Why truly tackling maverick spend starts with empathy.
Maverick, or non-compliant, spend can be a major problem for an organization’s bottom line. According to a 2019 report from The Hackett Group, up to 16% of procurement’s negotiated savings are lost due to off-contract purchasing.
Maverick buying also results in less spend being directed to preferred suppliers, which can damage supplier relationships and make it harder to negotiate more favorable contracts in the future. Then there’s the increased risk associated with purchases that don’t involve a formal approval process. And of course there’s the total lack of visibility until an invoice shows up…
In short, maverick spend is one of procurement’s worst enemies.
Although it’s the root of so many issues, maverick spend is also frustratingly common and can account for as much as 80% of an organization’s total spend. So it’s no surprise that tackling it is one of the highest priorities for procurement teams.
Putting users first
As explored in our eBook, Maverick spend: From defiance to compliance, understanding end users’ needs and why they might purchase in non-compliant ways is the fundamental first step in getting maverick spending under control. In organizations with decentralized purchasing models, buying is not a core responsibility for most of the people that do it — it’s simply something that supports what they or their team does.
The organization’s purchasing policy is likely fairly low down on their list of concerns; they’re just looking for the simplest and most familiar way to buy what they need. That might mean Googling a product and buying from a popular online retailer to avoid negotiating a complex purchasing system. Or it could involve buying from a non-preferred supplier because they simply didn’t know that the organization has purchasing guidelines in the first place.
Expecting people to make purchases in the right way simply because the rules say so is understandable. But enforcing purchasing policy can be a never-ending task and having to be the “procurement police” is both exasperating and ineffective in the long term.
Empathy better than enforcement
Procurement teams that can understand and empathize with why people buy in these ways and assess the buying experience from an end user’s perspective are much better equipped to address the underlying issues that cause maverick spend. Put simply, the most effective procurement teams recognize that empathy is better than enforcement.
An empathetic approach also builds trust and can help procurement establish itself as a valuable partner, instead of being seen as a department that makes buying unnecessarily complicated.
Teams across the organization must know procurement is there to help them and ensure they get the best product or service when they need it. This means listening to their pain points, being receptive to feedback, and working with them to create a system that works for everyone. This trust can then be leveraged to drive long-term, meaningful change and ensure better procurement outcomes for the organization as a whole.
Ready to get spend under control?
Discover four highly effective ways to tackle non-compliant spend with our free eBook, Maverick spend: From defiance to compliance.
January 25, 2023