Part I: Roadblocks to Supplier Diversity: How RFPs and Procurement Processes are Stifling Small Businesses
This is #IncreaseDiversity, a weekly newsletter series + Increase Diversity Toolbox sharing best practices for employers who want to learn how to… well, increase diversity. To see previous editions, visit JenniferTardy.com. | IG: @IncreaseDiversity | Increase Diversity - YouTube
JTC News + Events
RECRUITER TRAINING + CERTIFICATION | Qualified Diversity Recruiter (QDR) Bootcamp + Certification Exam | Learn best practices to FIND, ATTRACT, ENGAGE, and HIRE from historically underrepresented groups (+ get certified in the process). CLICK HERE
HIRING MANAGER TRAINING | Looking to accelerate inclusive hiring training for your leaders, hiring managers, HR Business Partners, and DEI Practitioners? Try our Fast Track Qualified Inclusive Leader Training. CLICK HERE
FREE PLATINUM CHECKLIST | We have a FREE, downloadable CHECKLIST for leaders called The Platinum Checklist for Hiring Professionals: 10 Immediate Actions Leaders Must STOP Doing to Increase Diversity. CLICK HERE
When we talk about increasing diversity, our minds instinctively race to human resources—the usual phenomena: hiring, promoting, and retaining employees. It’s like a well-rehearsed script we’ve read and re-read countless times. But today, I want to take you off this beaten track and onto a road less traveled, one that will give you a holistic view of diversity.
Let’s discuss an oft-overlooked aspect of diversity: supplier diversity. This will be a 2-part newsletter series: today, I’ll present to you how these 6 roadblocks hamper the growth of small- and medium-sized businesses (SMBs) and hinder supplier diversity; next week, I’ll be back with 10 potential solutions.
So, what is supplier diversity all about?
Well, think of supplier diversity as a thoughtful business strategy that's all about making sure businesses owned by traditionally underrepresented or underserved groups have a fair shot. This includes businesses steered by people of color, women, veterans, LGBTQ+ individuals, and many others who've often found themselves on the fringes.
But here's the key—it's not about giving them a leg up or favoritism. Rather, it's about creating an inclusive space where everyone gets a seat at the table and the opportunity to shine. It's about embracing their unique perspectives, acknowledging their strengths, and ensuring they're not left out when you're making your business decisions.
In my role at JTC, I've had the distinct honor of playing a part in our Increase Diversity™ Roadmap—an endeavor that has allowed me to collaborate with a broad spectrum of businesses. From the seasoned industry titans to the innovative startups, each of these collaborations adds a unique thread to the complex and vibrant tapestry of our collective experience.
However, amid these rewarding experiences, I've come across a concerning trend. The Request for Proposal (RFP) and procurement process often presents a series of challenges for new vendors that can hinder the growth of SMBs. Many of these enterprises are driven by people of color (19.9%), veterans (5.6%), and women (21.4%) entrepreneurs, as per the 2021 Annual Business Survey by the U.S. Census Bureau. They represent a significant portion, nearly half, of American businesses in 2020.
What’s an RFP?
An RFP, or Request for Proposal, is kind of like a business's way of saying, "Hey, we've got this project or need, and we're open to hearing how you can help." It's a document that companies put out when they need specific services or solutions and are seeking proposals from qualified vendors. It's their way of gathering all the details—the who, what, when, where, and why—about what different vendors can offer in a procurement.
RFPs ensure fairness in the selection process. It gives every potential supplier a chance to be in the bidding game and show how they can address the business's needs. More important, it helps the company making the request find the best fit for their project.
Are RFPs Speed Bumps for SMBs?
You see, many standard agreements and contracts are created with larger consulting companies in mind. They often erect barriers that are hard for smaller businesses, especially those owned by underrepresented people, to scale. This is how supplier diversity gets inadvertently hamstrung. Consider these stumbling blocks that often crop up in RFPs and consulting agreements:
Roadblock #1: Net Payment Terms: The business world’s version of the schoolyard bully could well be the dreaded 90–120 day net payment terms. For the bigger players, this might be an easy hoop to jump through; they’ve got the financial muscle to keep their operations running while waiting for that paycheck. But for SMBs, it’s like asking them to hold their breath underwater for an unreasonable length of time. In many cases, they’re depending on prompt payment to keep their lights on.
Roadblock #2: Insurance Requirements: Imagine that you’re a vendor specializing in, say, office stationery. But to get the contract, you’re asked to carry insurance policies related to, let’s say, high-risk industrial operations. That’s a little like asking a marathon runner to wear scuba gear. Needless to say, insurance requirements should align with the actual work scope.
Roadblock #3: Insurance Limits: And speaking of insurance, there’s another elephant in the room we barely address: disproportional insurance limits. It’s like asking that marathon runner (already perplexed by the request for scuba gear) to carry an oxygen tank for a Mount Everest expedition. Insurance should be calculated according to the risk involved, not set up as an overwhelming hurdle for small business owners who are striving to compete against large corporations.
Roadblock #4: Policy Requirements: Imagine being a vendor whose partnership involves no data handling, and yet, you’re asked to have full-blown IT or Cybersecurity policies. That’s like requiring a dress code for a radio interview. Focus on what actually matters.
Roadblock #5: Intellectual Property: For starters, intellectual property refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce. It is protected by law through patents, copyright, and trademarks, which enable people to earn recognition or financial benefit from their inventions or creations.
Let’s say a small business comes up with a genius invention. They’re the creators, the innovators. But the larger corporation they supply to says, “Thank you, we’ll keep that.” Attempting to seize a company’s intellectual property rather than licensing it isn’t just unfair; it’s like telling the goose that lays the golden eggs, “Thanks, but we’ll take over from here.” These businesses lose real cash here. And lots of it.
Roadblock #6: Financial History: Asking for years of financial statements from newer, small-scale businesses can feel a bit like asking a toddler to hand over their resume. Yes, these statements can offer some nuggets of insight, but do they really tell the whole story? Not by a long shot! When we're sizing up a business, we need to look not just at what's in the rear-view mirror but also what lies ahead on the open road. Evaluating a business is about understanding its potential, its vision for the future, as much as it is about scrutinizing its past track record.
So, if your workplace is earnestly working towards a more inclusive culture, it’s high time you scrutinized your procurement practices. These were the 6 roadblocks that create hurdles for small- and medium-sized businesses. Not only do they impede the growth of these enterprises, but they also stifle the richness of supplier diversity, limiting the broad spectrum of innovation and potential that many vendors bring to the table.
Next week, I'll be back with 10 potential solutions, some ways we might be able to level the playing field and give these hard-working small businesses the shot they deserve. So stay tuned; keep these roadblocks in mind, and together, let's see if we can't find a way to increase diversity and build a more inclusive business landscape.
In the meantime, if you've come up with a solution or have already put one into action in your own business, I encourage you to share it in the comments section below. Your insights are valuable, and I'm genuinely excited to hear from you.
