Supplier Diversity Goes Global: Best practices are emerging outside the United States
Something unlikely happened in the world of diversity in 2004. On Dec. 16 of that year, an event dubbed the World Diversity Leadership Summit was inaugurated in Prague, capital of the Czech Republic. The four-day summit, organized by VirtCom Enterprises, an African-American-owned New York City management-consulting firm serving Fortune 500 companies and government clients, sought to address key diversity challenges, trends and opportunities facing multinational corporations. Its theme was “Spreading Global Diversity Throughout the Corporate World: A Future Look at the U.S. Model of Diversity as It Migrates Abroad.” Panel discussions featured noted corporate diversity experts and covered such topics as the role of the chief diversity officer in multinational corporations and tapping into diverse global markets for profitable sales. Awards were presented to multinational corporations that had implemented “innovative diversity solutions.” Featured speakers from the United States included Carl Brooks, president of the Executive Leadership Council, whose membership comprises the most senior African-American corporate executives in Fortune 500 companies, and networking guru George Fraser.
What’s a conference on diversity doing in Prague? “The Czech Republic has gone through a dramatic transformation over the past 20 years, from the old days of Communism to becoming a vital economic and cultural player at the heart of the old world and the new world. It has embraced globalization and has a strong, diverse expatriate community, including one of the highest concentrations of U.S. expatriates in the entire European Union,” says Douglas Freeman, VirtCom’s founder and CEO. “Secondly, we have a direct entrée to Prague, which gives it a competitive advantage over other cities,” he says. That personal entrée is Freeman’s father, Paul, a “global maestro” who conducts the Czech National Orchestra. For an African-American to hold that position really shows the country’s openness to diversity, the younger Freeman says.
The second World Diversity Leadership Summit, held in March this year, again took place in Prague. The theme, “Leveraging Local Diversity for Global Success: U.S. and European Union Best Practices,” suggests not only that supplier diversity has taken root overseas, but also that effective supplier diversity programs are being developed outside the United States. Topics covered included how global diversity drives profit; building an implementable global diversity strategy; the business edge: global diversity best practices and case studies; and the European diversity legislative framework.
“The summit is really growing. Four cities in Europe want to host it in 2007: Prague, Brussels, Berlin and London,” Freeman says.
Supplier diversity, the origins of which lie in America’s response to calls for economic empowerment from civil rights advocates, has become a bottom-line issue in the global marketplace as companies establish operations in the resource-rich, fast-growing consumer markets of so-called regions of color. “Global diversity is a core issue for Fortune 1000 companies that operate in numerous country environments. From products, operations, culture, employees, markets and customers, global diversity is integral for successful business operations,” Freeman said at the launch of the 2004 summit.
Going With the Flow
Globalization, the International Monetary Fund says, reflects “the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows and more rapid and widespread diffusion of technology.”
The National Minority Supplier Development Council, which provides a direct link between major U.S. corporations and minority-owned businesses, is going with this flow, arguing that globalization is an opportunity for corporations to create and tap into a worldwide network of suppliers from traditionally excluded groups. To that end, it established Global-Link, a program that fosters the development of nongovernmental organizations overseas to provide linkages between historically excluded businesses and corporate buyers.
To date, Global-Link has been introduced to Brazil, Canada and several EU member countries. Typically, NMSDC first assesses the viability of implementing a Global-Link program in a targeted country. Once the country is approved, the program identifies useful contacts and potential partners, provides these partners with start-up support services and technical assistance and extends hands-on training and internship opportunities on the operation of a traditionally excluded supplier development program.
MBEs in the United States can take advantage of Global-Link’s worldwide network of organizations to go global themselves, NMSDC says. They can use the network to locate foreign trading partners, identify investment opportunities, create partnerships and strategic alliances with other foreign-owned suppliers and position their products in the global marketplace.
Role of CDOs
Although corporations purchase billions of dollars worth of goods and services from MBEs annually, supplier diversity still is a work in progress, with the role of corporate diversity officers (CDOs) very much a subject of debate. Organizers of the World Diversity Summit conceded as much in their description of a Global Supplier Diversity panel discussion at the 2006 event. “Supplier Diversity has served as a leading source of community outreach and small business development, particularly for small women- and minority-owned businesses. While supplier diversity is an important component of the overall diversity strategy, many organizations face challenges implementing effective programs,” the Summit brochure says.
According to the NMSDC, purchases by its corporate members from minority-owned business enterprises exceeded $87.4 billion in 2004, up from $86 million in 1972. “This was accomplished not by lowering corporate purchasing standards—in fact, these standards have gotten much tougher in recent years—but by sourcing qualified minority firms and giving them business on a competitive basis,” the council says.
In all, the corporations bought $737.2 billion worth of goods and services from MBEs for the entire 1972-2004 period, it says.
CDOs can serve a useful purpose for MBEs, says John Robinson, president and CEO of the National Minority Business Council. “However, if they act as a barrier to MBEs that wish to reach the right person in order to do business with the corporations, they will do a disservice to the MBE community as well as to the corporations that employ them. Corporate supplier development officers must understand that their job is to facilitate MBEs doing business with the corporations, to make sure that MBEs meet the requirements of the corporations in order to do business with them,” he says.
As the concept of supplier diversity expands globally, those in charge of such programs likely will come under increasing international scrutiny. At the very least they will begin to feel the rivalry from their counterparts in the overseas units of their companies. “They need to be the honest broker for the corporation or buying entity at all times and not make judgment calls that become a barrier to MBEs one way or another,” Robinson says.
Neither should supplier diversity Web sites become a substitute for human contact, he says. “Make appointments; see these people. Don’t tell everyone to go to the Web site and fill out this or that form. The human element has to stay in the mix,” Robinson says.
Prescriptions for Change
In his essay “Escaping the ‘Ghetto’ of Subcontracting,” which appears in the National Urban League’s report “The State of Black America 2006,” Mark D. Turner, president of Optimal Solutions Group, offers the following tips for small minority-owned businesses (SMBs) wishing to move from subcontracting to prime contracting. Corporate diversity planners have promoted subcontracting as a way for SMBs to expand. These companies, Turner says, should:
• View subcontracting as a necessary stepping stone, not a permanent state
• Develop relationships not only with small business officers but also with end users and contracting officers
• Always underpromise and overdeliver
• Periodically reassess the market, their offerings and future demand for their product or services
Corporate Purchases from MBEs
According to statistics from the National Minority Supplier Development Council, corporations purchased $737.2 billion worth of goods and services between 1972 and 2004. Here’s the annual breakdown:
2004 $87.4 billion
2003 $80.2 billion
2002 $72.1 billion
2001 $63.0 billion
2000 $54.3 billion
1999 $47.8 billion
1998 $41.0 billion
1997 $36.1 billion
1996 $33.4 billion
1995 $30.0 billion
1994 $27.3 billion
1993 $23.2 billion
1992 $20.5 billion
1991 $17.9 billion
1990 $15.2 billion