Managing Maverick Spend in Procurement
What happens when procurement managers go rogue? They try to act as mavericks and reach out to suppliers that aren’t a part of the company’s list of pre-approved vendors. Such suppliers are often friends or close business contacts.
Maverick spend is the expense resulting from purchases made within an organisation by circumventing pre-established procurement policies and other standard corporate procedures. Such rogue spending can cause serious losses to a company’s bottom line.
However, the intent may not always be malicious. Employees don’t always purposefully go against the company procedure. For example, a procurement manager may want to save precious time by reaching out for bids from acquaintances only because the process implemented by the company is time consuming and cumbersome. Afterall, every professional wants to keep things running smoothly in his job and its human nature to embrace the path offering least resistance.
In such a scenario, holding employees accountable for maverick spend won’t do justice to them. Maverick spend indicates that a company has loopholes in its procurement system and it can’t be eliminated unless it is recognised in the first place. So, what we need is a robust approach to understand the inadequacies of the procurement system and develop innovative ways to improve it. A regulated and streamlined purchase process can go a long way in reducing maverick spend.
Less maverick spending has its own benefits. The common myth is that maverick spend ensures faster order processing but this is far from the truth. Rather, it’s the pre-approved vendors that let you score brownie points for loyalty by ensuring faster receipt of materials.
How can you tackle maverick spend?
1) Review your procurement process. Make your software user friendly. Ensure that employees are comfortable with the technicalities of the procurement systems. In case they are not, provide adequate training. Do not give the impression that the processes and systems are time consuming and cumbersome.
2) Channelise the ordering process by using systems with built in electronic purchase order approval. This ensures that only the pre-approved vendors are considered. So, use a crafty and transparent purchasing solution that enables buying materials only from designated suppliers.
3) Adopt a strong P2P strategy that is clear and communicated to all employees. An ineffective P2P cycle without proper checks and balances can lead to uncontrolled purchases through maverick spending.
4) Raise awareness about the what is maverick spend. Use a proper system to monitor employees. Sometimes employees are caught unaware about what’s good and what’s bad. Make them aware of the fact that maverick spending is not an acceptable practice. Bolster their confidence in the current purchasing process.