially those that touch diverse suppliers, specifically supplier onboarding. As forms and workflow are fleshed out, supplier diversity requirements can be inserted, encouraging diverse suppliers to self-identify and provide certification documentation. Vendor onboarding is the perfect time to emphasize your company’s support of diverse suppliers.
Contractual language is generally rewritten during consolidations, offering a chance to (1) include a paragraph about your company’s support of diverse suppliers and (2) request your prime suppliers follow your lead in demonstrating they are doing business with diverse suppliers and agreeing to provide Tier-2 reporting if requested.
Supplier diversity professionals have broad insight across their organization since they rely on common infrastructure. Practitioners should find time to participate in workstreams that assess reporting requirements and procurement processes. The mad scramble to figure out the details offers the opportunity for identifying and adding supplier diversity touch points, including defining fields for reporting. During the discovery process, you may discover unused fields that can be used to flag diverse suppliers.
This is a perfect opportunity to roll up your sleeves, collaborate and create a future that includes supplier diversity.
Consolidations provide the impetus to create documentation. They prompt organizations to look at how each heritage organization is operating, which is called the “as is” state. From here, how the new entity should function can be determined; this is called the “to be” state. Supplier diversity managers can leverage these reviews to develop inclusive procurement policies, formalizing equal opportunities for diverse suppliers to participate in competitive bids.
Because the best way to function is the key consideration in mergers, the “not invented here” stigma is removed. This is the tendency for people to avoid things they didn’t create themselves.
Thus, mergers can provide organizations the freedom to reposition, refocus and find efficiencies — and they can open the door for companies to (1) consider industry best practices and (2) build internal processes supporting supplier diversity reporting. An example could be developing policies that require competitive bids to include at least one diverse supplier, with an associated exception process.
Supplier Diversity Call to Action
Mergers can be unsettling times. Some colleagues may be paralyzed with concerns about job security, and not motivated to take on additional work.
Yet, this can be the perfect time to re-introduce supplier diversity as a strategy — integrating it across the organization with top-down visibility and support. This is the time for supplier diversity practitioner to act. Find the time to demonstrate the benefits of supplier diversity.
Identify the work streams that have a touch point with supplier diversity as well as integration opportunities and collaborations. Offer to do the heavy lifting — drafting policies and reviewing process flows and data — and become more knowledgeable about interactions with peer organizations.
Then simplify the changes. Share them in bite-size bits that complement rather than complicate. Focus on the positives, synergies and value that diverse suppliers and inclusive procurement bring to the table. Expand your sphere of influence — gain supporters by explaining the business case and delineating the tangible benefits of using diverse suppliers. Provide alignment to corporate strategy and use metrics to showcase the business benefit of diverse suppliers.