Here’s How Google Is Establishing and Expanding Supplier Diversity
"Diversity helps to create better workplaces and to support higher performance and social advancement,” said McKinsey. "That’s why governments and companies have focused for decades on boosting the diversity of their suppliers. They are making significant progress in categories such as facilities management, construction, staffing, and food services.”
A diverse supplier is typically defined as one where at least 51% of the company is owned by a traditionally underrepresented population. Whether that owner belongs to an underrepresented gender identity, ethnicity, culture, sexual orientation, etc. expanding the diversity of your suppliers through procurement helps create a better industry and better world for everyone.
This is why, according to McKinsey, leading companies have committed more than $50 billion to partner with minority- and women-owned businesses over the next ten years. With corporations spending 58 cents of every dollar of revenue on payments to suppliers, this is no insignificant proportion.
It is this need which has driven one of the world’s largest tech brands, Google/Alphabet to create a bespoke supplier diversity program which aims to create a fairer and more equitable procurement landscape with the potential to benefit all stakeholders in the value chain.
"Google is committed to continuing to make diversity, equity, and inclusion part of everything we do — including how we buy goods and services and the suppliers we partner with,” said the company in a press statement. "We know that more diversity in our supply base means better products and services for Googlers and our users. That’s why we’re providing access, development and investment in diverse-owned companies through our Supplier Diversity program.”
In a staged program Google has steadily expanded its commitment to supplier diversity. In 2020 it announced its intention to accelerate supplier diversity with a target to spend $1 billion with diverse-owned suppliers and $100 million with Black-owned suppliers in the US. Then, the following year it announced it had surpassed that goal with a spend of nearly $1.5 billion with certified diverse-owned businesses and over $133 million with Black-owned businesses in the US.
Finally in 2022, Google announced it was expanding its goal with a target spend of $2.5 billion and a plan to expand its supplier diversity program outside of the US to the global marketplace.
"We believe in a holistic approach to supplier diversity and will continue to invest in diverse suppliers and their leaders. We offer mentoring, development, and partnership programs,” said Google.
Further Expansion
USD spend presents some impressive figures, but the benefits of Google’s supplier diversity program go beyond simple monetary considerations and ensures the benefits are far reaching and meaningful on an organizational level as well.
Firstly, the program ensures the supplier Google is doing business with has a meaningful role in the partnership. This will include factors such as the scope of work being larger than the size of projects it typically handles in order to create an opportunity for it to expand its capacity, and gaining experience with new capabilities which will help the business grow. The supplier is also given opportunities to participate in senior management tasks such as setting strategy and allocating budgets, evolving the relationships beyond being a simple subcontractor into something which more closely resembles a co-owner.
Google also sets realistic and clear expectations for the relationship from the start which ensures the diverse supplier doesn’t immediately bite off more than they can chew and provides opportunities for training and development which will help them gently grow into the role.
"For example, the mentorship agreement might require the mentor supplier to spend five hours training the diverse supplier’s employees to help it acquire a particular capability,” says Harvard Business Review. "The agreement might also call for the mentor supplier to allow employees of the diverse supplier to first observe the mentor’s employees executing a part of the work requiring that capability and then help the diverse supplier’s employees execute the remaining parts of the work.”
The most important factor is that Google structures the partnership as a long-term relationship. This looks beyond the present purchasing deal and seeks to anticipate future arrangements which become larger over time.
HBR provides another example of this in practice.
"A diverse-owned general contractor in Michigan that served the automotive industry owned 51% of an alliance with another general contractor. Through the alliance, the diverse supplier expanded its work to universities, utility companies, and refineries and vastly increased its revenues. Twenty years after the alliance was formed, the diverse supplier bought out its partner’s interest.”
Final Thoughts
As you can see, Google is committed to leveraging its supplier diversity program to create a more equitable economy, one which is less concerned with day-to-day procurement transactions and instead devoted to establishing long-term relationships which provide opportunities for expansion and growth among diverse owned suppliers.
Supplier diversity is sure to be a hot topic at ProcureCon Connect 2023, being held in June, at the Rancho Bernardo Inn, San Diego, CA.
Download the agenda today for more information and insights.