Why companies should contract with diverse suppliers

When a company contracts with diverse suppliers, they not only boost their businesses, they also create economic opportunities in communities where they work and live. The effort can reach far beyond typical suppliers and vendors – don’t forget outside attorneys and accountants, and even bond issuers. Get as creative as possible to close the wealth gap.

So says Cheryl Harris, head of business diversity and senior vice president, sourcing and procurement for The Allstate Corp. based in Chicago. Harris has helped Allstate pave the way to creating opportunities for diverse firms, which has led to the insurance company spending more than $366 million with minority-, woman-, veteran-, LGBTQ- and disabled-owned businesses in 2021, compared to $235 million in 2020. Under her leadership, and with direction from Allstate’s CEO, Tom Wilson, Allstate has set goals to increase spending on diverse suppliers to at least $470 million by 2025.

She currently serves on the board of the Women’s Business Enterprise National Council and remains involved with her alma mater, Florida A&M, chairing its Business and Industry Cluster where she actively recruits corporations to partner with FAMU to make progress against their respective diversity, equity and inclusion priorities.

Harris sat down with Benefits Pro to share her best practices for both procurement teams and diverse suppliers.

Katie Kuehner-Hebert: What’s your advice for companies on how to procure more minority and women small business owners to be suppliers?

I’ve been doing this work for about 32 years, working in and with many other organizations. I have to say when looking at how companies can advance the role they play in closing the wealth gap, it’s very important for them to take a step back and understand what they’re spending money on and how they want to make an impact.

At Allstate, we’re working to shift the wealth profile by addressing wealth disparities by increasing our spending with diverse suppliers.

There are a number of ways to measure impact. First, you can measure direct spend with certified and non-certified diverse suppliers, including businesses owned by minorities, women, LGBTQ, veterans, and people with disabilities. By really examining your corporate spending and ability to influence supplier selection across these classifications, know that you can make a difference.

The second level of impact, which is defined as Tier 2 spend, is tracking how much your non-diverse supplier’s contract with diverse suppliers, as part of the expectations you set for them in addressing wealth disparities. We’ve been on this mission for years, and have been encouraging very large and medium-sized majority-owned companies to create their own supplier diversity programs to join us in our journey.

We’re also taking a look at who is sitting at the table at these companies and how many diverse employees they have. This also helps fuel economic production through job creation in the communities where the hired employees work and live.

For example, we have relationships and contracts with preferred legal partners. We want them to not just have diverse paralegals, but also diverse equity partners and managers at the table representing Allstate. We hold them accountable, and it’s been a very successful program. We’re now expanding this approach and accountability to other professional services categories.

We’re looking at other ways we can have additional impact. We took a stand to expand diversity on Wall Street by issuing $1.2 billion of senior notes through a syndicate of exclusively minority, women, and veteran -owned business enterprises. It’s the first of its type ever done in the US. It’s not necessarily a procurement-related supplier initiative, but by partnering with those brokers and others, we’re able to create additional impact in the community.

KKH: What’s your advice for diverse suppliers wanting more contracts with companies?

They really need to study the organization that they are prospecting, because each organization defines impact in so many different ways and so it’s critical to understand what’s important to them.

Try to get deeper into the organization, for instance – try to get more information about their culture, their priorities, noting some of this information is publicly available, such as in earnings calls. Also seek out information about how the company connects with suppliers.

For example, does the organization have a supplier diversity exchange? Since 2007, Allstate has hosted an annual supplier diversity business exchange, pivoting to virtual forums because of COVID. We believe providing a forum for our business leaders, budget holders and project managers to become acquainted is absolutely necessary to foster relationships and trust building between the parties. Diverse companies should be looking for those opportunities.

Diverse suppliers also need to understand how supplier selection decisions are made, which can vary across different organizations. Also understand what will drive their decision – price, cycle time, quality, innovation, service – and who will make the final decision, and tailor their proposal and responses appropriately.

In all cases, diverse suppliers should be prepared to explain why they want to do business with the organization. They should be able to articulate what delineates them from other diverse firms or any other company, making the case for why the organization should want to do business with them. If it’s a commoditized business, then price is a factor, but also demonstrating how they differentiate their service will be incredibly important.

At Allstate, we partner with certifying organizations to offer an introduction into the corporate procurement process, as we have met with diverse entrepreneurs that have never worked in the corporate world and haven’t been engaged in the decision-making process within corporate organizations. They may not know the RFP process, the selected weighted criteria or even the contracting process.

Diverse businesses should reach out to certifying organizations that focus on creating opportunities for them, including providing training in the procurement process, and who knows, they may find that members of Allstate’s procurement team or other organizations are conducting the training.

Diverse companies should also seek out mentoring opportunities. We believe we have a responsibility to help support all diverse businesses. By making them stronger, scalable and sustainable, it then creates opportunities for those businesses to have economic impact in the communities where they are located.

We always make ourselves available – not only to all diverse businesses, but also to our peers. We believe that by partnering with other large organizations committed to addressing the wealth disparity, we will make the world a better place.