'Link buyer pay to supplier diversity'

12 October 2017

Procurement professionals should be incentivised around targets related to supplier diversity, according to experts speaking at the WEConnect International Europe Conference.

Pauline Gebon, global head of supplier diversity at MetLife, said her company tied supplier diversity goals to annual incentives for buyers. “If the goals are not met, they forfeit some of their incentives,” she said. “That pushes them to engage with diverse suppliers, hitting them in their pockets.”

She added that there were other ways to drive good practice. Metlife’s CPO has introduced a rule where every global procurement opportunity has to include at least one diverse supplier. “That really drives the right behaviours,” Gebon added.

Simon Marsh, global procurement director, marketing, at Dell, agreed that having targets for supplier diversity was useful. He said Dell spends around $5bn with diverse suppliers.

“This [area] is high on the corporate agenda,” he said. “It has executive sponsorship and is tied to targets. It’s very visible in what we do day-to-day.”

Marsh added that engaging with diverse suppliers can help bring innovation into corporates, as diverse suppliers are often smaller and more nimble.

“[Procurement should] look at diverse spend as an opportunity for innovation and growth,” he said. “Procurement has to balance cost savings and rationalisation of suppliers with driving new sources of value. Doing what we do today is not how we will be successful as a business.”

At IBM, supplier diversity is reported on at twice yearly board meetings, said Michael Robinson, global program director, supplier diversity at the firm. It is also linked to procurement professionals’ performance management and incentives.  

Targets can also be used to drive diversity lower down the supply chain. Megan Stowe, international supplier diversity manager at Intel, said Intel’s tier 1 suppliers had to ensure a certain percentage of their spend was with diverse suppliers.

To further track the positive impact of using diverse suppliers, Gebon said MetLife had commissioned an economic impact study to work out how each dollar spent with a diverse supplier translated into job creation, tax contributions, community impact and so on.

Boosting a community means more potential customers, she explained. “It’s closing that loop. What is the business value you are bringing?”

Amanda Spencer, head of supplier relationship management at EY, added that big corporates needed to think about what “blockages” might make it challenging for smaller suppliers to engage with them, such as regulatory requirements, liability insurance or legal costs. “Can we break that down?” she asked. “We should look at creating new policies of having exceptions to the rule.”

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