5 Types of Maverick Spend
Many organisations are faced with an unexpected drain on their resources. Often this is the result of maverick buying. This takes money away from the company, and it can be difficult to stop because it is spread across so many employees. This article is the second in a series on why maverick buying is a problem and how companies can stop it.
The first article of the series discusses all 5 forms of maverick buying, each of them have different reasons and causes. To stop maverick buying, we need to understand the different motives for non-compliance.
Where is maverick buying particularly relevant?
Maverick buying is often caused by maintenance, repair and operations as well as office supplies, hotel contracts, travel, printing, IT hardware and software. In general, maverick buying occurs mainly with indirect products and services. In most organisations, indirect products and services account for up to 80% of purchase transactions and up to 40% of total spending. Consequently, deviating purchasing behaviour with small losses on each transaction can add up to an impressive figure. In other words, the savings potential is enormous.
According to Aberdeen Strategy & Research, the pharmaceutical company GSK loses between $80 and $120 million annually from non-regulatory purchases. This represents approximately 20-30% of unrealised cost savings. Aberdeen estimates that across all industries, the average savings from compliant purchases is 22% compared to non-compliant purchases.
5 forms of maverick buying
Researchers have identified 5 different types of maverick buying. All maverick buying across organisations can be traced back to them.
Each cause of maverick buying must be approached differently. It is not possible to stop maverick buying without addressing its root causes. Each form of maverick buying mitigation strategy. Therefore, maverick buying can only be countered with tailored concepts. There is also a general solution, which will be discussed further below.
1: Unintentional Maverick Buying
Unintentional maverick buying occurs when the employee is not aware of official sourcing processes. The employee is not an expert and has not been adequately trained. Because there is no negative intention, this form of maverick buying is the most desirable, it is easiest to resolve.
2: Forced Maverick Buying
Employees are often forced to bypass official procedures. There are several reasons for this. One cause could be that products or services have not yet been defined by the procurement team and are therefore not available through official processes. Another reason could be that the production function needs to make an emergency purchase outside of the procurement department’s business hours. In cases like this it makes logical sense to not have the production line waiting all night for the procurement team to buy the appropriate piece at 8am. In this case, the maverick buying is forced. Similarly, this form of maverick buying has no intention of harming the company, it is rather a sign of lacking flexibility in purchasing systems.
3: Casual Maverick Buying
A casual maverick buyer is an employee who intentionally does not follow the official purchasing process. Possible reasons are convenience and reluctance to adapt to new processes. The employee’s behaviour is driven by his or her own interests and habits. The employee is aware that he or she is breaking official rules. However, a lack of transparency in the procurement process allows for this sort of behaviour. The maverick purchases are often simply not noticed.
4: Well-intentioned Maverick Buying
This employee is aware of existing contracts and official procedures but ignores them because he or she believes it is in the best interest of the company. The employee believes that they will find a better offer, this can have two causes: perceived superiority of an alternative and perceived superiority of their own purchasing expertise. In most cases, a lack of insight and knowledge about total cost of ownership leads to this sort of behaviour. Well intentioned buyers aren't trying to hurt the company, on the contrary, they believe that they are helping the company.
5: Ill-intentioned Maverick Buying
This form of maverick buying occurs when the buyer is aware of and could use preferred contracts, but deliberately does not. The reasons for this can be opportunism and resistance to change. The introduction of centralised procurement teams in recent decades has left some employees with the feeling of being treated unfairly and having their power curtailed. The purchaser knows that he or she is breaking the company rules with his or her behaviour. The difference to the casual maverick buyer, is that the ill-intentioned buyer has the intention of causing harm.
Consequences of maverick buying
There are many consequences that arise from maverick buying, these will be discussed in the next article.
**Are you experiencing maverick buying as well?
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