Most Supplier Diversity Programs Simply Fail To Deliver

While world-class procurement organizations continue to outperform their peers in driving supplier diversity spending, a new study by The Hackett Group, Inc. identifies several critical ways that most companies fail in their supplier diversity programs.

Companies with world-class procurement organizations commit 33% more of their spend to diverse suppliers (13.3% of total spend for world-class versus 10.0% for typical companies.)

But according to Hackett's research, most companies still make major errors in how they operate and measure the performance of their supplier diversity efforts. Most rely on overly simplistic measures to evaluate the progress of supplier diversity programs, and never truly assess whether programs are meeting corporate objectives.

Most companies also fail to consider whether a few large suppliers or many smaller suppliers best supports their corporate goals.

"What we see here is serious misalignment," said Hacketts North American Procurement Advisory Program Lead Kurt Albertson. "Many companies are taking the easy way out, and as a result aren't driving real supplier diversity benefits. They are focused on making the numbers they need to meet government requirements, or getting recognition from their customers or industry. But they arent showing the attention to detail required to create programs that have real impact."

The study found that there are two primary drivers of supplier diversity efforts. While business-to-business companies are frequently focused on meeting supplier diversity requirements of customers and/or government contracts, business-to-consumer companies generally focus on the market value supplier diversity offers, in the form of increasing market penetration in diversity markets, driving social and economic benefits in targeted communities, and improving corporate image.