Four ways to get buying back on track

Almost all procurement teams deal with problematic buying behaviors that make it difficult to execute an effective procurement policy. The biggest issue in your organization might be a general lack of awareness of purchasing policy. Or it could be that your organization’s purchasing system and processes are unnecessarily complex, meaning staff want to buy through other channels.

Your organization may even have inadvertently created a culture of non-compliant buying simply because there are no consequences for people who don’t follow the rules. Once you have identified the biggest problems in your organization, it’s time to choose the best course of action to address them. In this article we explore four highly effective ways to combat maverick spend.  

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1. Simplify purchasing   

Your purchasing process should be as unobtrusive as possible, taking into account that buying is not a core part of most people’s jobs.

They need to get it done so they can do their work, but it has to be as simple and quick as possible. When buying is complicated, time consuming, and bureaucratic, there’s likely to be more maverick spending. If a convoluted and clunky purchasing process is a stumbling block in your organization, a more familiar and intuitive purchasing tool may be just what you need.

Online B2B procurement marketplaces are eCommerce platforms that bring all of your preferred suppliers together in one place. They are designed to be simple to use, providing the kind of streamlined online shopping experience people are used to in their personal lives.

Marketplaces can be implemented as part of an eProcurement solution that allows for the automation and optimization of the entire procurement process, but they can also be integrated with your ERP as a complementary tool that is simply better suited to the job. 

A marketplace reduces non-compliant spend in a number of ways:

• Easy buying: A marketplace makes finding, comparing, and buying products much simpler and easier.
• Automated approvals: Instead of waiting hours or days for sign-off, users can finalize purchases instantly thanks to the automatic approval of purchases that fall within set parameters.
• Greater supplier choice: As your preferred suppliers are accessed through the marketplace, they don’t have to be integrated with your ERP in time-consuming, one-to-one integrations. This saves your organization time and money and allows for greater supplier choice and competition.
• More control: Your procurement team has complete control over which suppliers are part of your marketplace, ensuring all spend is directed to your preferred suppliers at your negotiated prices.

If you do decide that a procurement marketplace (or full eProcurement solution) is the right choice for your organization, it’s important to choose the right one for your needs.

Platforms can vary both in functionality and cost, so make sure you’re clear about the features you actually need so you don’t end up paying a lot more for functionality you don’t need and likely won’t use. It’s also important to choose a solution provider that has experience working with organizations with similar needs and challenges to yours.

2. Get buy-in from senior leadership 

There can be little point in trying to get everyone in the organization to adhere to procurement policy if senior leadership doesn’t set the right example. Culture change has to come from the top.

You need champions in the leadership team that understand the value and importance of effective procurement. These champions can:

• Set the standard for compliant purchasing behavior
• Help enforce purchasing policy and address persistent maverick spending
• Support any process or technology change required to increase compliance and process efficiency.

The most effective way to make champions of senior stakeholders is to show them the effect of maverick spend. You need to highlight how purchasing policy compliance not only minimizes risk but also has a range of quantifiable benefits for the organization. Let’s look at what those benefits are, starting with the big one: cost savings. While the amount of non-compliant spend varies, it can be as high as 80% in some organizations.

Put another way, this means that only 20% of total spend:   

• Is directed to preferred suppliers at your negotiated prices
• Can be leveraged to negotiate better contracts
• Contributes to potential volume discounts.

Plus, factor in labor costs incurred to reconcile purchases after the fact and procurement’s ability to save the organization money in the short and long term is damaged significantly. And then there’s risk. Uncontrolled and unknown spend means your organization is unexpectedly on the hook for purchases from suppliers you may not have worked with before and/or for unspecified or vaguely described products or services.

The large majority of maverick spenders are well meaning, but non-compliant spend comes with risk and the more there is, the harder it is to identify more nefarious or questionable spending behavior. Procurement fraud is more prevalent than many expect and it accounts for 19% of all fraud within organizations, according to a 2020 PwC report.

A lack of visibility into spend is another major issue senior leadership will care about, especially your CFO. There’s no record of a non-compliant purchase until the invoice arrives, making it impossible for finance teams to forecast or effectively manage budgets.

If your battle against non-compliant spend is being hampered by clumsy and dated purchasing processes and systems, buy-in from senior leadership will also be essential to introducing a marketplace or broader eProcurement solution.

3. Align procurement with your people’s personal values  

As a society we are increasingly concerned about the impact our choices have on others and the environment.

In a recent global survey, 81% of people said that purchasing ethically sourced products matters to them. In other research, 56% of Americans said they would stop buying from a brand they believed was unethical. There is a growing appreciation of sustainability, diversity, inclusion and equity in the workplace. Some workers are interested in supporting local suppliers, others in working with partners that can demonstrate ethical labor practices in their supply chain.

If your procurement policy includes a commitment to ESG, consider how it might align with the values of those in your organization. As a wealth of research indicates, we are more likely to support a business that acts in an ethical and responsible way. You can leverage this support for more on-contract spend by showing that the organization shares those values and that staff purchasing decisions are an important expression of that. 

There are also other ways to motivate people to follow purchasing guidelines. In private companies, staff may be rewarded if the business performs well financially. Lean operations that produce a profit for the year are more likely to issue bonuses and pay increases. In the education, health, and government sectors, staff are likely to be motivated by making the best use of the resources and budget available to their department. Whatever their motivation, it’s useful to explore how the values and motivations of people can be utilized to boost compliant spend.    

4. Build trust through great communication

When it comes to procurement, sending out all-company emails on what to do and not do, or publishing your procurement policy on an intranet page is unlikely to win fans and encourage compliance.

To establish trust and get people on board, you need to communicate in a relatable and personable way. Arranging small meetings with departments or regular one-on-one catch-ups with people who are having procurement problems are much more effective options, backed up by simple how-to guides where helpful.

Education is key, and must be delivered in formats that suit the practical needs of your organization and your colleagues. If your organization introduces a new purchasing system, it should involve a change management program in which staff are consulted. It’s also vital that they take part in user testing to identify issues and ensure the system works for them.

Don’t leave people behind on your journey to better procurement. Part of that involves building education around procurement into onboarding processes for new staff. With high staff turnover in many organizations currently, this is particularly important to keep everyone on the same page.

Download the eBook

Get non-compliant spend under control in your organization — download Maverick spend: From defiance to compliance today.

Download the eBook