Breaking through to the big time

  • 9-8-2011

There is no doubt that entrepreneurship is a diverse domain, with ethnic minorities engaging in enterprise and self-employment at rates similar to the rest of the population. The problem is that far fewer of these businesses supply large companies compared to their white competitors.

There is no doubt that entrepreneurship is a diverse domain, with ethnic minorities engaging in enterprise and self-employment at rates similar to the rest of the population. The problem is that far fewer of these businesses supply large companies compared to their white competitors.

In fact, research shows that many ethnic minority businesses rely completely or heavily on co-ethnic minority markets. In other words, they supply and trade with businesses owned by people from the same ethnic group.

Professor Monder Ram, director of the Centre for Research into Ethnic Minority Entrepreneurship at De Montford University, believes part of the reason is that ethnic minority-owned firms tend to be smaller than enterprises run by white people. "This means they generally have less resources in management and finance, both of which are important factors in supplying larger contractors," he says.

In addition, some black and Asian business owners may perceive discrimination outside their communities. They may also find it easier to build up contacts within their own communities. But, points out Professor Ram, while this concentration of activity may offer a clear focus for business support activity, it also limits the potential for growth and creates vulnerability as a result of over-dependence on specific markets.

The large businesses that these black and Asian businesses have the potential to supply to also lose out, according to Race for Opportunity, a network of public and private organisations which focus on race and diversity. After all, there is a clear business case for supplier diversity, explains director Sandra Kerr. "There are potential economic benefits to large organisations from purchasing locally, for example. Many local businesses can provide goods and services to major private purchasers at better value and with greater efficiency."

Meanwhile, public sector organisations that fail to focus on supplier diversity are breaking the law. "The Race Relations Amendment Act (2000) requires public authorities to take account of racial equality in their various activities and functions including purchasing. So there's an actual duty there," explains Kerr.

She adds that while many minority-owned businesses are classed as SMEs (small and medium-sized enterprises), some are growing so fast that they are set to become tomorrow's big businesses. "My message to big organisations both in the private and public sector is that it's very unwise to close the door on them. One day in the not-too-distant future, they may find themselves begging to do business with them."

In recognition of these factors, a small but growing number of organisations are introducing supplier diversity initiatives that aim to increase the number of ethnic minority-owned businesses that supply their goods and services. According to Kerr, these organisations are reaping the benefits.

Specifically, they are enjoying improved quality and enhanced service, both at a lower price, as a result of ethnic minority businesses having lower costs compared to large suppliers. Other benefits include a more competitive supplier base, better access to strategically important market segments, as well as better business solutions and second-sourcing alternatives.

BT is one of these organisations. "We have long recognised that focusing on diversity is essential if we are to create competitive advantage," says Pam Farmer, BT's equality and diversity manager. "But the one we hadn't looked at until recently was the supply chain."

BT began addressing the issue with a fairly small programme. "This involved inviting small ethnic minority suppliers to come and learn about how to supply to BT," she explains. "There is never any promise of a contract because that would be unfair. But we felt that an awareness programme of how we work and who the buyers are would, at the very least, put them on an equal footing to other more confident suppliers. It is working well and our next step is to develop the programme further."

In many ways, says Farmer, BT is acting in anticipation of the Race Relations Amendment Act (2000) being used more forcefully in the future. "The act is relatively new at the moment, but once it is fully understood and used, it will inevitably have a ripple effect," she says. "At that point, public sector organisations will start saying to companies like us who are their suppliers, 'How many suppliers do you have from ethnic minorities?' If we don't have any or many, they will have the right to shop elsewhere. That could have a huge effect on businesses like ours."

HBOS is another organisation realising the benefits of taking a proactive approach to its supply chain management. As a company that spends over £2bn every year with more than 20,000 suppliers, it has implemented a number of activities designed to build excellent supplier relationships which add maximum value. Included in these activities is HBOS's Supplier Diversity Policy.

"At HBOS, we want to provide opportunities for suppliers to use their specialist knowledge to offer us the best value," says Ian Taylor, HBOS's head of group procurement. "This means not only encouraging all suppliers and business partners to aspire to the same standards as we do, but also selecting all our suppliers through structured, non-discriminatory and competitive processes."

Earlier this year, the company commissioned research to gain a better understanding of the existing relationship between HBOS and its suppliers and to find out their views on the company's approach to diversity and its corporate responsibility agenda.

Among the other things that large organisations are doing to improve supplier diversity is business-to-business mentoring. Richard Neville, head of employee relations at Yorkshire Water, says: "We have just started a programme called Building Bridges that involves employees - principally managers - from our company acting as mentors for minority ethnic people running small businesses. It will run for a 12-month period and our employees will essentially help them to expand their businesses through mentoring on issues like finance, marketing and customer relations."

Yorkshire Water's programme also consists of regular master classes where all the people running small businesses meet for a class on a particular subject like employment law or procurement. "Members of the ethnic minority SME community often find it difficult to break into large corporate business because they are not familiar with the sometimes complex procurement procedures," he explains.

According to Neville, Yorkshire Water has, for a long time, been tackling the issue of diversity in its workforce. "We now want to have a bigger impact in terms of diversity in our community. In fact, the two very much go together. We don't have as high a profile as we'd like in Bradford, for example, with many people not even aware that we are located in the area. So we lose out from them not applying for jobs. This programme, we hope, will raise our profile, as well as our commitment to diversity."

Another way in which big businesses are improving supplier diversity is ensuring tender documents are user friendly. Taking into account cultural considerations is also important - for example, by being aware of key cultural festivals when asking for tenders to be met. Other large companies are using networks such as Business Link, local chambers of commerce and local authorities to obtain data on ethnic minority businesses regionally.

Sonia Gill, whose work focuses on improving supplier diversity issues in the West Midlands, welcomes the move that big organisations are starting to make, but believes we still have a long way to go. "One of the problems is that each geographical area around the country is doing its own thing," she says. "That's why I'm trying to work towards a more nationwide approach."

Bryony White, England director of Shell LiveWIRE, an organisation that helps young people start up their own businesses, agrees that there is still much to be done. "I still think some ethnic minority suppliers are used tokenistically as an excuse for large businesses to say, 'Look, we are doing something', when they are really not doing enough. I also think that supplier diversity is an issue that all sized businesses should be thinking about, not just the big ones," she says.

White adds that it's important not to treat ethnic minority entrepreneurs as a homogenous group. "Anecdotally, we know that the Asian community has less trouble than the African-Caribbean community in supplying other companies, for example. Whatever the reasons for this, it's important for companies not to focus on one group at the expense of the another."

Jasvinder Bal, whose recruitment company Balfor Recruitment Partnership, was started up in 1997, says he has never suffered problems in supplying other organisations. Bal, who is of Asian descent, explains: "We do what we do very well and business comes in from all sized organisations as a result. I can't say I've ever experienced any problems."

'I was asked if I was picking up a parcel'

Craig Cordice is creator of One Spare Chair Creative, a design solutions provider. He grew up in Tottenham to a Welsh mother of mixed parentage and a Caribbean father

One Spare Chair boasts an admirable list of clients ranging from the CPS to Kiss FM, but it wasn't always like that.

It was in the late Eighties, when I established my first business with three white colleagues, that I realised how much my ethnicity mattered. On one occasion, I turned up to a meeting and was asked if I was there to pick up a parcel. It was more fruitful to send my white partner along to certain meetings, even if he was pitching my ideas.

Later, when I had set up my own business, I had even more doors shut in my face. It has been through sheer determination and using other people's assistance that I've managed to break through. It seems that organisations are just not prepared to take a leap of faith and recognise talent in different places.

One of our recent assignments was to work in partnership with Bartlett Scott Edgar on a branding concept for the Metropolitan Police. It took some time before we found the right person who could use their influence to make it happen. If we had approached it in the usual fashion, we wouldn't have been given a look in.

I think businesses should challenge the attitudes and self-perceptions that cause people to feel the business world is inaccessible and to make them believe that they will be given the opportunity to prove what they can do.

Because I feel so strongly about everyone getting a fair chance, One Spare Chair has recently set up a training centre which will focus on nurturing talent in the creative sector, an industry that now accounts for more than half of the local economy. We would like businesses to support this programme as far as possible to show that they are serious about nurturing talent.

Everyone is always looking for the next best thing and we want business to wake up to the fact that they must play a role in this.

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