Northern Trust’s data-driven approach helps the bank integrate diversity into any procurement decision, expanding opportunities for diverse suppliers and broadening the analysis to include all firms.
For many companies, efforts to diversify vendors and suppliers have centered on contracting with firms that are minority and /or women-owned business enterprises (M/WBE).
That focus on ownership as a binary dimension makes intuitive sense, but limits the scope of supplier diversity. It excludes a vast swath of companies including those that are publicly held, major professional firms and more. The end result of many supplier diversity programs is too often a few good results on the margins while leaving the lion’s share of business suppliers and partners untouched.
Last year, Northern Trust developed its Business Diversity360 framework to evaluate business partners and prospective vendors using a data-driven approach to evaluate diversity in a range of ways beyond ownership. The framework takes into account employment diversity, procurement, and community impact as well as ownership. The approach has had a number of beneficial results, including:
“It is important to encourage doing business with women- and minority-owned firms, but ownership is just one way to measure diversity,” according to Northern Trust Chief Financial Officer Jason Tyler. Other factors can have equal or even larger impact, Tyler says, including the diversity of a company’s board, senior leadership and workforce, along with a firm’s community engagement.
The Business Diversity360 framework leverages a tool built by the bank’s Asset Management division, according to Rosi Hasan, Global Head of Business Diversity & Demand Analytics.
In 2020, Northern Trust expanded its framework to focus not only on suppliers but all partners including professional services firms ranging from law firms to consulting and financial services.
The Business Diversity360 framework includes three steps:
Diversity score can be used alongside other essential factors that go into every purchase decision. “Obviously, quality and cost are key criteria to evaluate our vendors,” Hasan says. “But diversity should also be a criterion.”
With Northern Trust’s top leadership in support, the new framework has helped generate healthy competition. Vendors can use the score to identify areas to improve, and Northern Trust business units have new tools to analyze how their purchasing decisions help advance the bank’s strategic goals.
Summing up, Hasan says the framework has allowed the bank to build diversity into any purchasing decision: “it has helped us go from supplier diversity, to business diversity.”