Supplier Diversity: Thriving Without Strict Governance

June 20, 2023
By Suzanne Weston

Supplier diversity programs tend to be structured, measured against achievement of established spend targets, and controlled by foundational processes, policies and procedures.

Effective programs are organizational mandates that rely on senior management support and endorsement — as well as enforcement — to thrive. This implies that supplier diversity programs would vanish without strict governance, requiring explicit oversight and direction to survive.

Recently, a client demonstrated that supplier diversity programs can continue to grow and thrive without strict governance. Their magic sauce is having a culture that values information-sharing and prioritizes inclusion.

Understanding the Why

Knowledge is power. Depending on corporate culture, it is possible that (1) focusing on internal education, (2) sharing information and (3) explaining the business case for supplier diversity can change behavior and expand the use of diverse suppliers. This enables a shift from favoring program structure to employee empowerment.

By combining the mindset of younger generational employees with a welcoming open leadership style and an increase in mindfulness about inclusion, organizations can create a culture with an entrepreneurial spirit supporting inclusive procurement.

Over the years, the consumer and employee mindset has changed to foster inclusion. The benefits of workplace inclusion apply to supplier diversity, including better decision-making, innovation and improved profitability.

Shifting the corporate mindset to recognize the value of diverse suppliers changes the positioning of supplier diversity departments. They become facilitators, providing connections with qualified diverse firms, instead of being enforcers urging colleagues to look beyond incumbent providers. Inviting diverse suppliers to compete against incumbents can be viewed as an opportunity to understand their capabilities and establishing strong relationships.

The result is a win-win, generating not only increased internal awareness of competitive diverse firms but potential innovation. Giving diverse suppliers this opportunity embeds diversity in the company’s culture, and the mindset change prompts organizations to reconsider their leadership approach, especially as it applies to supplier diversity.

Change in approach. Traditional supplier diversity programs tend to be prescriptive, with a defined set of the rules. They require the inclusion of diverse suppliers, with the intention that such a directive will be carried out without question. They work best in centralized procurement environments where there is a formal bid process for purchases over a specific dollar amount. Supplier diversity programs rely on this structured approach to gain companywide support, using a “command-and-control” style, which is a holdback from an earlier era. In the current environment where emerging leaders want to make insightful decisions, this may not be a best practice.

Change in demographics. Workplace demographics are shifting; there are five distinct generations, each with different leadership styles and preferred methods of engagement:

 The older traditionalists (born before 1946) are accustomed to top-down leadership and more command-and-control. Baby boomers (born between 1946 and 1964) also favor a hierarchical leadership style. Preferences begin to change with Generation X (born between 1965 and 1980); they value independence and involvement in the decision-making process. Millennials (born between 1981 and 2000) place high value on diversity and inclusion; they tend to weigh information and opinions before making decisions, while Generation Z (born after 2001) value authenticity. Emerging younger generational employees tend to make good decisions that support the organization’s bottom-line while valuing inclusion if they are given information. This shift is reflected in emerging leaders’ styles, which tend to be more transparent, authentic and accountable.

Change in leadership style. Innovative leaders build trust and gain support by information sharing and providing guidance, relying on their staff to make informed decisions. This approach aligns with the increase of emergent leadership, a management structure that allows leaders to arise naturally from within an organization.

Emergent leadership values creative and critical thinking over explicit guidelines, shifting organizations away from strictly structured and controlled supplier diversity programs. Decision-makers can decide to include diverse suppliers in competitive bids because it’s good for the business.

Supplier diversity benefits from the infusion of engaged and purposeful leaders who embrace an inclusive supply chain as an initiative, thus driving efficiency, flexibility and creativity. Likewise, it changes the focus to value creation rather than a compliance exercise. Combining thoughtful decision-making with purposeful inclusion moves beyond the scripted structured supplier diversity programs into a space of innovation and exploration.

The Value of Empowerment

When people are empowered, they are likely to make informed independent decisions that drive business value. Organizations whose culture values inclusion, with leaders who empower their employees, are apt to develop approaches for maintaining an inclusive supply base.

Education can be valuable as a way to focus decision-makers on the potential business value of bringing diverse suppliers into the conversation while allowing each organization to find their correct fit — the solution that compliments their organizational culture as well as their management style.

Historically, overly structured, measured and controlled supplier diversity departments were used to deliver desired results. Such programs were consistent and comfortable. Organic growth, driven by thoughtful and passionate professionals can be less predictable, since each decision maker is allowed to develop an approach suitable for their situation. But it can lead to breakthroughs and creative fresh approaches — as well as results.

Meeting in the Middle

Supplier diversity programs should be designed to accommodate both approaches, with a stable, lattice-like structure that sets guidelines and provides consistency across the organization, while leaving latitude for innovation and creativity.

By creating room for generational differences, supplier diversity practitioners need a lighter touch, scripting the expectation that diverse suppliers will be invited to participate while leaving the mechanics to the individual. This moves supplier diversity away from a command to a reward, recognizing colleagues who have successfully identified and onboarded new diverse suppliers.

Harnessing the passion of employees who want to create supply chain inclusion is infectious; it inspires others to follow suit. Employee-driven focus can weather an environment of cost-cutting, relying on emergent leaders who are artful and resilient. Powered by inspirational leaders, organic growth is possible.

(Image credit: Getty Images/John M. Lund Photography)

About the Author

Suzanne Weston

About the Author

Suzanne Weston is partner, program strategies at IW Consulting Group, specializing in supplier diversity program creation, innovation and management. She is passionate about building impactful second-tier programs.