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Growth Pacts : Tomorrow's Success Begins Today

Author(s):

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

80th Annual International Conference Proceedings - 1995 - Anaheim, California

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/prot­g­ 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 GrowthPacts. These include:

  • Requirements and expectations of key stakeholders involved in GrowthPacts;
  • Differences and benefits of mentor/prot­g­ programs, partnering, strategic alliances, and GrowthPacts;
  • Steps for developing successful GrowthPacts;
  • Using GrowthPacts as viable alternatives for organizations.
  • Who Is Involved In a GrowthPact ?
  • Key Stakeholders in GrowthPacts

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, etc.

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 its competitive position in: management controls, financing, accounting, marketing, quality, technology, responsiveness, customer relations etc.

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;
  • Utilizing clear written and verbal communication patterns;
  • Demonstrating 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;
  • Demonstrating 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/Prot­g­

  • Limited advancement
  • Behavior, operations and/or results are modified (improved), but expertise is not signi- ficantly transferred to MBE
  • Focus is on developing core competencies of MBE firm
  • Optional or voluntary
  • Limited immediate financial impact
  • Less formal in some cases
  • Length of relationship varies

Partnering

  • Medium advancement
  • Knowledge tend not to be transferred
  • Project specific
  • Two-way relationship between organization and MBE
  • Short-term relationships
  • Increased financial impact

Strategic Alliances

  • High advancement
  • Limited knowledge transferred (in some cases)
  • Focus is on increased sales and new market segments
  • Parties share in financial success
  • Royalties and intellectual or patent rights complexities
  • Name recognition
  • Increased profits
  • Relationships can be tenuous

GrowthPacts

  • Radical advancement
  • Extensive transfer of knowledge
  • Focus is on raising competitive position and growth of MBE
  • All stakeholders benefit for distinct competitive advantages (e.g. market segmentation, expanded distribution, successful track record)
  • Growth for MBE is specifically planned for optimum success
  • 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 .
  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 quantitative and qualitative data from stakeholders and the best methods for determining the process investment needs.
  4. Develop a work plan and budget to be approved by key stakeholders.
  5. Conduct an organizational culture analysis to assess the behaviors and conditions that will affect GrowthPact success. The findings will be used to identify pressure points and critical success factors and construct an agenda for educating the procurement and non traditional signature buyers throughout the customer organization.
  6. Orient customer organizations, purchasing managers, and local minority purchasing councils on the process. It is helpful to enlist the assistance of local minority purchasing councils to identify qualified MBEs to be involved in the GrowthPacts process.
  7. 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.

Some organizations may already have some of the above steps in place, thus eliminating the need for implementing them.

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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