In SBE Engagement, Directions Are Not Included

February 06, 2024
By Suzanne Weston

Winning the attention of large corporations is key for small and diverse businesses — certified Small Business Enterprises, or SBEs — that actively search for contracts.

They register in databases, obtain certifications and attend conferences, all in the hope of being invited to bid on upcoming contract opportunities through the RFX toolbox.

For large companies, engagement with SBEs is a key metric used to calculate a company’s environmental, social and governance (ESG) performance. While ESG is intended to measure how well a company addresses risks and is often associated with environmental issues, the social component addresses job creation and community support — providing its touch point to supplier diversity.

Because a high ESG score is important to investors and job seekers, corporations focus on checking all the boxes to improve their rating. In the supplier diversity space, this translates to having documented processes to engage diverse suppliers, measure engagements and related spend. On the surface, this connection seems to be ideal.

But There Is a Disconnect

The misstep is in the ESG measure, which presents a composite score, comingling numerous metrics and requiring documentation. Rather than focusing on effectiveness, it looks for the existence of processes, often pushing companies to solicit bids and registrations from SBEs and forgoing the need to find the right fit by measuring quantity rather quality.

ESG processes should be designed to provide inclusion. In their effort to remove barriers to entry and provide SBEs with equal opportunities, some RFX processes underplay limitations on participation, treating them as scored variables rather than requirements. While it’s true that “you need to be in it to win it,” presenting unrealistic opportunities can cause SBEs to spin their wheels hoping for an impossible win. This opens the flood gates allowing all aspiring SBEs to pitch.

Some SBEs use an RFX to get their foot in the door and be noticed. They hope that their capabilities or creative solutions will make the positive impression needed to begin a relationship. But the company issuing the RFX is soliciting bids for a specific, time-bound, upcoming opportunity. It has already established selection criteria and generally will evaluate bids using a preestablished scoring methodology. This is not the correct time or place to begin to build a lasting and meaningful relationship.

The Role of AI

SBEs whose bids are rejected can request a debrief, a session to review their submission and understand why they were not selected. But this can be time-consuming for the company running the RFX.

Another option: Leveraging artificial intelligence (AI) to let SBEs realistically access their ability to compete for a specific RFX. AI prescoring algorithms can be designed to let SBEs fine-tune bids, make revisions and sharpen their focus without human intervention. Some RFXs are overly broad, even though the final selection will be based primarily on best pricing. The AI evaluation could give SBEs a way to realistically evaluate their competitive advantage and devote energy to opportunities they can win.

This hands-free evaluation communicates the corporations’ priorities, and the relative weighting of bid components in a fully inclusive, interactive manner. For example, if the selection criteria require a minimum number of years in business, a SBE who lacks this component will be disqualified, and recognize their bid is not viable. It can free them to focus on better fit opportunities.

Provide a Playbook

Even if they do not opt for AI bid evaluation, corporations should provide a document that outlines their SBE engagement mode. It should specify minimum requirements, as well as avenues for relationship building, including which events to attend, registration databases and where to find upcoming bids.

This establishes a structured bi-directional communication, guiding the SBE on the best way to begin to establish a relationship and do business with a specific company, including the desired way to move forward.

For SBEs with potential but not yet able to provide a competitive bid, companies should establish a formal mentorship program. This provides a way to groom the next generation of SBEs, specifically aligned to meet the company’s needs. The SBEs gain valuable internal contacts and can shape their offerings to fit a specific need. It offers them a chance to mature professionally and address internal weaknesses positioning them for future growth.

Charting a Path Forward

How can a SBE be effective without guidance?

Relying on luck and connections can help, but it is not enough. A structured and systemic approach can save energy and produce better results. SBEs are searching for the right opportunities that capitalize on their skills. They want to hone their presentations to win contracts. Charting a path forward that choreographs each partner’s roles and responsibilities will match SBEs with corporates that need their services.

Offering SBEs equal access to bids requires removing barriers to entry. Yet, leaving SBEs to navigate the bid process alone may not produce the optimal results. Think of the RFX process like a dating game: finding the right matches through mentoring and information sharing.

Finding the SBEs that fit current and future needs using established processes will not only improve corporations’ ESG scores, but foster partnerships and innovation.

(Photo credit: Getty Images/Jacoblund)

About the Author

Suzanne Weston

About the Author

Suzanne Weston is a former 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.