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CVM Supplier Diversity Blog

Discussing the Benefits of a Supplier Diversity Program with Your CFO

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The chief financial officer (CFO) is the steward of any organization’s finances. This senior executive, charged with duties that include financial planning, maintaining cash flow, managing financial risk, leading budget management, forecasting, and record-keeping, likely will have a say in all major decisions of the company.

As procurement and supplier diversity managers know, communicating with the CFO on the benefits of supplier diversity programs and initiatives is essential to success. Fully articulating the business case for the supplier diversity program to the CFO, along with other top executives, including the CEO, is always a good idea. The aim is to get buy-in for initiatives from the highest levels of the organization the benefits of business and cultural diversity to the organization.

CFOs are financial numbers people. For them, the numbers do not lie. Getting the CFO to understand the benefits of supply-chain diversity, both in tangible and intangible ways, can lead not only to supplier diversity priorities being funded, but also to buy-in with the entire executive team.

In communicating with the CFO, first articulate the business case for supplier diversity. The business case outlines the benefits the organization can derive from developing or expanding a supplier diversity program and should be rooted in the tangibles, or the numbers. Some tangible benefits to articulate include:

  • Documenting cost savings to the company: If there is one thing that characterizes diverse suppliers, it is that, by the very nature of their existence, they must be “leaner and meaner.” Often, because of operational efficiency, the cost of doing business with diverse suppliers can be less, thus allowing some costs to be absorbed by creating savings within supply chain. These diverse suppliers make their mark on innovation and flexibility—and may just create the opportunity to inject new ideas into the company.
  • Explaining demographic shifts: By mid-century, the nation’s majority population is expected to comprise racial and ethnic minority groups. If the company plans to expand its markets in the future, it will need to address these groups directly. Supplier diversity presents a conduit in this effort because when diverse suppliers are supported, economic activity is generated in the communities where customers live.
  • Highlighting the metrics: Supplier diversity is a business function in which outcomes can be measured. Show the CFO how the program is creating economic benefit to the company in all areas within the organization that the program touches. Be sure to discuss metrics such as total dollars supported by diverse supplier procurement, documented successful procurement engagements, and the impact of Tier 2 spend reporting, because this spend tends to reach the smaller diverse suppliers. For more information, see this blog by Molly Larsen of CVM Solutions.
  • Articulating the needs of the program: Devise a budget for the CFO to justify the expenditures the company will need to make available to support the supplier diversity effort. For instance, will full-time equivalents be needed to carry out the process and how many? What types of support staff are needed for answering the phones and correspondence? How much travel to industry functions and visits to diverse suppliers are necessary, and how much for marketing the program? In addition, outline costs and functions for services to be outsourced when the incumbent staff needs help with components of the program. For instance, outsourcing could include Tier 2 reporting or data enrichment. When articulating the budget, be sure to explain what the return on investment will be in specific numbers the CFO understands.

In an article from several years ago that still resonates today, author, advocate, and entrepreneur Dr. Melvin Gravely, who leads an organization called the Institute for Entrepreneurial Thinking, says that despite some challenges, “a case for supplier diversity can be built.” According to Gravely, lowering cost, the ability to get more business, and doing well by doing good are three primary benefits for building the business case.

In another article on justifying the business case, supplier diversity executive Brian Tippens offered on LinkedIn how to articulate an intangible benefit of supplier diversity. Tippens writes that supplier diversity managers “must prioritize and craft the messaging in a targeted way. In doing so, it is important to appreciate the fact that supplier diversity programs impact stakeholders well outside the four walls of the procurement organization.”

Senior executives such as CFOs will understand this sentiment well. Crafting messaging around the program will also serve to address corporate objectives, including that companies must  be responsible corporate citizens by supporting communities in which they do business. Supplier diversity is tailor-made for such a sentiment.

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For over a decade CVM's mission has remained unchanged: lead the transformation of Supplier Diversity program management and support Supplier Diversity programs. CVM helps corporate supplier diversity programs in every stage of their evolution; from those that are just getting started, to the most advanced, world-class programs. Equipped with unparalleled data intelligence, superior technology and expertise guidance, businesses can effectively establish and advance their Supplier Diversity initiatives.