Supplier diversity
Working with minority-owned companies isn't just a social issue

by Donna C. Gregory
for Virginia Business
August 2007

For large corporations, contracting with minority-owned businesses used to be the socially conscious thing to do. Today, it's just smart business.

The trend has led to a new job category: supplier diversity manager. These managers are now the norm at most large companies. A few, such as Richmond-based Dominion Resources Inc., even have entire departments dedicated to recruiting minority-owned suppliers. Dominion formed its seven-member team last spring. "Before, you had two people who were trying to do it all. Now, we can really look for ways to diversify Dominion," says Anne Oliver, Dominion's director of supplier diversity. "It's been a major change, and the reason for the change is the value it brings to Dominion."

She says minority-owned suppliers "bring knowledge and experience to better understand the communities we serve, and it helps us to compete more effectively."

Initially, the team's purpose is twofold: to look at how Dominion can increase its total spending with minority suppliers and to promote a second-tier program that encourages Dominion's non-minority contractors to subcontract with minority firms.
The primary focus for Dominion has been with minority- and women-owned businesses to date. "It promotes economic development with suppliers in the communities. There's nothing more important than doing that," says Oliver.

For some companies such as Northrop Grumman Corp., supplier diversity is mandatory. "Because we're out there trying to win contracts [with state and federal agencies], many times it depends on whether we're going to subcontract with minority suppliers," says Joni Blizzard, manager of the socioeconomic business program for Northrop Grumman's McLean-based IT sector.

The billions of dollars in government contracts generated by Uncle Sam each year means Northrop Grumman is a major player in supplier diversity. "There are a lot of supplier diversity conferences and workshops that are held throughout Virginia and the nation, and we normally sponsor or are invited to those events," says Blizzard.

The global defense and technology company also conducts quarterly in-house information sessions for potential contractors and provides training to help contractors grow their businesses. These contractors provide a variety of services to Northrop Grumman, including IT services, engineering and research. "We take this very seriously," says Blizzard. "We're all about small business."

Each of the company's eight sectors employs a manager like Blizzard who seeks out contracting opportunities with small businesses — many of them minority-owned. Blizzard cited Dataline Holding Inc. as an example. Dataline Holding is a woman-owned business based in Norfolk, which has won a contract with Northrop Grumman to work on its $2 billion Virginia Information Technology Agency deal revamping the state's computer services. "There are 20 minority companies that are our tier-one suppliers for contract labor on the state contract," she says.

To find qualified vendors, Northrop Grumman and other major companies such as SunTrust Banks and Capital One Financial Corp. turn to the Virginia Minority Supplier Development Council (VMSDC). An affiliate of the National Minority Supplier Development Council, the Virginia council matches up minority suppliers and corporations.

The council's database is the first place that many corporations look for minority suppliers. "The national council and the sister councils have a very rigid, standardized certification process for minority firms. They do the legwork I would not have time to do," says Tim Hanger, vice president of SunTrust Bank's corporate procurement group. The certification process verifies that a company is minority-owned and in good standing.

The VMSDC currently has 230 corporate members and a database of about 375 certified minority suppliers. The database belies the stereotype of minority businesses falling under the categories of janitorial services, landscaping or other blue-collar occupations. About 42 percent are telecommunications firms while another 28 percent are professional services.

"We want them to compete, and to compete fairly, and we also want corporations to give them that opportunity," says Tracey Jeter, the council's president and CEO. "It's still an uphill battle because there are corporations who have a philosophy or a policy that says, ‘We support minority business development,' and that may be all they have. There are still companies that are left in 1960 who think it's still about social consciousness and are handing out contracts just so they can say, ‘We did something nice.' "

But that viewpoint is rapidly changing in corporate America, prompting a new challenge. "I see a real commitment and drive toward equality of opportunities. [but] I have not seen a tremendous shift in the results," says Stacy Burrs, director of the Virginia Department of Minority Business Enterprise.

That's due largely to the relatively small number of minority businesses. In 2002, minority businesses accounted for less than 18 percent of Virginia firms. And only a small percentage of that number has the ability to take on major contracts.

For now, finding enough minority firms to compete for contracts is the greatest challenge faced by supplier diversity managers.

"It's a business imperative. Minorities are very brand loyal, and they want to see their bank is out there to do business with them," said Hanger. "Our goal is to include any qualified minority bidder we can."