GrowthPacts: Tomorrow's Success Begins Today

Author(s):

Tom Nesby
Tom Nesby, President & CEO, Nesby & Associates, Inc. Seattle, WA 98109, 206/623-2403

81st Annual International Conference Proceedings - 1996 - Chicago, IL

The Issues. Today, global expansion and business transformation are catalysts for change behind virtually every company. The ultimate challenge to MBEs' growth and financial success is their ability to participate in this global expansion and corporate transformation. The challenge for purchasing personnel is to effectively integrate MBEs into their organization's existing structure in spite of the shrinking supplier base. GrowthPacts are viable alternatives to ensure long-term involvement of MBEs, provide solutions to vendor base reduction, and increase profitability in this new global economy.

What Is A GrowthPact? A GrowthPact is a mutual agreement between corporations, first tier suppliers, and MBEs to transfer critical knowledge among them. The three parties involved commit the necessary resources to develop specific execution plans for MBE firms to experience sustainable growth and financial success.

GrowthPacts are the next step beyond strategic alliances, partnering, and mentor/protege programs; they enable MBE firms to stay competitive by working in conjunction with corporations and first tier suppliers in a win-win-win arrangement that results in increased competitive advantage for all.

Key Topics. Several elements comprise the process of developing Growth Pacts.

These include:

  • Requirements and expectations of key stakeholders involved in GrowthPacts;
  • Differences and benefits of mentor/protege programs, partnering, strategic alliances, and GrowthPacts;
  • Steps for developing successful GrowthPacts;
  • Using GrowthPacts as viable alternatives for organizations. (Figure not available in this text-only version of the Proceedings.)

Customer Organization Role.
The role of the customer organization is to clearly communicate corporate expectations on: vision, plans for growth, distribution, quality, marketing focus, and value of supplier diversity. The goal is for the participating MBE and first tier supplier to completely understand customer expectations through 3-way dialogue.

First Tier Supplier Role.
The first tier supplier's role is to provide continuous transfer of pertinent knowledge and information to raise MBE's competitive position in areas such as: the customer's corporate culture, the unwritten rules of success within the corporation, technology, quality, key personnel to know, and internal/external pressures that affect delivery of products and services.

Second Tier MBE Supplier Role.
The second tier MBE supplier role is to fully accept the input offered by the corporate and first tier suppliers and incorporate the appropriate strategies to raise their competitive position in: management controls, financing, accounting, marketing, quality, technology, responsiveness, and customer relations.

In order for these key stakeholders to generate a meaningful relationship, essential relationship norms must be established. The norms may include, but are not limited to:

  • Willingness to disclose pertinent information that will enhance the relationship;
  • Clear written and verbal communication patterns;
  • A desire to "style-flex" to accommodate the others' behavioral and communication styles;
  • Willingness to explore cultural differences and their influence on work relationships;
  • Honest assessment of stakeholders' competencies and shortcomings;
  • Patience;
  • Diligent follow-up.

Successful relationships require an atmosphere of trust and commonality. The goal of each stakeholder is to demonstrate behavior that facilitates mutual trust and admiration.

Comparison Of Key "Features" Of MBE Procurement Strategies.

Mentor/Protege Partnering
Limited advancement Medium advancement
Behavior, operations and/or results are modified (improved), but expertise is not significantly transferred to MBE Knowledge tends not to be transferred Project specific
Focus is on developing core competencies of MBE firm Two-way relationship between organization and MBE
Optional or voluntary Short-term relationships
Limited immediate financial impact Increased financial impact
Less formal in some cases  
Length of relationship varies  
Strategic Alliances GrowthPacts
High advancement Radical advancement
Limited knowledge transferred (in some cases) Extensive transfer of knowledge
Focus is on increased sales and new market segments Focus is on raising competitive position and growth of MBE
Parties share in financial success distinct All stakeholders benefit for competitive advantages (e.g. Royalties and intellectual or patent market segmentation, expanded rights complexities distribution, successful track record)
Name recognition  
Increased profits Growth for MBE is specifically planned for optimum success
Relationships can be tenuous  
Relationship is strong and solid Leads to long term financial success

The Seven Steps Of Forming A GrowthPact: The following steps are delineated in the proper order for developing a successful GrowthPact:

  1. Identify organizations that are best suited for GrowthPacts These will include customer organizations that are: forming strategic partnering agreements with prime suppliers; consolidating their vendor base; fulfilling compliance requirements due to disparity studies; incorporating supplier diversity goals and initiatives; and reengineering their purchasing and procurement functions.

    First tier (prime) suppliers that are best suited for GrowthPacts are: reducing their operating costs; attempting to raise their images in diverse communities; incorporating supplier diversity goals and initiatives; and forming strategic agreements with major corporations and organizations.

    Second tier (MBE) suppliers should be: offering unique solutions to problems faced by the customer organization and first tier supplier; motivated to grow their business; well established with adequate capital; willing to invest time, human resources, and money to develop a prosperous business relationship; ready to reengineer their operations if necessary to successfully respond to an increased number of orders.

  2. Conduct an Executive level briefing to clarify the role of the key stakeholders, the nature of the relationship, and the dimensions of GrowthPacts. The briefing will also determine areas of opportunity for MBE development and long and short range corporate needs.
  3. Conduct a "visioning" workshop for the customer organization and first tier supplier executives. The workshop will address the best approaches for sharing and gathering data from stakeholders, launching the process within stakeholders' organizations, and the best methods for determining the process investment needs.
  4. Develop an application and selection process for MBEs to determine the MBEs' current capabilities, offerings, financial strength, and vision and goals. Candidates would be selected by a panel composed of the Executive Director of the regional minority purchasing council, and stakeholders' representatives.
  5. Provide solution-based education to key stakeholders on the development of successful GrowthPacts. The training will include the following elements: specific performance measure and reporting systems; clarification of roles for each stakeholder; techniques to bridge cultural gaps; communication methods for multicultural contexts; techniques for successful transfer of knowledge and expertise; and cross cultural conflict resolution.
  6. Formulate strategic plans to develop the MBE and hold regular meetings between the MBE, customer organization, and first tier supplier to determine the best methods for executing the strategies.
  7. Conduct a follow up session to evaluate the MBE's growth, identify impediments to continued growth, and formulate solutions to those impediments. The session will also reinforce the skills learned in the process, and generate high levels of enthusiasm and motivation for future success of the GrowthPact.

Why Are GrowthPacts A Viable Solution For Organizations? GrowthPacts offer all parties involved an opportunity to develop a relationship that results in increased growth and competitive advantage.

The purchasing departments of customer organizations are provided with expanded alternatives to their existing vendor base. In addition, the cost of identifying qualified MBEs and meeting MBE purchasing goals is alleviated by involving local minority purchasing councils in the process.

First tier suppliers are able to expand their revenue channels by tapping into underutilized market segments which, in turn, raises their public image/perception in those communities.

MBEs benefit from their involvement in GrowthPacts by raising their level of competency and efficiency. Focusing on specific areas that affect their competitive position allows them to increase their presence in the business community and gives them the opportunity to compete in an otherwise difficult-to-enter environment.

Overall, these three-tiered relationships work to satisfy government requirements and diversity initiatives while simultaneously providing economic infusion into communities that are often overlooked. The win-win-win strategy of GrowthPacts will stimulate growth in our economy leading to an increase in American businesses' competitive advantage.


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