Supplier Diversity Grows the Business Pie

Cover Story

by Charles Molineaux

May 30, 2008

Women-owned businesses and corporate employers find themselves on the same page in the fast-growing field of diversity outreach efforts: More should be done, and much more can be.

F or experienced testimonials about the value of corporate diversity initiatives, one can find few persons as enthusiastic, or as experienced, as Monica Maldonado.

"I could probably be the biggest spokesperson for diversity and supplier diversity," she proclaims, "because I really believe in it." As president of Interprint Communications Inc., a Decatur-based graphics company for 25 years, Maldonado has run a company that qualifies as both a minority business enterprise and a woman business enterprise. "We've been dealing with supplier diversity programs since the get-go."

Much has changed since she and her company made their first inroads into the corporate world in the early 1980s via a General Motors diversity initiative. Today metro Atlanta is seen by diversity advocates as not merely a major corporate center rich in opportunity but also a hotbed of vigorous inclusion initiatives where corporate citizens appreciate the value of making room for women- and minority-owned companies as business partners.

Leaders of the Georgia Women's Business Council, the local arm of the national Women's Business Enterprise National Council, repeatedly cite that welcoming aura. The national council, the leading third-party certifier of women-owned businesses, will hold its national Women in Business conference and business fair in Atlanta in June.

"We have a lot of major corporations in this city who are already locked into the supplier diversity field," says Kathy Homeyer, director of supplier diversity at UPS and a corporate co-chairwoman of the conference. "So they understand the economic impact of minority- and women-owned companies that can really drive their business."

But while minority- and women-owned businesses enjoy progress in getting bigger slices of the business pie and their corporate customers celebrate the growing numbers of Minority Business Enterprises (MBEs) and Women Business Enterpises (WBEs) that they've managed to bring on board, both groups see ongoing growth that co-exists with opportunities yet to be exploited and progress yet to be made.

Advocates also look at signs of a slowing economy and see a newly urgent need for diverse businesses to hang together. At The Home Depot, Supplier Diversity Director Michelle Johnson muses, "The reality is, the further we grow, the more that we see that there's a gap, and we need to continue to work harder to fill that gap."

And Growing
Pyramid Consulting Inc., an information technology company in Norcross, may owe its very existence to its status as an MBE.

It had already been in business four years with no special designation when, in 2000, it became certified with the National Minority Supplier Development Council's local council, the Georgia Minority Supplier Development Council, and through the GMSDC started seeking big corporate clients. That relationship gradually led to a contract with GE, which Pyramid founder and CEO Sanjeev Tirath figures came just in the nick of time.

"That really turned us around," Tirath recalls, "because 2001 and 2002 were really down years for IT after 9/11, and the whole economy went down with the dot-com bust. 2002 was the year that we started working with GE, and that sort of salvaged the company, getting that relationship with GE in place, and GMSDC was instrumental in getting us together."

Today Tirath estimates half of Pyramid's sales are with Fortune 100 corporations, and most of that is a direct result of its minority business designation, its diversity contacts and its involvement with the GMSDC.

"If you're looking at small- and medium-sized businesses, they don't really care about being a minority company or bringing on minority vendors, but Fortune 500 companies, especially Fortune 100, have good programs for diversity companies, and it is really helpful being a diversity company if you're trying to work with a Fortune 100."

And the GMSDC reports that the number of companies becoming involved keeps going up. Now 32 years old, the organization claims more than 500 certified MBEs in the state and a steady stream of corporate members signing up including, most recently, Zoo Atlanta as well as construction giants Holder and Skanska.

"Quite often new businesses say they want in," notes Angela Soyemi, who is with the GMSDC. "A lot of corporate members when they ‘get it,' they understand when they do business with people of color or ethnic minorities, typically that equates to more business for the corporation. If their suppliers look like their customer base, that only grows their customer base, and in that way they can grow their business."

Even Home Depot, corporate co-chairman of the Women in Business conference and recipient of numerous awards for its inclusion initiatives, is a relative newcomer. Its supplier diversity program is only in its fifth year.

"Each year," Johnson says, "we've had tremendous growth when it comes to the number of suppliers, when it comes to the type of programming that we offer the suppliers, but also in edging up our ‘ dollars spent' goal to ensure that we do have small-, minority-, women-owned businesses across the board."

At UPS, Homeyer sees rapidly rising corporate demand from both sides of the diversity equation, one as an employer trying to fulfill its own diversity targets and second as a supplier dealing with the targets of its clients. "It's like a roller coaster," she says with a laugh. "Not only does UPS have a strong supplier diversity program, but the other companies out there do, too. Let's say UPS is ready to sign a contract. One of the questions they will ask is, ‘What does your supplier diversity program look like, and what are you doing to help grow it?'"

Not that woman or minority certification makes a slam dunk of any business relationship, nor does the initial contact provided by agencies like the GMSDC. "It gets you in front of them, and then you have to be a capable provider of services," Tirath says. "Once you're in the program, you're evaluated like everybody else. You perform. If you don't perform, you get booted out."

"You have to work your way in," Maldonado agrees. "You have to be good, too. Hey, I may be a woman-owned business, but if I don't have something great to deliver, do you think they're going to pay attention to me?"

Sign on the line... and on that one, too... and that one
The adventure of entrepreneurship certainly continues to lure dramatic numbers of women and minorities. The Center for Women's Business Research reports woman-owned businesses are growing at twice the rate of all U.S. firms, while those owned by women of color are growing at five times the rate.

"There are a lot of individuals out there who are leaving the corporate world and recognizing opportunities and really going after it," marvels Tara Abraham, co-chairwoman of the WBENC conference and CEO of Accel Inc., a contract packaging company. "I think [a diversity certification] just really helps them get their foot in the door and helps propel their businesses much quicker."

But inasmuch as businesses can open doors for themselves by having that MBE or WBE certification, they also can find a daunting obstacle in getting a certification, or more likely two certifications, or three, or more.

Tracey Johnson, president of Genesis Ktisis Inc., a Lithonia marketing solutions company, may see paperwork in her sleep for years. "Sometimes it's like they want your firstborn," she says cringing. "All the information you have to give, it's very extensive. The applications are very thick. But we survived." As a WBE and MBE, Genesis is certified through the GMSDC as well as through a patchwork of local municipal certification agencies. "Fulton and Cobb counties weren't that bad, but DeKalb was very demanding," she says. "They needed minutes from your corporation meetings, bylaws and everything. They wanted a lot."

"It can be a lengthy process," Maldonado says in acknowledgement. "You expect a certain level of scrutiny, and you get it, too, site inspections, big time. They look at your numbers. They make sure you are signing the checks, making the decisions, that it's not a facade."

Maldonado says she, too, has gone through an alphabet soup of multiple certification processes, gaining recognition by GMAC, GMSDC, WBENC, GDOT, the City of Atlanta and, most recently, six months of getting certified by MARTA. It's a familiar scenario for leaders in diversity. While the certifications of the NMSDC and WBENC are widely accepted in the corporate world, governmental diversity initiatives, long a major source of diversity contract opportunities, frequently require that prospective MBE or WBE designates run a gantlet of differing local certification processes.

"How many times does that minority business have to prove it's a minority business?" exclaims Roz Lewis, executive director of the Georgia Women's Business Council. "DeKalb, Atlanta, Cobb County, there isn't one municipality that doesn't have its own certification process. It becomes a challenge for the business, and they're spending a lot of time working their way through the certification bottlenecks as opposed to spending time on growing their business."

"Is that a burden on small business? It's a huge burden on small business," agrees Linda Denny, president and CEO of the Women's Business Enterprise National Council. "One of our longest certified businesses provides insurance to Avis Budget. So because Avis Budget car rentals are in airports and downtown areas, that's at least four, and in some places five, certifications for every single site, multiplied by hundreds of sites. She has, I think, two or three full-time employees and spends well over $100,000 a year in fees just to be certified by all these places."

It's a burden that only grows more onerous as small MBE or WBE businesses try to expand, seeking customers in new areas only to encounter more and different local certification bureaucracies.

Now, however, some efforts are under way to streamline the crazy quilt of governmental certification requirements. Nationally WBENC has been huddling with the Small Business Administration to develop a standardized certification. The GWBC is in talks to persuade Fulton County to accept the WBENC certification process. Lewis concedes that on this change, Georgia diversity advocates trail their counterparts in other sections of the country. Affiliated local councils in the Philadelphia and Chicago areas are already making inroads with local municipalities there to obtain acceptance of WBENC certification, and Los Angeles has informally contacted the Georgia Council to accept the GWBC's site visits for a company based in Atlanta seeking a contract with Los Angeles.

Denny says supplanting entrenched local governmental systems, many of them much older than the 11-year-old WBENC, will understandably take time. "State, city and local authorities all have staffs that do them, and it's become kind of a fiefdom in all these different places," she says.

Return on investment
"Is it time consuming? Yes, it's time consuming," says Kanchana Raman, founder, president and CEO of Avion Systems Inc., a wireless telecom company. "But I think the ROI [return on investment] on the few hours you invest in getting certified is invaluable."

Raman launched her business in 1996, unaware of the opportunities available to her as both a WBE and MBE. She says the change was dramatic in 2003, when she finally became certified.

"Before," she recalls, "to get an introduction to a customer or to meet a vice president would be a long journey. But once you are a certified company, Fortune 100 or Fortune 500 companies have a presence, so you pick up the phone and you call them and request an introduction. So instead of going up the food chain, you get right to the top."      To Nancy Williams, co-owner of ASAP Staffing LLC., certification is the "icing on the cake. You still have to prove that you're capable of handling the business and offering value-added solutions."

Leaders like Roz Lewis place a premium on the networking, mentoring and mutual support side of the equation ... now more so than ever as concerns about the economy become more acute.

"The government's trying to decide whether we're in a recession. The consumer says that we are. That is going to impact women and minority business. We advocate our businesses do business with each other. They need to walk the talk. If major corporations do business with you, what are you doing to support other woman-owned businesses or minority-owned businesses?"

Denny says it's happening. "What's very exciting is that we're seeing many of our WBEs be very specific about how they want to do business with other WBEs. Some of them have formal supplier diversity programs of their own. Others are small but are very conscientious about trying to do as much of their business as possible with other women business owners."

Williams believes that companies need to find business partners, including financial partners, who are willing to stick with a company through thick and thin. "That's very challenging," she admits.

Johnson says her Genesis Ktisis enjoys a shot of business adrenaline by virtue of being plugged into the GMSDC. The company has gotten work with Hartsfield-Jackson Airport and Southern Co., but also has enjoyed mentoring assistance from Georgia-Pacific.

And because she's now part of this community. "We get a lot of referrals. It's really good and important having your information in their database where other individuals have access to it. They will refer other customers to you, and that's been great for me, for the company."

Williams, who says her company is the "poster child" for certification, says the networking is important but that the minority- and women-owned companies need to turn that networking into business. Her company, which boasts revenues of $60 million, spends about $6.9 million worth of business with minority companies. "I intend to do more next year," she says. "That's what this is all about. You move each other up. You do what you can to help others who are not as large and established as you. We're very loyal with each other."

The GMSDC cranked up the hobnobbing opportunities in March at its 2008 Business Opportunity Expo, which put small minority businesses in the same room with execs from major corporate employers, including Coca-Cola, Delta Air Lines, AT&T, Wachovia, Lockheed Martin and Anheuser-Busch.

"This one event here," Soyemi points out, "is a guarantee for them to meet with their potential customers. They have open door access to Fortune 500 and 1000 corporations, which they may not have access to otherwise, by being involved in this network."

Tara Abraham says the same phenomenon is already startlingly clear in her role as co-chairwoman for the Women in Business conference in June. "We haven't even had the convention yet, and the exposure just from the planning stages has really opened a lot of doors as well. I find myself networking with the supplier diversity professionals from the corporations."

Raman checks off the possibilities. "You have the social network," she says, "the professional network, the support organization, then you have a lot of internal groups that support and mentor businesses, with mature entrepreneurs, the corporate signup for a mentor protégé program. There are so many things that are offered."

"I think it's [diversity] a bigger deal today than it ever has been," Denny sums up, looking at the growing acceptance in the corporate world of efforts to be inclusive and the momentum that such efforts have in an ever widening variety of companies. "There are still some that are out there kicking and screaming. Some smaller companies just don't understand what supplier diversity programs are. But a high percentage of the largest names, they're telling their prime suppliers that ‘You must do certain percentages of your contracts with women- and minority- owned companies.' So we're seeing that pushed down the supply chain quite a ways. That's creating new opportunities for new supplier diversity programs, which then opens up still more opportunities."

Raman says motivated businesses that sign on for diversity outreach initiatives are playing with priceless power as long as they make the most of it.

"When I look back 11 years, I wish I met WBENC's team 11 years ago," she says. "What took me 11 years, I probably could have accomplished in five years, half the time."

UPS Supplier Diversity Program
• Launched in 1972 and executed by UPS managers in seven regions and in 55 districts.
• In 2006, UPS increased its spending with minority businesses to $341 million, an 82 percent increase over its 2005 spending. The company contracted with 1,342 certified first-tier MBEs in 2006. The company also unbundled large contracts to provide more opportunities for minority and woman-owned businesses and increased business opportunities in nontraditional areas such as asset management.
• In 2005, UPS awarded more than $249 million in contracts to minority- and female- owned businesses. Small businesses in the Supplier Diversity Program were awarded more than $342 million in contracts.
• Among the products and services used by the company are: legal, advertising, consulting, computer support and office supplies.
• The Women’s Business Enterprise National Council named UPS to its list of the top America’s Corporations for Women’s Business Enterprises for six consecutive years.
nForty-four minority- and women-owned businesses were suppliers to the UPS Worldport project, a $1 billion expansion of the company’s facilities at the Louisville International Airport.
• UPS met its goal at Worldport of 20 percent minority and women-owned business participation, which includes $250 million in construction and supplier contracts.

Source: UPS

Terms:
Tier 1: Direct supplier to a customer or contractor.
Tier 2: Second-level contractor, subcontractor.

WBE (Pronounced W-B-E): an acronym for Women’s Business Enterprise – a woman-owned business that has received WBENC certification.

WBENC (Pronounced Wee-bank): An acronym for Women’s Business Enterprise National Council, the national organization that sets the certification standards and procedures administered by 14 regional affiliate organizations. Through WBENC, the WBE certification is recognized nationwide.

Criteria for Certification
•   Fifty-one percent ownership by a woman or women.
•   Proof of effective management and control of the business (operating position, bylaws, hire-fire and other decision-making roles, signature role on loans and contracts).
•   Contribution of capital and/or expertise.
•   Independence.
•   U.S. citizenship or U.S. resident alien status.

Source: WBENC Website

Relevant Organizations:
National Minority Supplier Development Council (NMSDC)
Regional Affiliates: Georgia Minority Supplier Development Council
Women’s Business Enterprise National Council (WBENC)
Regional Affiliates: Georgia Women’s Business Council (GA)
Women’s Business Enterprise Alliance (TX)
US Pan Asian Chamber of Commerce (USPACC)
US Hispanic Chamber of Commerce (USHCC)
United Indian Development Association (UIDA)
Native American Chamber of Commerce (NACC)
Native American Business Alliance (NABA)
Atlanta Business League (ABL)

Facts And Figures:
• The average WBENC certified company has revenues of $7.7 million, 45 employees and 14 years of experience.
• Approximately 50 WBE firms have revenues of more than $100 million, and six certified WBE companies have revenues in excess of $1 billion.
• 240 U.S. corporations are active members of WBENC.
• More than 1,000 corporations accept WBENC certification.

Source: The Women’s Business Enterprise National Council website

Survey Says
• 79 percent of respondents said knowing a company buys from women businesses would compel them to try a company’s product or services if they were not a current customer.
• 51 percent said a company’s support for women’s businesses is even worth a mulligan if the product or service misses the mark the first time.
• 81 percent said awareness of a company’s mission to buy from women’s businesses would moderately or significantly solidify their brand loyalty.
• 76 percent said they were not aware that some corporations made a concerted effort to buy from women’s businesses.

Source: A survey of 1,227 women consumers between 35 and 55, conducted by the WBENC and SB Services, a consulting firm.

What Georgia-Pacific Buys From Female And Minority-Owned Suppliers:
Chemicals
Computer hardware and software
Construction and engineering services
Consulting services
Contract manufacturing
Fuel and energy
Industrial supplies
Maintenance and repair parts
Office supplies and equipment
Packaging materials
Promotional items
Printing services
Telecommunications hardware and software
Transportation and logistical services
Wood and recovered fiber

WBENC's The 2007 Top Corporations
Alcatel-Lucent
AT&T
Avis Budget Group
Bank of America
Chevron Corporation
Energy Future Holdings (formerly TXU Corp.)
Exxon Mobil Corporation
IBM Corporation
J.C. Penney Company, Inc.
Office Depot
PepsiCo., Inc.
Pfizer, Inc.
Shell Oil Company
The Coca-Cola Company
UPS
Verizon

WBENC awarded its ninth annual America's Top Corporations for Women's Business Enterprises recently. The organization bestowed the honor based on corporations that not only have instituted programs to offer equal access for women-owned suppliers, but also have attained world-class quality in their supplier diversity programs featuring WBEs.