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Supplier Diversity Benchmarking

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Procurement leaders are looking for ways to measure the success of their programs, including supplier diversity. A recent conversation between The Hackett Group’s Principal of their Global Practice Leader, Chris Sawchuk, and CEO, Aylin Basom, uncovered some exciting ideas for procurement teams. Here are three big insights from their recent webinar discussion:

Results come from the right enablers

Aylin shared the variety of benchmarking results companies are seeing with the cross-industry average of 3.6% for all companies, while the top performing companies (the top 20%) are achieving more than twice the results at 9.1%. This was a bit lower than expected.

“When we did research in 2021, most organizations said that by 2023 they had set a goal to spend around 10% with diverse suppliers,” offered Chris. “One of the main enablers of the leaders is staff. Leading organizations have allocated 2.5% of their overall staff to supplier diversity, versus 1% for most organizations.”

Budgets were also critical to program success, including funding for supplier diversity events, systems, and data. Chris solidifies this by stating, “93% of top performing organizations had dedicated budgets either at the enterprise or procurement organization to support these programs.”

Leaders set goals and measure performance

Our benchmarking data shows a big difference between leaders and average performance within industries, with many leaders achieving 2-3x industry averages. Chris identified one of the major differences between leaders and the rest of the market is their focus on goals and measuring performance.

“If you don’t know where you’re going, any road will take you there.” Chris said. “Top performing organizations have set significant goals. You simply won’t drive your program forward if you have no goal.” One example he shared got even more specific, with 77% of organizations setting specific goals to grow spending with African American businesses.

In fact, leaders also hold other leaders accountable. “29% of organizations CPOs are accountable for supplier diversity program performance success.” Chris pointed out.

Supplier Diversity can help with economic challenges

Supplier diversity remains a big focus for organizations and the economic environment hasn’t impacted that. For many organizations it may be an even bigger priority with the current economy.

“In 2020 we saw a lot of large companies working hard to support diverse suppliers during the difficult times then.” Chis reminded. “I expect us to see that continue as we move forward in this current economic environment.”

Chris also suggested how leaders can do more to support their programs internally and externally. “Don’t keep secret all the great work you’re doing.” Chris recommended. “Not only does it help with business results, it also improves staff retention, a big challenge for procurement at this time.”

Parting thoughts

Both Chris and Aylin shared the importance of data and clear goals for any procurement team.

“This is a big effort that is very important to your boards.” Chris pointed out. “They want validated metrics on the success of these programs. They expect these updates to be more frequent and the data has to be accurate. It’s never been more important than right now.”

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