Assessing the business case for supplier diversity in the construction housing sector

As the construction industry faces increased pressures to act in a more socially responsible way, the concept ofsupplier diversityis one of several topics that have found its way to the corporate social responsibility agenda. Often seen as a strand of the notion of ethical sourcing, the supplier diversity debate relates to the issue of promoting greater diversity in the supply chain by providing opportunities for traditionally under-represented suppliers to engage with large purchasing organisations. This thesis is an account of the final stage of a wider exploratory study assessing whether there is a business case for supplier diversity in the construction housing sector. Utilising an in-depth interview approach, it focuses on the merits of the business case for supplier diversity from the perspective of the minority business owner operating as a contractor (typically a small firm), in the construction housing sector. The research evidence presented stimulates a discussion about some very sensitive yet serious issues with the aim being to crystallise and create greater awareness of the business case for supplier diversity in the construction housing sector. The research findings provide a detailed insight to the key issues why minority business owners feel larger construction companies should act to implement effective measures to ensure they are managing diversity in their supply chain – these are examined through the lens of social exclusion, corporate social responsibility, diversity management, supplier diversity, and buyer-minority supplier relationships. The research concludes that from the minority contractor's point of view, there is a compelling business case for supplier diversity. The minority contractors' perspective on the impact that a positive action scheme such as supplier diversity could achieve in terms of addressing the numerous barriers and obstacles faced by these SMEs is thought to be significant. The research reports on the minority contractor's perspective of supplier diversity and highlights a number of significant benefits which include amongst others: large construction companies demonstrating they are socially responsible; minority contractors believe they are more competitive than non-minority owned businesses with their pricing; supplier diversity programmes push buyers to engage more with the minority business community; minority contractors contribute significantly to the local economy; and, larger construction companies, have a duty to ensure a level playing field exists for all. The research evidence also reveals that there are a large proportion of minority business owners operating in the construction housing sector that choose to exclude themselves from accessing contract opportunities with the larger construction companies – referred to in this study as an example of self exclusion. A number of factors are highlighted which contribute towards this decision made by minority contractors to opt-out and exclude themselves. This could be one explanation for why buyers for large construction companies report that their view is that it is hard to find qualified and capable minority businesses, thereby illuminating further reasons why the diversity record of the construction sector has been reported by many as being poor Based on both the minority contractors' and procurers' perspectives of the business case for supplier diversity in the construction housing sector, the researcher recommends that supplier diversity programmes can certainly go some way to help address some of the issues and barriers to contract opportunities unveiled as a result of the research evidence. In particular, a well designed and successful supplier diversity initiative can help overcome much of the negative issues outlined in this study which includes: addressing the industry image in relation to diversity and sending out the right signals to the minority business community; enabling procurement directors for large construction companies to demonstrate they are serious and willing to engage with minority contractors; large construction companies will be able to select from a larger pool of contractors thereby increasing their competitive advantage; supplier diversity enables dors to be openedfor minority contractors by inviting them to engage more with the larger construction companies, and, encouraging Tier 2 level contractors to implement supplier diversity further strengthens the industry?s action response to the diversity agenda. In looking beyond the business case, the researcher concludes that industry leaders and diversity practitioners, might do better to recognise that while there is no reason to believe diversity will naturally translate into better or worse results, diversity is both a labour market imperative and societal expectation. Therefore, managers for the larger construction companies might do better to focus on building an organisational culture, procurement practices, and the managerial and group process skills needed to translate diversity into positive organisational, group, and individual results.