Supply Chain Diversity - Thirty-six years after Executive Order 11625
When Joseph T. Crowder started his building services company, Royal Cleaning Services Inc., in 1991, he chose not to become a certified minority business enterprise. Crowder believed that any government contracts received through MBE certifications would be tantamount to handouts. But when the time came to compete for bigger contracts with major corporations and government agencies, MBE certification turned out to be an all-access pass. “The Marriott Corp., for example, is my biggest supporter,” says Crowder, who was awarded the cleaning contract for the New York Marriott Marquis in Times Square five years ago. “The Marriott people answered every call, returned messages and even introduced me to other organizations and decision makers to help my business.” Marriott recently pledged to spend $1 billion with its women- and minority-owned business suppliers and to double the number of diverse franchisees over the next five years.
Other private companies and government agencies were not as accommodating. “Many companies or organizations say that they have MBE programs or supplier diversity initiatives in place, but they haven’t put them to use or are waiting to get them started,” Crowder says. Thirty-six years after President Richard Nixon created the Office of Minority Business Enterprises (O.M.B.E.) to facilitate the strengthening and expansion of minority-owned firms, the idea of making MBEs an integral component of government and corporate supply chains has still not found acceptance. In the private sector, “supplier diversity”–a term that includes everyone from women and gays to ethnic minorities and the handicapped–has supplanted the government’s original “minority” focus; diversity and MBE initiatives are still evolving; and MBE certification–acquired through a tedious and costly process– has become the passport to a shot at, but not a guarantee of, getting a contract. At the very least, certification gets a firm listed in a database for diverse suppliers.
The O.M.B.E., created by Executive Order 11625, gave the secretary of commerce the power to implement federal policy in support of MBEs, provide additional technical and management assistance to MBEs and to coordinate the participation of all federal departments and agencies in the beefed-up MBE effort. Today, according to U.S. Census figures, minorities own 15 percent of the nation’s businesses, employ 4.5 million people and generate $591.3 billion in gross receipts.
“The biggest obstacle with private corporations was acknowledging the business case for MBEs,” says Lynda Ireland, president and CEO of the New York & New Jersey Supplier Diversity Council. “Once a company incorporates the business aspect [of minority buying power] for their sales into their rationale, they are more receptive. Others had to be led a little slower to understand that supplier diversity or MBE programs were not giveaway, charity, or social programs but initiatives to facilitate opportunities for minority business.” According to Ireland, within the private sector–where companies are not required to have MBE initiatives–the key to ensuring supplier diversity is to get those in charge of purchasing and contracting to step out of their supplier comfort zone and give new vendors a chance. MBE certification will be relevant indefinitely, once you identify the money spent by minority groups and you recognize that it is part of the business flow, she says.
Lewis Green, national director of supplier diversity at NBC Universal, says, “Our primary goal at NBC Universal is that MBEs get a fair percentage to do business with us because these are the people that watch our shows and use our products, and we want them to have the opportunity to partake in our business process. With that in mind we don’t set aside contracts for minorities, we look to grow our percentage every year. Our MBE involvement has grown 20 percent in the last two years, and this year we want to grow from 20 [percent] to 30 percent.”
Green adds that in developing new markets, NBC Universal looks for minority firms as aggressively as it looks for major corporations to do business with in order to be profitable in all areas. “The goal is not about numbers. The focus is for and about economic development, job creation, and business relationships,” he says.
Green contends that a lot of work has to be done and ground explored on both sides. MBEs have to show capacity for growth in order to receive larger contracts, he says. He cites the following example: “Recently there was a situation where we had a large IT contract on the table for two minority companies. All they had to do was agree to work on it together and share 15 percent of $20 million. Instead they got 100 percent of nothing when they could not agree on whose name would be first, and the contract went to a major corporation.” Green concedes that the idea of sharing your business with a new partner is not always appealing to entrepreneurs, who consider their businesses their life’s work and are dedicated to seeing them flourish on their own. But he urges these business owners to be open to the idea of working collectively, since that is another opportunity for your business to grow.
On the corporate side, Green says, some companies still view the creation of MBEs as a social program. “Supplier diversity will be relevant depending on the way people in the business world approach it. If you view it as a business opportunity, you will be successful, but if you do it just to save face, it is not profitable,” he says.
Many minority business owners are daunted by the rigorous MBE certification process, with its list of requirements, forms and different standards for federal, state and local government. Whereas certification by the U.S. Small Business Administration may work in some circles, some federal contracts require additional agency-specific certifications. Many agencies at the federal, state and local levels are now trying to make certification less daunting.
“Our mission is to assist the growth and expansion of all MBEs in the United States,” says Heyward Davenport, regional director of the Minority Business Development Agency, U.S. Department of Commerce. “Our goal is to help minority-owned companies by enhancing their access to contracts across the board in the public and private sector and accessing financing for their companies in addition to training and technical assistance.” The M.B.D.A. also assists with certification.
In most cases certification is not just a way in, but a bonus for MBEs. Certification serves as a vehicle through which it is possible to discover new clients and business opportunities in areas they normally would not know about. “MBE certification is important because without it you are not on the radar when it comes time to competing for contracts,” says Glenis Henriquez, director of external affairs for the New York City Department of Small Business Services’ MWBE program. “Our success is an expanded circle of opportunities as a proactive SBS where you can find procurement opportunities in private and federal agencies. If you are equipped with the information that we offer, the benefits are tremendous.”
SBS spokesman Aton Davidson says Mayor Michael Bloomberg’s administration views procurement opportunities as an engine of economic development. Success lies in seeing more businesses going into the neighborhoods, ultimately making the city more livable and more accessible to all, he says.
As minority businesses experience growth, their next moves should be to forge strategic partnerships with other MBEs and mentor younger businesses, business advisers say. Partnering expands capacity while mentoring creates a pipeline of competent businesses. “From my own experience I call tell you the benefits of MBE certification. Don’t waste time thinking about it,” says Crowder. Then he adds, “We are looking for a small minority company to mentor so that they can benefit as well.”
By Ines Bebea