In part one of our maverick spending series, Maverick Spending is Your Friend: Don’t Chase It, Ride It, we highlighted that while maverick spending in its own right is generally bad, its root causes often highlight problems with the procurement System (with a big “S”) that, if fixed, improves not only maverick spending, but other areas of procurement performance.
In this second part of our series, we will highlight some proven practices to improve maverick spending performance beyond merely chastising malfeasant requisitioners. Here they are:
- Include maverick spending as one of the top-level metrics in the procurement scorecard. It is especially useful for procurement groups who don’t yet work with finance to reduce stakeholder budgets. In other words, you track negotiated savings for a category and then track maverick spending in that category to ensure compliance. Of course, budget reductions for indirect procurement are the ultimate mechanism to ensure realized spend reductions, but this is different from reducing maverick spending, even though both have the same overall benefit of increasing procurement credibility regarding realize savings. Budget reductions reduce overall spend, but don’t ensure internal contract compliance because spend is defined by price and volume, and if the preferred contract price is not realized, the stakeholder must therefore consume less (i.e., procurement has not created economic value but rather has only reduced the stakeholders’ budgets). Budget reductions without maverick spend elimination are merely a vehicle for forced consumption reduction.
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