By Rose Wang, Chief Executive and Co-Founder of Binary Group, Inc.

Member, National Women’s Business Council

The business owner landscape has changed dramatically over the last twenty years. Women are creating more businesses, employing more workers and generating more revenue than ever, as demonstrated by these statistics:

  • Women-owned businesses are growing. It is estimated there are over 8.6 million women-owned businesses in the United States The growth in the number, revenues and employment of women-owned firms over the past 16 years exceeds the growth rates of all but the very largest, publicly traded corporations in the country.1
  • Women are hiring more employees. When looking specifically at the 2007-2013 period, it is estimated the net increase of 5.3 million jobs economy-wide has come almost entirely from very large public corporations and women-owned firms.1
  • Women-owned firms continue to diversify into all industries.  Women are starting more businesses in areas outside of education and other services, including technology, engineering, and health care1
  • Women have a major impact on the economy. The economic impact of women owned businesses in the United States is $3 trillion annually and job creation or maintenance of more than 23 million jobs –16% of all US jobs.2

Many of these women-owned businesses provide services, products and consulting to the Federal Government. The Federal Government established a 5% goal for procurement with women-owned small businesses (roughly at 3% now).  In early 2013, a major improvement to the program was achieved.  An amendment to the FY13 National Defense Authorization Act removed the dollar award caps on the women-owned small business (WOSB) set-aside program.  With these policy changes and the current administration’s focus on creating new jobs and economic growth, one would think that agencies would be trying to meet or exceed the WOSB 5% goal.

Federal Government Report Card

According to the National Women’s Business Council (NWBC), preliminary findings of a research project on the impacts of the newly implemented WOSB program3, women-owned small businesses are not getting their share of WOSB set-aside contract $.  In fact, among the top five Federal Government agencies to use set-aside contract mechanisms (DoD, GSA, VA, DoJ, and DoI), WOSB set-aside contracts are at an average of 0.12% of the total set-aside contracts awarded since FY2011!

The Women Owned Small Business (WOSB) procurement program was signed into law in 2000 and implemented by SBA in 2011.  Why is this program so important?  It’s all about job creation.  By 2018, the Bureau of Labor Statistics projects that small businesses will create 9.7 million new jobs, with approximately 5 million to 5.5 million of those being created by women owned businesses. This represents over half of the new jobs in the small business sector and one third of the total new jobs that will be created nationwide over the next eight years.4

Shrinking the Gap

Corporations have used pay incentives and management by objective methods to motivate C-level executives to achieve corporate goals.  CEOs are held accountable and receive pay-for-performance incentives for achieving revenue, profit and hiring goals.  If they do not achieve corporate goals, they do not get paid – and in some cases, they may even lose their job.

Currently, the SBA uses an annual Procurement Scorecard as an assessment tool to measure how well federal agencies reach their small business and socio-economic prime and sub-contracting goals, providing accurate and transparent contracting data and reporting agency-specific progress. The Scorecard includes goals for procuring goods and services from women-owned small businesses.

In addition to lifting the caps on the WOSB awards, the National Defense Authorization Act contained several other amendments designed to help Federal agencies achieve small business goals. One amendment clarified the steps that the leadership of an agency should take to ensure that members of the senior executive service (SES) who are responsible for acquisition, and any member or official who acquires services or supplies, directs agency organizations to acquire services or supplies, oversees acquisition officials (including program managers, contracting officers, and other acquisition workforce personnel responsible for formulating and approving acquisition strategies and plans), and other members of the senior executive service) assume responsibility for the agency’s success in achieving small business contracting goals and percentages by

(1) promoting a climate or environment that is responsive to small business concerns;

(2) communicating the importance of achieving the agency’s small business contracting goals; and

(3) encouraging small business awareness, outreach, and support.

Promoting, communicating and encouraging personnel to reach set aside goals is great on paper, but where is the accountability?  How does this ensure that the 5% goal for women-owned business set asides is actually achieved?  More importantly, how do these steps motivate agency leaders and everyone involved in acquisition and contracting to set aside contracts that have real $ value and offer opportunities for WOSB across every industry, versus just ‘checking the box’ with set asides that are very small in value and provide opportunities in limited ‘service’ categories?  The reality is they don’t.

Pay for Performance

What if the same pay incentive principles already known to work in the private sector were applied in the Federal sector for executive leadership and all contracting and acquisition personnel involved in procuring products and services?   Incentives have been proven to work not only in the corporate arena, but have worked to encourage consumers to lose weight, patients to visit doctors and parents to start college savings plans.  Why wouldn’t it work to help Federal agencies reach small business and WOSB set-aside goals?

Recently, I was meeting with a SADBU representative, and they were thrilled to have completed their very first WOSB set aside.  Many contracting officers want to do the right thing, however, adding a sense of urgency – pay incentive for reaching goals and consequences for falling short – may significantly change the practices of underperforming agencies in the number and value of set asides going to WOSB.

Small businesses are just as competitive in performing work as large publicly traded companies and women-owned business just as effective as their male counterparts – sometimes even better, as smaller businesses can be nimble and adapt to change quickly, while neutral gender leadership teams can outperform companies that have leadership teams that are one-sided.

By ensuring WOSB set aside goals are met at every agency will ultimately lead to better job creation and economic growth.  Adding pay-for-performance incentives for leaders and all acquisition and contracting personnel will give agencies the motivation needed to shift a larger pool of contracting dollars to women-owned businesses, exponentially benefiting employment rates and the economy.

That’s one small step for (wo)man (owned businesses), one giant leap for the economy.

1According to American Express OPEN’s 2013 State of Women-Owned Businesses Report: A Summary of Important Trends, 1997-2013.

2The Center for Women’s Business Research 2009 Study.

3 The full NWBC report will be released in June 2013 with much greater detail about procurement practices across the Federal government.

4The Guardian Life Small Business Research Institute 2010.