Minority business partnerships: a successful past and promising future - includes brief testimonials from 24 major corporations on their relations with minority businesses - Special Advertising Supplement

Black Enterprise, June, 1997 by April W. Klimley

Over the past 25 years, minority business partnerships with large U.S. corporations have flourished. And these private business partnerships are steadily expanding today, despite waning support from the very government entities that originally gave these programs a big push.

"These (minority vending) programs started as a response to civil unrest in the 1960s," explains Harriet R. Michel, president of the National Minority Supplier Development Council (NMSDC). "But today, corporations know that in the future, a large part of their customer base will be people of color...And there is no better way to show your customer that you value them than by doing business with them."

Ms. Michel describes demographic reality. By the year 2050, over half of the population of the US will be made up of people of color - African Americans, Asians, Hispanic, Native Americans, and others. Consumer-oriented companies understand these facts. These numbers are one element that is driving them to enlarge their minority purchasing and diversity programs.

Results of these programs are impressive, especially in some industries such as automotive, retail and consumer products. Just listen to the following statistics: Ford, the largest purchaser of minority goods and services in the U.S., spent $2 billion on purchasing from minority-owned enterprises (MBEs) in 1996.

Both General Motos and AT&T spent over $1 billion in 1996, and certain other corporations spend over 5% of all purchasing dollars on minority vendors. In 1996, for instance, Xerox Corporation spent $138 million with MBEs, which represented 6.3% of all purchasing contracts, while J.C. Penny spent $438.6 million with minority suppliers, a 12% increase over the previous year.

Overall, minority purchasing increased 10% to $30 billion among member organizations in 1995, reports NMSDC, the most active nationwide leader in this field. And minority-owned businesses - at a rate of 61% versus 26% for the five years up to 1992, according to the U.S. Census Bureau.

Ironically, bigger, bolder corporate support is coming at a time when government support is fading. many of the very programs set up by government in the late 1960s and early 1970s have been under attack or even eliminated in the 1990s. Setbacks include a federal court ruling in the case of the City of Richmond vs. J.A. Croson; Adarand vs. Pena; and the elimination of the `rule of two,' which allowed federal contracts to be reserved for small disadvantaged businesses when there were two or more such companies both qualified and available for such work.

The dismantling continues today with the Justice Department on the verge of issuing a new rule to bring federal business programs in line with the Adarand standards, which eliminated a race-oriented standard for affirmative action purchasing programs. The new rule seems likely to require a preponderance of evidence of social or economic disadvantage. Those remaining programs, like SBA's(8)a, while still powerful, will probably have to be modified to go along with these benchmarks. Other programs may also be impacted, like the 950-407 program, which requires prime contractors to set aside certain percentages of large contracts for minority firms.

To many observers, these changes suggest that the federal government is going backward. Even on a city and state level, there are negative signs. New York City, for instance, dropped its minority purchasing program soon after Rudy Guiliani took office as mayor.

But private industry remains surprisingly unaffected by these trends. How is this possible in an in an era of downsizing, when most companies are shrinking their purchasing base? Nick Sena, manager of small and disadvantaged business programs at Boeing in Seattle, has a very emphatic answer. "What happens on a federal, state and city basis has no effect on our programs," he says.

Actually, corporations are coming up with a number of new ways to help vendors deal with the new environment. Having enough capital has always been a problem for suppliers. To counter this, corporations such as Ford have set up special subsidiaries that offer debt and equity financing to vendors who qualify. A growing number of banks ranging from Chase to NationsBank have created very active minority business lending programs. NationsBanks' lending to minority businesses rose from $11 million in 1990 to $100 million at the end of 1996. In addition, there is the Business Consortium Fund (BCF), set up by NMSDC in 1986, which has provided vendors with over $20 million in capital funds.

Corporations have also begun investing in special new education initiaties to make their minority suppliers more competitive. Last fall, Sears Roebuck & Co. began funding an Advanced Management Program in conjunction with NMSDC, at the J.L. Kellogg Graduate School of Management at Northwestern University in Chicago. Over 15 CEOs from minority-owned businesses participated in the first seminar held in November, which aimed at helping companies better understand what major corporations expect from quality suppliers, especially in the midst of a changing procurement environment. The program may be repeated in the Spring and Fall of 1997.