This week’s webinar notes are from a July 23 webinar hosted by ISM Vermont and presented by Verian Vice President Tommy Benston on ‘Five Steps To Eliminate Maverick Spending.’ Although an on demand version was not available as of the posting of my notes, it will be available on Verian’s site shortly.
While maverick spending, addressed more generally as contract compliance, is not a new topic for procurement, it is one that continues to be a problem for us as a function and for the organization as a whole. Since most procurement organizations as measured on their ability to help the company realize savings, maverick – or off contract – spending is a huge concern. Not only does it prevent the company from making the most efficient use of resources, it creates a divide between procurement and the internal colleagues they need to have positive working relationships with.
Benston covered the usual maverick spending background (definition, explanation, impact statistics,etc.). We need to remember that true compliance must include both the relevant contract and the required process. Non-compliance includes ‘people not buying what you want them to buyin the way you want them to buy it.’ Levels of maverick spending also provide an indicator for tracking system adoption and leadership or communication problems.
More importantly, in my opinion, Benston provided some different perspectives on the challenge maverick spend poses and the productive responses procurement should keep in mind.
The first idea that struck me was the concept that what maverick spending really does is reduce our spend under management. Usually we think of maverick spend as a cause of savings ‘leakage’, but the lost savings only reflects a small percentage of the total spend. When you subtract maverick spend from spend under management, its impact on procurement’s performance using that common metric becomes more evident. Accurately defining what is required to bring spend under management is not a simple exercise, nor is it easy to track, but it is reasonable to conclude that maverick spend is not, in fact, being managed.
The second major take-away was actually a valid exception Benston made to the phrase maverick spending itself. We use the labels maverick, non-compliant, and off-contract interchangeably. But each has different implications regarding the intent of the buyer. The term ‘maverick’ implies malicious intent, but that may not be the case at all. Many off-contract buyers believe they are doing the right thing when they stray from the proper path. Doing a root cause analysis of what is driving that behavior may uncover very real challenges in balancing procedure with productivity. If procurement makes the mistake of handling all non-compliant spend as malicious, we will inadvertently alienate the very colleagues we need to make our work a success.
Although there are many ways to reduce maverick spending, Benston outlined five not to be missed:
- Be inclusive in all efforts to change and redefine buying processes
- Automate and close ‘old’ buying channels
- Simplify and improve rather than just automating
- Monitor spending through internal visibility and cooperation with supply partners
- Incentivize by rewarding good practices as well as addressing undesired ones.
What sort of success has your organization had with managing maverick AND off-contract spend? Share your thoughts by commenting here or by contacting us directly on Twitter: @BuyersMeetPoint.