Often referred to as maverick buying, this type of behaviour can also be the result of lax enforcement of policies, simple ignorance of proper procedures or staff turnover and poor knowledge management.
Are the mavericks deliberately deciding not to conform?
But deliberate non-compliance should be seen for what it is, a system failure and it should be addressed as such so that the organisation as a whole can be more efficient. So what leads to maverick buying and what can we do under the umbrella of procurement 4.0 to reduce maverick buying?
Maverick spending has been defined as the expense resulting from purchases that are breaking the rules established by corporate procedures. At the most basic level, maverick buying can be fuelled by a simple cost-benefit analysis. If an employee needs to buy something for $20 and their hourly rates work out to be approximately $100. Spending 20 minutes to fill out onerous procurement paperwork is less cost-effective than simply paying for the part out of pocket. The employee may then proceed to reimburse themselves by taking a bit of extra time during lunch or leaving early that day or some other method they deem appropriate compensation. The individual level of maverick buying is still a sign of system failure and inefficiency, more importantly, it does add up and contributes to the cost of wasted time and expenses.
Maverick buying can be a case of misunderstanding the set procedures or making a decision at the site level that goes against previously negotiated purchasing terms.
That said, we should not be naïve enough to think that procurement non-compliance is always either a case of taking the path deemed most convenient or a failure of communication. But maverick buying can also be a deliberate act of putting personal interest ahead of the organisation. For example, someone might opt to send some business the way of a friend, even if the friend isn’t on a list of approved vendors. But from an organisational point of view, both the misunderstanding and any self-motivated action is still a form of system failure.
So how do we stop maverick buying?
The key is communication and streamlining of the procurement process through technology and optimised workflow. Procurement departments should never be silos and should work with other departments to make sure that procurement process is working as intended.
Educating them on the current procurement workflow and the process would also explain to employees why compliance with the established process is important. But it’s important to recognise that it is impossible to achieve 100% compliance. However, when maverick buying can be as rampant as 80% of all purchases, every percent of improved compliance can be a big win (Ref. Supply Management, 2014).
If you would like help reviewing your procurement processes and advice on gaining visibility of maverick spending, we have created the mavericks suite of dashboards especially to meet this need. We can provide help with latest in procurement dashboards as well as training for your team. So contact us today and let’s reduce the maverick buying in your organisation.