What the Federal Government Can Teach Companies About Commitment
The private sector seems to be at an inflection point. Back in 2019, 181 CEOs representing leading U.S. companies — including many of the world's largest advertisers — declared that the modern corporation had a responsibility to not just shareholders, but to everyone.
As members of the Business Roundtable, each of them signed a commitment to "deliver value to all stakeholders, for the future success of our companies, our communities and our country." In the years since, research has confirmed the business case for a purpose-driven corporate strategy, and these and other executives have touted various DEI programs and ESG initiatives as proof of their commitment to something greater than profits.
When it comes to working with small and disadvantaged businesses, however, the U.S.'s largest companies and biggest ad spenders have a track record that's, well, hard to find. Surprisingly, the same cannot be said about their counterparts in the public sector.
Proof of Concept
While cynics (sometimes rightfully) decry the U.S. government as ineffective and obtuse, there's no denying its commitment to supporting small businesses. While politicians are notorious talkers, their words typically lead to action in this case.
Last year, the average small business contractor was awarded $2.7 million from public sector work. In addition to the numerous loans and resources offered to small business leaders by the SBA and other federal agencies, the government has met or exceeded its goal to award 23 percent of all prime government contract dollars to small businesses year after year. Moreover, goals for minority-owned businesses have more than doubled in recent years, with the government benchmark for minority-owned suppliers sitting at roughly 12 percent.
In the marketing communications space in particular, contracts of considerable size are now being designated as small business set-asides. This trend started with FEMA's "floodsmart" contract (a $112 million award to small business, Yes&) and now includes a $217 million NASA contract awarded to a tribally-owned small business, PCI Productions, as well as the $300 million set-aside detailed in an RFP released by the U.S. Census Bureau earlier this year. The SBA has already increased the small business size standards (the criteria the government uses to define a small business) twice this year, giving more firms the opportunity to compete for contracts like these.
A quick glance at the SBA's FY23 small business goals reveals that agencies across the federal government are aiming high. Agency-specific objectives for percentage of prime contract dollars awarded to small businesses range from 13 to 68 percent. Furthermore, if a contract isn't set aside for small business, it very likely has a 30 to 40 percent requirement for small business participation. This requires a detailed plan identifying the small business firms and the roles each will play in the contract. A failure to do so could quickly disqualify a company from competition.
Time for Action
Rarely does the federal government outpace the private sector when it comes to planning and executing initiatives that drive business growth. However, its support of small businesses continues to be undeniable — and makes the relative lack of follow-through by its commercial counterparts all the more troubling.
Industry leaders have certainly talked a lot about their collective commitment to community and equity, but the tangible evidence of that commitment is sparse. What major automotive brands are working with a small or minority-owned agency of record? What big CPG or telecom advertisers are making mass-market media partnerships with small businesses a priority?
Sure, smaller firms might be contracted to lead projects or channel-specific engagement with multicultural audiences, but companies like Walton Isaacson (now AOR for American Airlines) are rare exceptions in a landscape that seems determined to uphold the status quo. Even the internal DEI initiatives that major brands highlight in their marketing and in the press usually fall short of employee expectations. Now, with a recession looming and layoffs on the rise, those programs are often among the first to be discarded.
There could be a plethora of reasons that big businesses have largely failed to match the government's commitment to small and disadvantaged businesses. CMOs who have seen their average tenure continue to decline might view partnering with smaller firms as an unacceptable risk, for example.
Juxtaposed against the public sector's comparatively stellar track record of supporting these firms, those reasons just sound like excuses. Given the immense importance of small businesses to the vitality of the communities and country American executives claim to care so much about, excuses shouldn't suffice. Economic volatility will likely pose a serious threat to small businesses in the months ahead. For commercial leaders who continually talk about purpose, now is the time to act.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.
Mike Kapetanovic is a former ad agency president. He currently works with ad agencies, holding companies, and independents on their public-sector and commercial-sector pitches. He can be reached at mike@growthlab.us.