CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

Why your corporate supplier diversity efforts are not going as well as you think

January 25, 2022, 8:45 PM UTC

Increasing the diversity within a company’s supplier and professional services network seems like a quick and easy way to boost diversity numbers, share the corporate spend wealth, leverage the power of vibrant new perspectives, and join forces with other companies with similar ideas about inclusion and social impact. And, it’s popular! According to a 2021 survey of 100 large global companies from The Hackett Group, they expect diversity supply spend to increase by 50% by 2025. “While supplier diversity has been a hot topic since mid-2020, our volume of inquiries on the topic exploded by 500% last year,” reported Gartner earlier this month.

But, says former GolinHarris Chief Creative and Community Officer Caroline Dettman, it’s “easy to say, harder to do.”

Dettman, along with former Golin global marketing executive director Erin Gallagher, and former Pepsico Chief Global D&I officer, Pamela Culpepper, is the co-founder of Have Her Back, a still newish consultancy that helps big companies chart a path to equitable inclusion. 

But it turns out, they were facing one of their own. 

The big looming contract known as Master Service Agreement or MSA, is a foundational document typically used by professional services firms—like marketing, consulting, and financial services companies—to work effectively with clients over a long term. It sets some basic terms of engagement and eliminates the need to negotiate over individual phases of a project, multiple projects or a larger scope of work.

But they are also used by very large companies to engage with suppliers of all kinds. And that’s where bias and big legalese can cause unintended problems.  

“The MSA is meant to obviously mitigate risk when companies are bringing in other companies to work for them. But the reality is that they’ve been designed for larger companies,” says Gallagher. So, for approved and vetted smaller firms that would fit a diverse supplier profile, this can mean leviathan-sized hurdles buried in the fine print: things like outsized insurance and cybersecurity requirements, or onerous payment terms. “We were facing it, other businesses we knew were dealing with it, and we wanted to understand the scope of the problem,” Gallagher explains.

The HHB team commissioned research which informs their new report, The State of Supplier Diversity: Opportunities – and Headwinds – to Achieving Women & Diverse Supplier Goals. Of the 400 supplier-network-ready and qualified small businesses they surveyed, some 64% reported feeling that MSAs didn’t reflect the realities of their business, and half reported walking away from opportunities with larger companies due to contract terms, conditions, or complexity.

It has been an issue for Jennifer Risi, the founder of the Sway Effect, a network of diversity-minded communication agencies. 

“We see things in RFPs [request for proposals] and MSAs all the time that aren’t fair,” says the former head of communications for Ogilvy. “I left a big agency to have more simplified agreements. I’m still being given 50-page documents and have to edit them line by line.” A common fix is money: smaller companies can’t always afford to invest in developing projects without a more accommodating compensation schedule. “As a woman-owned business, flexible payment terms let me build my business and grow my team,” she says. “The good news is that brands who get it will work with us.”

But if a big company isn’t responsive, the damage works both ways.  

The burden on the small business who is forced to walk away from a long-sought relationship is clear. “But we know there’s a financial cost to a big company when an existing supplier relationship chooses to leave,” says Gallagher. “The massive service agreements that companies are using to bring on [diverse suppliers] is causing real inequities that put everyone in the relationship at risk.”

This includes the opportunity cost of unmet diversity goals. 

HHB has created an equity council of experts to study the MSA issue and identify ways to modernize and simplify the contracts while addressing normal business concerns. “As more and more large companies want to diversify suppliers to show commitment to small and minority owned business vendors… it’s important that they learn to easily participate in this process,” says Dettman.

So, that leads me back to you. What do you know about your company’s supplier diversity efforts? Met anyone who has amended an MSA? Let us know, so we can share best practices.

Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com

This edition of raceAhead was edited by Wandy Felicita Ortiz.

On Point

Cash payments to impoverished mothers lead to better infant health, specifically brain activity that indicates stronger cognitive development. One related study offered participants cash stipends for monitoring the first year of a baby’s life. If the impacts of that study hold up—which will take time and more study to determine—then could enormous policy implications going forward. “This is a big scientific finding,” said neuroscientist Martha J. Farah, who reviewed the study for the Proceedings of the National Academy of Sciences.“It’s proof that just giving the families more money, even a modest amount of more money, leads to better brain development.”
New York Times

Black farmers in Texas are facing a challenge to federal aid The challenge, which comes from the state agriculture commissioner, will block the farmers from receiving Congressionally approved support for “socially disadvantaged farmers and ranchers,” designed to cover their debts and offer a form of reparations for historically discriminatory treatment from the Department of Agriculture. But many white litigants, including Texas Agriculture Commissioner Sid Miller, are stepping in to challenge the law.  In 1920, there were over 925,000 Black farmers in the U.S. according to the U.S. Department of Agriculture. Now numbering less than 18,500. In the last century, Black farming families have lost more than 12 million acres of farmland over the past century due to racist government policies.
Texas Tribune

Peter Dinklage to Snow White: Drop dead Really, it’s the new live-action reboot that Disney is planned for Snow White and the Seven Dwarfs that's got him so angry. Dinklage did not hold back during a recent appearance on Marc Maron’s “WTF” podcast. “There’s a lot of hypocrisy going on,” Dinklage said. “Literally no offense to anyone, but I was a little taken aback when they were very proud to cast a Latina actress as Snow White,” he said. “You’re progressive in one way but then you’re still making that fucking backwards story about seven dwarfs living in a cave together, what the fuck are you doing, man? Have I done nothing to advance the cause from my soap box?”
Variety

On Background

Save the date: How to talk to your boss about race Y-Vonne Hutchison is one of my favorite thinkers on race and equity, an early raceAhead supporter, and the the CEO and founder of ReadySet, a diversity and inclusion training firm. Her new book, How to Talk To Your Boss About Race, promised to build on years of work in the field, helping employees have effective conversations with powerful leaders and live to make a difference. The TechEquity Collaborative is hosting a free webinar with Hutchinson on Feb 2, 2022 at noon Pacific Time. Y-Vonne is a treasure, please share widely.

Mood board

Nina Simone, a FOREVER mood.
Tom Copi—Michael Ochs Archives via Getty Images

This is the web version of raceAhead, Fortune’s daily newsletter on race, culture, and inclusive leadership. To get it delivered daily to your inbox, sign up here