Maverick Spend: 12 Ways to Fix Internal Non-Compliance Beyond “The Stick”

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.

The rest of this PRO research brief can be found on Spend Matters PRO. If you’d like to become a Spend Matters PRO member, please subscribe. If you’re not ready to subscribe or wonder why you should, we’ve answered some FAQs here or you can email a Spend Matters team member directly. If you’re not into paying for content, we get that too. Thanks for reading!

Voices (6)

  1. Pierre Mitchell:

    Toby, yes, absolutely agree! Below is a snippet one of the recommendations from the PRO piece that I just enhanced based on your feedback (thanks). It actually now has a few recommendations combined into one. We’re going to play a game of “guess all the recommendations” behind the paywall. 🙂
    Thanks again…..

    Allow a “bail out” option” for requisitioners to use free text requisitions. Also set up a virtual “buying desk” to not just process one-time buys (e.g., “tail spend”), but also to triage incoming these free-text requisitions. Analyze the source of these requisitions and fix any root cause issues (e.g., training, catalog improvements, process clarification/simplification, etc.) to reduce free-text requisition volume, improve internal satisfaction, and of course reduce maverick spending.

  2. Toby Thorsen:

    I think that one of the keys to successfully managing off-contract (maverick) spending is to actually enable users to buy off-contract in the e-procurement solution – most easily done by allowing free-text orders to non-contracted suppliers.

    This allows procurement to: (A) actually be able so fully understand the needs of the organization as well as find/shortlist new suppliers and (B) capture the PO and re-route to contracted suppliers if they have the capacity.

    Furthermore, it allows procurement to better analyze spending, since the spending patterns are captured, even though the non-compliance is a factor.

    The unability to learn from maverick-spending patterns is probably one key aspect to why procurement is still being held back in many organizations. In many cases procurement is not responsive enough.

  3. Pierre Mitchell:

    Many just use the term off-contract spend % or bypass spend %. I agree with you that the term “maverick” denotes the wrong context: a malfeasant corporate-hating requisitioner defiantly exerting his righto to buy off contract. The whole point of the article was to point out that while off-contract spending can be a bad thing, it’s important to learn from it and find multiple root solutions to its multiple root causes rather than ascribing it to a single incorrect root cause and then using a single tactic (e.g., “three strikes” policy) to try to fix it. The conventional procurement wisdom is not always right.
    Thanks for posting.

  4. bitter and twisted:

    Which is why ‘Maverick spend’ is a misleading metric. It must be split into ‘justified’ and ‘unjustified’.

  5. Pierre Mitchell:

    Yes, it’s still maverick (i.e., non-compliant). But, I think your question is more about whether a better deal is really bad? One of the 12 recommendations in the PRO piece is a “meet or beat” clause (like you see in Retail: ‘We’ll match any offer!’) that I’ve seen used. That at least ensures price parity and that the maverick event isn’t bad from a price standpoint. But, companies try not to create an environment where end users are encouraged to waste their time trying to get a better deal on staplers. Still, there’s a balance, and the travel management space is probably the best example of auto-approval of preferred vendors, but extra approvals for non-preferred. You can still do it, but it’s a little more work, and doesn’t force requisitioner to give up on the PO, give the head nod to vendor, and then the dreaded non-PO invoice scenario ensues.

  6. bitter and twisted:

    If the maverick got a better deal, is it still maverick spend?

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