The fundamental goal of supplier diversity is to build wealth within communities, says Kenton Clarke in “Supplier Diversity: Food for Thought.” It’s been generally accepted that Fortune 1000 companies can best do this by including diverse-owned businesses in the supply chain.
But while many of these Fortune 1000 companies have and continue to spend with diverse-owned businesses, Clarke says this spend hasn’t actually affected employment and economic opportunities in underserved communities.
He gives four main reasons why:
- Partnerships between large corporations and diverse owned businesses still funnel money to the larger corporation. “These transactions inflate diverse spend and create the illusion of progress and new economic development.”
- The same small “club” of diverse owned companies are tapped for jobs because of established history and proven ability. “So what we have is a critical mass of dollars flowing to a very small number of companies.”
- Established processes, systems and administrative support limit job creation, and those jobs that are created are inconsequential to the supply chain. “There is a significant number of pass-through and no-value added transactions, and these commodities are at non-critical places within the supply chain.”
- Successful diverse owned companies eventually limit their own ability to continue diversity spend. “As diverse companies become larger, their ability to hire employees like themselves becomes diminished because now they have to hire the best person in the marketplace to continue their growth and also to avoid any discriminating hiring practices.”
The solution? New diversity spend goals:
- Procurement with smaller-revenue companies. “Companies under $1 million in annual revenue tend to hire people that look like them, have between five and 10 employees and are from the same physical community. Increasing their business by a small $500,000 contract will not only result in job creation, but further promotion and goodwill among their employees. … That also means non-diverse owned companies with high employment in the targeted communities.”
- Significant investment in education. “As we all know, the majority population in a few short years will be people of color; We are very aware of the education, asset gaps and poverty levels that will be prevalent in our country right around the corner. Our standard of living, global competitive advantage and world power status are in jeopardy if we don’t raise the level of economic participation within the African American and Latino communities that will dominate our population.”
Larger corporations need to rethink their current methods to accommodate supplier diversity in order to make a true impact – steps that ensure measurable impact beyond the small “club” of diverse owned businesses being used. The benefits will be universal.
Click here to read Clarke’s complete article “Supplier Diversity: Food for Thought.”
KENTON CLARKE is the founder, president and CEO of Computer Consulting Associates International Inc. (CCAii) and the founder of DiversityBusiness.com. CCAii, of Southport, Connecticut, is one of the nation's leading multicultural Information Technology consulting firms. DiversityBusiness.com, CCAii's flagship product, is the nation's largest and most comprehensive online resource center for small businesses and large procurement organizations.
Mr. Clarke's accomplishments have been recognized by numerous local and national awards, including the Regional Minority Small Business Person of the Year Award from the US Small Business Administration, the Ernst & Young's Entrepreneur of the Year Award and the Connecticut’s "Small Business Person of the Year" Award from the SBA.