Growth Pacts : Tomorrow's Success Begins Today
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
- 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
- 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.
- 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
- Less formal in some cases
- Length of relationship varies
- Medium advancement
- Knowledge tend not to be
- Project specific
- Two-way relationship between
organization and MBE
- Short-term relationships
- Increased financial impact
- High advancement
- Limited knowledge transferred
(in some cases)
- Focus is on increased sales and
new market segments
- Parties share in financial
- Royalties and intellectual or
patent rights complexities
- Name recognition
- Increased profits
- Relationships can be tenuous
- 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
- 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:
- 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
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.
- Conduct an Executive level briefing to clarify the role of the key
stakeholders, the nature of the relationship, and the dimensions of
- 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.
- Develop a work plan and budget to be approved by key stakeholders.
- 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.
- 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.
- 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
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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