News and views from the award-winning author of the Class H Trilogy: AMERICA LIBRE, HOUSE DIVIDED and PANCHO LAND

Saturday, March 28, 2009

Will this recession hurt minority firms more?

Across the United States, companies large and small are cutting payrolls - and one of the first groups getting the ax are employees in supplier diversity positions.  Over the last two decades, most large U.S. corporations created departments to nurture relationships with minority and women-owned businesses. But many CEOs now see this commitment as a luxury they can no longer afford. However, some proponents of minority enterprises believe the consequences of these cuts could last far beyond the inevitable recovery.

"If you don't have a dedicated staff of people whose responsibility it is to carry forward the supplier diversity initiatives, there will be fewer contracts for us in the future. We may see the negative effects of these cutbacks for a long time," said Harriet Michel of the Minority Development Council of New York to Hispanic Business magazine.

Ironically, shortly after the U.S. elected its first African-American president, the gains made by minority and women-owned companies are now in jeopardy. Small companies that have relied solely on their protected status will need to rethink their business models. And perhaps that's a healthy thing.

Not every minority-owned business employs minority workers. In those instances, what's the virtue of awarding that business preferential status besides enriching a fortunate few? In the spirit of the law, any business that employs large numbers of minority and female workers would be a better candidate for preferential treatment, regardless of who owns it. But there certainly are exceptions.

Take the media, for example. When owned by minorities and women, radio and TV stations along with print and online publications bring a decidedly different approach to the industry. But if you are supplying concrete blocks, how does minority/female ownership change the nature of the business?

The current recession may force us to reassess our approach to the preferential treatment given to minority and women-owned businesses. At the same time, this downturn could also create new opportunities. One thing is certain: business as usual will no longer prevail. As large companies look for ways to cut costs, it could mean the end of the "good old boy" supplier network. This could be a huge break for small, agile firms to step in and provide better solutions.

As things stand now, minority-owned businesses are often relegated to a "10% ghetto." In the minds of many corporate execs, partnering with minority firms is a social obligation. So they set aside roughly 10% of their supplier dollars for that purpose. While well-intentioned, that perception is also a barrier to growth for minority and women-owned businesses. Hard times will force new ways of thinking on large companies locked in old supplier habits. And who is better at dealing with adversity than women and minorities?

Every crisis contains opportunities. I have faith minority and women-owned firms can truly deliver superior value - and not only survive these difficult times but actually thrive.

Raul Ramos y Sanchez

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