Last week I visited the beautiful Hurlingham Club in west London, with its cricket ground, croquet lawns and beautiful terraces, for the annual Procure to Pay Network summit. It’s good to keep close to the less glamorous end of procurement, and it’s been a useful and enjoyable event the times I’ve occasionally attended over the years. Ellen Leith who leads the P2P Network really knows her stuff and has developed strong relationships with “her” community – mainly transactional procurement managers and AP / shared services executives.
It was interesting to see that even this audience is now really into discussions about purpose and ESG. So, one of the highlights was a panel discussion titled “diversity matters” featuring Rebecca Howard (Coventry Building Society), Liz Barclay (Small Business Commissioner), Dan Foley (Shared Services Director at Kier Group), our old friend Jason Roberts (CEO Kaleida), another friend in Dave Jones (procurement leader and influencer), all moderated very capably by Sheryl Miller (diversity consultant and author).
The main thrust was around achieving a more diverse supply base, although the speakers did touch on diversity within our own teams. Jason and Rebecca talked about unconscious bias – it does exist, and we have to look hard to see if it is impacting our business decisions. Apparently, the owners of many small minority owned firms don’t put any pictures of themselves on their websites because they think that will hurt sales. That’s a terrible state of affairs really when you think about it.
But of course, we are losing economic benefits if we miss good suppliers because we aren’t open-minded enough. If you don’t have a diverse supply base, then you are likely to miss out on innovation and good ideas. From a staff point of view, people – particularly younger folks – don’t want to work for a firm that doesn’t care about diversity.
Howard talked about the local aspect for her building society, and it is stakeholders such as staff and investors who are driving this. The organisation wants to support its local community in Coventry, and customers want to see the Society putting something back into the region. “We include this in our annual reports, with detail on local suppliers and under-represented groups. And the more you talk about it, the more understanding and more questions, and you start seeing this becoming a “pull” rather than a push”, she said.
While there is still a way to go, matters have improved, and technology - like the Kaleida platform which Coventry uses to help identify potential minority suppliers – is helping. “These suppliers also give us access to different opinions. We have to stay relevant to compete with the new challenger entrants to the banking sector, and diverse suppliers can help in that process”.
But does diversity in our supply base really matter? Yes, it does, Foley said. We make choices based on our values, but crucially the pandemic showed that we need innovation from our suppliers. That is more likely to come if we have a range of suppliers with different views and experiences. There can be issues in terms of whether smaller firms can win business, but they can partner with larger firms if this is an issue.
Roberts explained that he doesn’t advise firms should set targets for awarding work to minority owned suppliers or implement positive discrimination. It was more appropriate to talk about offering opportunities and targeting that. Firms should still compete and win the business on merit. But if you don’t put opportunities out there that are accessible and feasible for these firms, then clearly, they will never win the business. (There is a counterargument to that, which is that targets for actual spend can focus minds and drive real change).
Why isn’t every organisation doing this? Well, some may have pretty diverse supply chains already but simply not know it. “Tail spend” is often diverse; so baselining can be a useful place to start. This requires two skill sets though, both procurement and an understanding of the diversity (or DEI) issues. If you have a DEI team, procurement should work with them on this type of initiative. And as always, Jones pointed out, change needs senior support. There are also other aspects to consider; Barclay pointed out that smaller firms struggle if buyers don’t pay promptly. 60 days plus as standard payment terms just aren’t feasible for many.
We also have to be cautious about other actions which might accidently make life difficult. Ironically, reporting on emissions and carbon, another key element of our “purpose” agenda, can erect barriers to entry. The “net zero by 2030” imperative can create difficulties and stress for smaller firms.
So, diversity can be included in your supplier code of conduct; it can be baked into sourcing processes – indeed, these “social value” and purpose issues now account for 20-30% of tender evaluation marks within Coventry’s supplier selection process. It’s not easy; but equally taking action in this area is not as challenging as some of the purpose topics we talk about. So do take a look at your supply chain and supplier base if you haven’t already.
And remember - encouraging more diversity in your supplier base is not just an altruistic move to support people who might need and appreciate that. It is a value-creating, risk-reducing action for the buying organisation.