Increase supplier diversity
Supplier diversity encompasses various types of diverse suppliers, such as small businesses, those located in historically underutilized areas, and those with majority ownership by women, underrepresented racial groups, veterans, LGBTQ individuals, or people with disabilities. It is crucial for law firms to prioritize supplier diversity as it is valued by their corporate clients. However, despite the potential benefits, 50 percent of surveyed law firm procurement leaders reported taking no formal steps to increase diversity among their suppliers, indicating a need for greater consideration and intentional promotion of inclusion in procurement practices.
Why increase supplier diversity: client demands and better results
Research has shown that diverse suppliers offer a range of benefits, including:
- an untapped well of creativity, as diverse perspectives naturally give rise to new solutions;
- greater resilience to supply chain disruptions through increased sourcing options;
- greater agility and adaptability by avoiding stagnant or overused suppliers; and
- decreased costs through greater competition and a wider pool of potential vendors
Increasing supplier diversity is a trend that will continue regardless of the nation’s overall economic outlook.
How: intentional inclusion and advocacy
To increase supplier diversity, procurement leaders need to actively seek out diverse or underutilized options, avoid relying solely on personal networks, and conduct research to identify and engage with diverse suppliers. While ensuring that general vendor governance criteria are met, procurement should avoid writing criteria that disproportionately exclude smaller vendors or suppliers. They should expand their vendor base by advocating for diverse suppliers, providing clear feedback, offering mentorship, supporting certification processes, and creating training programs in collaboration with other organizations.
Increasing supplier diversity requires continuous thought and intentional decisions about contracts and supplier relationships.
Where to start: three levels of maturity
To improve supplier diversity at your law firm, identify which of the following three tiers of maturity you have attained and set your sights on progressing.
- Level 1: Encourage use of diverse suppliers through policies. Establish a formalized supplier diversity program. Create a diversity policy for external vendors and communicate that policy, as well as any related processes, to your staff.
- Level 2: Build on policy to achieve 3 percent diverse spending. First, gain an understanding of your current supplier base and its diversity. Track performance metrics for your current supplier diversity and tailor your processes and communications to reach more diverse suppliers.
- Level 3: Create a goals-based program to increase diversity. If your firm is at 3 percent diverse spending, you might set a goal for 5 percent diversity in the next three years. Design a strategic plan to ensure that you accomplish that goal by developing a pipeline for new diverse suppliers as well as partnership and growth opportunities for prospective diverse vendors. Make sure you are communicating consistently with your suppliers about your diversity initiatives.
Promote flexibility and adaptability
The past year has presented organizations, including law firms, with unprecedented challenges and the need for agile responses. Remote work, disrupted supply chains, and societal changes have reshaped priorities, emphasizing the importance of remote meeting technology, cybersecurity protocols, and adaptability in vendor relationships to foster an agile mindset.
Initial focus: reviewing and adjusting agreements
- Procurement should review agreements to establish knowledge of existing rights and obligations and introduce flexibility where possible.
- Mapping existing agreements against the firm's needs and priorities allows for evaluation, renegotiation, and identification of areas for flexibility and scalability, including realignment of services and recurring cost savings.
2020 has demonstrated that law firms must be prepared to instantly adapt to changing circumstances, from the way they begin their vendor relationships through their preparations for change, toward the goal of developing an agile mindset.
Execution: preparation without overcommitting
Prepare for possible outcomes but hold off on an irreversible course of action until your path is confirmed or at least clearer. From local governments to schools to businesses, decisions have changed on a daily and sometimes hourly basis this year.
Continue to centralize the procurement function
Centralization of the procurement function remains a key operational strategy for law firms. By consolidating procurement into a unified function, firms can realize a number of benefits, including:
- Cost control. Firms with a clearly defined, centralized procurement function that is thoughtfully aligned with the firm’s overall strategic goals are in a better position to weather economic turbulence.
- Risk mitigation. All spend introduces potential risk. A centralized procurement function can coordinate efforts to vet vendors and—more importantly—build monitoring and mitigation measures into their contracts. Procurement can also track vendor risk management against a standardized scale, thus identifying and discontinuing service from vendors that pose an unnecessary risk.
- Coordination with the firm’s overall strategic goals. Procurement is in a position to ensure that the firm’s contracts and services support outstanding service delivery by making the right tools available to the right employees at the right time.
- Support supplier diversity initiatives. As noted in the first section, a centralized procurement function can also develop the intentionality and advocacy needed to achieve diversity goals.
- Promote flexibility and adaptability. By centralizing knowledge and decision-making about contracts and service relationships, procurement can position the organization as a whole to rapidly pivot and adapt to changing circumstances.
Centralizing procurement creates synergistic benefits by guaranteeing that the right hand knows exactly what the left hand is doing, thus enabling better coordination between its various functions. There are three main approaches to increasing the centralization of the procurement function.
- Assimilate existing resources. The firm may choose to consolidate its existing internal resources into one procurement office. Procurement is in a position to ensure that the firm’s contracts and services support outstanding service delivery by making the right tools available to the right employees at the right time.
- Build a new department from scratch. Rather than rearranging current resources, the firm may create a new department staffed entirely by new hires with specific skill sets. While this approach is logistically complex and requires a clear vision of the intended result, it can produce outstanding results.
- Outsource the procurement function to a managed service provider. By transferring the traditional cost center of procurement to an outside service provider that uses an agile staffing model, firms can achieve efficiency, scalability and cost containment along with improved diversity and risk mitigation.
For the full report, download the PDF.
- Business operations
- Cost & spend management
- Financial management
- Show all 5
