Tag Archives: maverick spend

What Procurement Dangers Are Lurking In The Shadows?

Just as the organisation’s CIO has been struggling with “shadow IT” the CPO is now faced with similar challenges as company employees armed with a credit card and a browser can buy almost anything online.

For years the enterprise CIO has been struggling with Shadow IT which has been described as “IT systems or solutions used within an organisation without the approval, or even the knowledge, of corporate IT” . This is often referred to as the consumerisation of IT.

Various IT industry analysts reports state that Shadow IT is somewhere between 30-50 per cent of the total IT spend in large organisations and this is a large number considering that this is IT spend that has not gone through the sanctioned IT function.

Shadow IT has transitioned into Shadow Procurement thanks to the rise of digital cloud marketplaces

The ‘shadow’ problem is no longer confined to the CIO with
the CPO also facing a growing population of enterprise staff
that procure and subscribe to many services in the cloud that havent been through the sanctioned process and often they are not allocated to the correct budget codes.

Thanks to the public cloud there are many new digital marketplaces that have lowered the barrier to entry for the end user for procuring a range of products and services (e.g. Amazon, eBay, Alibaba, Google, Rackspace, Microsoft, even crowd sourcing).

Also of concern is that shadow procurement can also include the teams of people hired by the business to provide various services across the business (often these costs are hidden in project budgets or expense codes and not shown against the correct budget categories).

While the CPO aims for compliance the shadow procurement means a further loss of control

For the CIO the issue of Shadow IT often means they are excluded from the decisions of how the IT services are supported as well as assessing the risks of what is being purchased such as security.

Similalry for the CPO the issue of Shadow Procurement often means that they are excluded from important commercial decisions particulalry when the staff member blindly clicks the “accept terms and conditions” button when buying products and services online. These online terms will always favour the supplier and may not satisfy the commercial appetite or the target price point. Only when things come unstuck will these accepted terms and conditions see the light of day.

The rise of shadow procurement flies in the face of the respected analysis of CPO surveys over recent years that continue to place “Procurement Compliance” as one of the top three challenges that the CPO is focused on addressing*.

When Procurement is seen as beeing a blocker then Shadow Procurement is likely to be, or become, an increasing problem

While I have discussed that the rise of the easily accessible digital marketplace has contributed to the increase in shadow procurement there are likely to be a range of other factors that will also determine the size of the problem in your own organisation:

Business and Procurement mis-alignment

Where procurment is seen as a blocker and the process takes too long then the employees will find a way to work around Procurement to achieve business and project goals

Lack of clear roles and responsibilities and an inneffective governance structure

Where the roles are not clear and the governance is inneffective, or not well understood, then the employees may take this as a green light to hire a shadow team within their project or business unit. In some organisations it can become an unnofficially sanctioned fixture

Many organisations are decentralised and large programs/projects operate separately to the Business-as-usual functions such as Procurement

Because many companies are decentralised and indirect spend is spread across departments and projects, there is typically little input from procurement.

Little or no use of big data analytics to understand the indirect spend occuring as part of the Shadow Procurement problem

  • Indirect spend is often very difficult to understand as the shadow procurement buyers don’t use a formal process in purchasing goods and services for the indirect spend. indirect purchases are often made off contract.
  • Therefore spend data is not effectively leveraged or analysed, or spend data is typically incomplete and not coded by the commodity or category.
  • Instead, spend data is linked to accounting or expense codes, and purchase orders are either not created or if they are created they can be vague or created “after the fact.”

Procurement have not leveraged digital disruption putting themselves in front of employees like their “shadow suppliers” have done

  • If your employees rely on digital and mobility solutions to buy, then you have to have a procurement solution that is mobile-centric and digitally-enabled
  • Automation of a quicker quoting and approval process is just one key factor

The Bottom Line For The CPO

  • Partner with stakeholders to better understand their needs, supplier relationships and processes. Show them that you’re not just trying to find a lower price at the expense of their quality requirements, supplier relationships or the time they have available to move
  • Embed procurement staff into their project teams to bridge the misalignment gaps
  • Adopt an “agile procurement” approach to shorten the time it takes to complete the procurement cycle. An RFP is not always required and there are many opportunities to leverage flexible and agile thinking
  • Invest in big data analytics to understand the company’s indirect spend amount, categories and how many suppliers are currently being used in each category. Leverage consultants spend analysis tools or request data from suppliers to achieve better visibility into your spend data
  • Implement an eSourcing tool to better manage indirect categories supported by automated processes

How to Reign In Even The Wildest Maverick Spenders

A candy fix. Underwear from Victoria’s Secret. An obsession with purple. Real maverick expenses from the front-line of procurement, and how to reign them in.

Image: Jackson Stock Photography/Shutterstock

Anyone who works in an office environment has experienced a scenario that goes something like this:

There’s something you need to do your job, so you just go out and get it – the quickest and easiest way you know how – and then expense it back to the company. Maybe that means buying a notebook from the store around the corner or ordering computer accessories from Amazon.com. Maybe you’ve booked your own travel for a business trip or called up a good friend to get her events management company to help with a corporate event.

Using these shortcuts may feel like you’re doing yourself and your company a favor, but most employees have no idea just how counterproductive this “maverick” spend behavior can be for the organisation’s ability to accurately analyze spend, supplier management, and procurement’s overall strategy.

When employees go rogue, purchasing goods or services out of contract or from unapproved suppliers, the company will miss out on certain discounts they worked hard to negotiate. Worst case, it can damage relationships and impact future contract terms with preferred vendors and even open the door to unethical business practices that taint the organisation’s reputation.

What’s scary is that these scenarios mentioned are all too common and appear to be relatively innocuous, believe it or not. In my 20 years of experience in procurement leadership roles, I’ve seen it all. Some of the craziest purchases I’ve seen employees make on behalf of their companies have been things like:

  • Buying candy for the “office” candy dish… you know, just in case a guest might want to help themselves to some. In reality, the employee that purchased it, ate it all.
  • Purple pens to match purple highlighters, purple pads of paper, purple post-it notes, you name it… simply because purple was this employee’s favorite color.
  • Items from Victoria’s Secret which were expensed as “marketing apparel.” Enough said.

So what needs to happen to reign in this type of behavior, both the common and unwitting cases, as well as the rare and extreme? Simply put, you need to make it fast and easy to place and receive the orders.

Start by putting a system in place for better control and compliance– one that simplifies and automates the purchasing process, regardless of the product/service, approval process or supplier. This makes the entire process a lot more efficient by governing requisition, approvals, buying, receipt, reconciliation and reporting. It streamlines even the most complicated workflows, making it much easier for employees to comply.

These systems should also have intuitive and easy-to-use interfaces (think of the way consumer e-commerce sites are designed) so that employees actually want to use them to make purchases, and not just because they have to.

Lastly, and most importantly, take maverick spend seriously. Maverick spend can still sometimes happen even with the most sophisticated and intuitive systems. Keep a close eye on spend analytics to track exactly where rogue spend is coming from, so you know when and how to enforce spending policies that prevent future rogue behavior – and those surprise expense requests.


To learn more about maverick spend and how to set your key initiatives in the coming year, join Basware and The Hackett Group on November 7th for Ramp Up: Planning Your Key Improvement Initiatives in the Coming Year with Amy Fong of The Hackett Group and Nancy Jorgensen of Basware.

Big Procurement Questions Deserve Big Answers

We know that procurement professionals like to get the latest intel on the hottest topics from the best in the business – so we’ve sorted you right out.  Your big procurement questions: answered. 

Elizaveta Galitckaia / Shutterstock

What are the surefire ways to speed up procurement processes?

Can procurement ever completely eliminate maverick spend?

Why shouldn’t procurement simply squeeze their suppliers for every dollar they’ve got?

What technology will be the most game-changing for procurement?

What’s the best question to ask a candidate during a job interview?

Procurement questions as big as these require big answers from  people who know their stuff.  Happily, we gathered 50 of procurement’s top influencers and thought leaders in Chicago last month for Big Ideas Summit 2018 and managed to steal a few quiet minutes to put some of them to the test.

Pat McCarthy,  SVP & GM – SAP Ariba

Pat on eliminating maverick spend…

“Procurement can [eliminate maverick spend] but it has to make the purchasing process a destination people want to come to”

Pat on supplier relationships…

“You have to have a great relationship with your suppliers, one where they benefit and you benefit so that making a profit and you fining value in their solutions is the right balance.”

Pat on his favourite job interview question…

“I love to ask candidates about the last book they read because I’m most interested in curiosity – are they curious, what are they curious about – it tells me a lot about them.”

Read more from Pat McCarthy in his blog Procurement with Purpose – Not All Rainbows and Fairytales. 

Doug Leeby, CEO – Beeline

Doug on eliminating maverick spend…

“I think there are certain people, especially executives, who are special and they will always go around the system. If you had the power to say only those that are in the system will be paid then perhaps you [could eliminate maverick spend] but i’ve never seen a situation that had 100  per cent compliance.”

Doug on  his favourite job interview question…

“My go to question is – what are two or three things that you’re really really bad at?  What I’m looking for is A) what they’re really bad  at but more importantly the degree of introspection they have. If they’ve been honest with themselves and done a real inventory of what their areas of development are, what are their weaknesses then they’re somebody I can trust and work with.  If I hear somebody say that they don’t have any then they’re not going to be a good fit for us”

Read more from Doug Leeby in this blog The Rise of the Contingent Workforce… And How to Manage It. 

Daniel Perry, Global Alliances Director – EcoVadis

Daniel on eliminating maverick spend…  

“I don’t think procurement can necessarily eliminate all maverick spend, buyers find ways around any rules that you might put in place.  But if you can provide a very strong vision and mission for procurement and the company in general as to why you are trying to avoid maverick spend, if you can align it to your company’s  sustainability mission or the fact that you want to try and avoid using suppliers that use modern slavery then it gives the buyer another cause for pause before going off and doing maverick spend.”

Daniel on game-changing technologies… 

“Transparency is really changing the way that business is being done these days –  there is much a higher expectation for businesses and their supply chains, who they work with and who they’re associated with so I think the technology around due diligence, around assurance, around using companies that are reputable is going to be a big game changer in the way that companies decide which suppliers to use.”

Read more from Daniel Perry in this blog, Making Sustainable Procurement Work. 

Check out all of our exclusive video content from Big Ideas Summit Chicago via the Digital Delegates group on Procurious. 

3 Ways We WISH We Could Deal With Serial Mavericks

(Satire alert!) Does out-of-control maverick spend in your organisation give you high blood-pressure and/or violent thoughts? Check out these suggestions for cruel and unusual ways to deal with your mavericks!

They really knew how to send a message in medieval England.

After being found guilty of treason in the summer of 1305, William Wallace was dragged through London at the heels of a horse, hung, drawn (eviscerated) and quartered, with each of his four limbs sent to trouble-spots throughout the kingdom as a warning to others.

One hundred and twenty years later, Pope Martin V was so infuriated by the teachings of John Wycliffe (who translated the New Testament into English) that he declared him a heretic. Wycliffe had died of natural causes 44 years earlier, but the message still had to be sent – so Wycliffe’s bones were exhumed, crushed, burned and scattered into the River Swift.

Highly effective PR, right? The extreme brutality of these acts was motivated not so much by a desire to punish the offenders as horribly as possible, but as a way to discourage others from going down the same path.

For the 21st-century procurement professional, maverick spend is one of those issues that can lead to us having (secret) violent thoughts in the office. How many times have you confronted a serial maverick and been offered these weak excuses:

  • “Oh, sorry – I didn’t know!”
  • “But I have a really good relationship with this other supplier…?”
  • “I found a better deal.”
  • “I always use this website to book my travel!”

Infuriating. Maverick purchasing cuts profits, impacts contract fulfillment, damages supplier relationships and can mean no legal protection outside of contracts.

So, it being a Monday, let’s indulge in a bit of fantasy about some effective ways that procurement could deal with mavericks in their organisations.

To begin our list of cruel and unusual punishments…

1. The Maverick Leader Board

Name and shame! What if every procurement function had a Top Gear-style leader board on prominent display, listing your organisations’ worst mavericks? You could make a real spectacle out of it whenever it’s time to add a new maverick to the board (lights, music…), and even call them over to receive a prize!

  • Pros: People will work hard to ensure they get their name off your leader board asap.
  • Cons: With maverick spend as high as 80% in some categories, you’re gonna need a BIG board.

 2. The Scarlet Letter

American author Nathaniel Hawthorne’s masterpiece The Scarlet Letter tells the story of Hester Prynne, a woman accused of adultery in 17th-century Massachusetts. Hester is forced to wear a scarlet “A” (for adulteress) and has to stand on the scaffold for three hours while the Puritan townsfolk hurl insults at her.

Wouldn’t it be satisfying to see your most notorious maverick skulking around the office with a giant “M” for Maverick sewn onto their lapel?

  • Pros: Very visible, and a great way of spreading the message as your mavericks move around the office.
  • Cons: Making people sew symbols onto their clothing is a more than a little suggestive of the Third Reich, so maybe we should give this one a miss.

3. Make them pay

A “cost-conscious culture” is a workplace where employees treat every dollar of company money as if it were their own.

Sounds good in theory, but even the most tight-fisted person can suddenly become extremely lavish when it comes to spending someone else’s money.

The solution? What if it actually is their own money on the line? We need a piece of software that draws unauthorised purchases straight out of the offender’s personal bank accounts – and watch your maverick spend problem vanish overnight.

  • Pros: You could spin this as procurement’s contribution to top-line growth.
  • Cons: Probably illegal.

Seriously, though:

There’s plenty of great advice to be found online about tackling maverick spend, including these articles and videos here on Procurious:

4 Ways To Reduce Maverick Spend

The Hackett Group estimates that maverick spending can cost companies up to 2 per cent of all indirect spending, due to lost savings opportunities and inefficiencies. That amounts to millions of dollars wasted every year.

Dean Drobot/ Shutterstock

Maverick spending, also known more formally as unmanaged spending, is a big problem for most companies. Maverick spending is when employees “buck the system” by going outside of contracts negotiated with preferred suppliers to purchase goods and services on their own, normally paying much higher rates. It occurs most often in areas of indirect spending, which includes large, diverse categories like MRO (maintenance, repairs, and operation), office supplies, professional services, and contract labor, to name a few. This diversity makes maverick spending behavior hard to spot and control. It’s not hard to spot the damage to the bottom line, though.

The ironic thing is that most negotiated supplier contracts are in place for the express purpose of governing tricky indirect spending categories. Yet studies have shown that a large percentage of indirect spending is still non-compliant.

What gives? Why do some employees still go off contract? Here are three eye-opening reasons:

  • Because they can – If there are no controls in place to enforce supplier contracts and negotiated rates, and no penalties for purchasing off-contract, it’s easier for employees to justify bypassing agreements when it suits them.
  • Because they don’t know any better – Especially in large companies, poor visibility is often blamed for maverick spending. If everyone in the buying chain is not aware of the contracts, or worse yet, contracts and catalogs are out-of-date, off-contract spending becomes more likely.
  • Because existing processes take too long – Slow ordering and approval processes are one of the leading causes of maverick spending. If approving a purchase and placing an order takes weeks, employees are going to go right around that process, especially in the case of time sensitive needs.

So how do you stop it? Put plain and simple, maverick spending will not stop until an organization does something about it. There’s a saying that goes, “Make the right way easy, and the wrong way hard.”

Here’s how to reduce maverick spending, so you can get better compliance, and realize some savings from your supplier contracts:

1.Put a system in place for better control

If you haven’t thought about this already, you should strongly consider implementing a purchasing system that automates all of your purchasing, regardless of commodity, approval process, or supplier. Purchasing systems make your entire purchasing process more efficient by governing requisition, approvals, buying, receipt, reconciliation, and reporting. They also serve as a “corral” for maverick spenders, by running all spend through a single platform, and providing only one way to do all purchasing.

2. Provide an intuitive and easy user interface

When putting a system in place, look for a best-in-class solution, known for being easy to use, and place where users can actually find goods or services they most commonly need. Usability and an intuitive shopping experience like consumer e-commerce sites will provide an inviting atmosphere that attracts off-contract purchasers back into the fold.

3. Simplify workflow procedures

World-class purchasing systems can streamline even the most complicated workflow procedures, making it much easier for employees to comply. Cumbersome purchasing processes that used to take weeks can be reduced to days or even hours. Even in cases where complicated ERP or accounting systems are gumming up the works, integration with cloud-based solutions are available to reduce traditional time, cost and resource hurdles and help simplify workflow for employees.

4. Take it seriously

It’s hard to believe, but maverick spenders still sometimes dodge even the easiest and most intuitive systems. The good news is, the spend analytics available in purchase-to-pay systems can tell you exactly where that rogue spend is coming from. Once it’s identified, it becomes much easier for management to enforce spending policies in those areas.

The Root Cause Of Maverick Spend

The issue of maverick spend continues to dominate the Procurious Discussion Board. Does the solution lie in systems? People? Or something else entirely?  Let’s examine some of the approaches to tackling mavericks that came up when this question was crowd-sourced to the global Procurious community.

Orla/Shutterstock.com 

We keep an eye on the most popular discussion questions here on Procurious. One topic that always generates a buzz is the issue of how to deal with maverick spend. The fact that this question keeps rearing its head proves that the problem is perennial; there’s no easy fix and it’s unlikely to be 100% solved any time soon. It’s also an area of common ground shared across our hugely varied procurement community. No matter what sector or geography you may be based in, everyone gets frustrated with maverick spend.

The value in the Discussion Board lies in the authenticity of the advice. Real procurement practitioners share real experiences, war-stories and recommendations, which is so refreshing compared to the “advice” given by agencies trying to push a product or service. There’s also an inherent acknowledgement that there’s no one correct answer – instead of being told by a systems provider that there’s a single, guaranteed fix to your problem, you might get 15 different crowd-sourced responses that you can use to cobble together your own tailored solution.

Systems or people?

Suggested approaches to tackling maverick spend tend to fall into two camps – systems vs people. A discussion started by Louise Cairns shows a great cross-section of suggestions across both these categories.

Procurious member George Thompson, for example, had this advice: “Having a good e-Procurement Portal in place, which is mandated to be used for seeking competitive quotes from suppliers, would be a great help. Simple to use, robust and efficient and very inexpensive SaaS e-Procurement Portals are available … by all means set guidelines, but ensure that there is a user-friendly e-Procurement system in place to support your policies.”

Justin Plokhooy takes the people view: “Relationships, Relationships, Relationships! … Growing your relationships with those perpetrators of maverick spend is vital to ensuring their understanding of the value Procurement can bring. The reason they are behaving like they are is because they probably either don’t fully understand what Procurement brings to the table or had a bad experience that has tainted their view of Procurement.”

Plokhooy advocates the “good cop” approach to engagement: “This is a situation where you will catch more flies with honey rather than vinegar. Heavy handed tactics won’t work.”

Scott Seymour writes that it’s about “Communication and building relationships. You also have to prove your worth to the stakeholders, which can be a daunting task, but stick with it and let them see the value sourcing can bring. Follow this up with data to show the results you are bringing.”

Getting to the root cause of maverick spend

James Ferguson writes: “I would say that maverick purchasing is normally a sign that something is wrong with the current process; people are unaware of the agreements in place, they don’t like the chosen suppliers, the system sucks, the procurement process takes too long, they can’t get the exact goods/services they need or some other issue that is stopping them. Either way, it is Procurement’s job to find out what the root cause is and solve the customers’ issue.”

Iain Wicking, a frequent commenter on the Discussion Board, agrees: “Root cause analysis is a good place to start … [companies] try to solve the problem not realising the … causes are ‘up-stream’ in terms of poor processes, hard to use systems and/or poor leadership that fails to mandate systems (providing they are easy to use) and project the value of good procurement practices (could be a combination of all of these).”

After a tongue-in-cheek suggestion that the best way to address maverick spend is by using a taser, Daniel Warnock writes that “Maverick purchasing is a symptom of a problem, not the problem itself. People buy outside the procedure for various reasons (lack of awareness of the procedure, the existing contract does not suit their requirements etc). Identify the underlying problem and maverick purchasing should be minimised.”

“Maverick purchasing is a symptom of a problem, not the problem itself.”

Cristian Martin has a similar message: “Address why there is maverick spend. Do you have the right policies in place? Has training been given to staff? Do you have the support from your senior management team? Have you given poor customer service in the past?”

And finally, this gem from Piyush Shah gives us some valuable insight into the mind of a maverick: “At a place I worked, there was a feeling [of] us (the people at the plant) versus them (the people at head office). Maverick buying was a way to assert our independence and dominance over them. It was clearly brinkmanship from both sides.”

Keith Bird, Managing Director of The Faculty, comments that the popularity of this topic demonstrates that compliance is a long-term challenge. “Maverick spend and contract leakage hamper effective benefits realisation, but a focus on compliance, effective business partnering and an understanding of the business pressure points will help CPOs make savings stick.” 

You’ve crowd-sourced your peers’ solutions, now it’s time to read the report! Download The Faculty’s “Making It Stick” research on tackling maverick spend and driving savings all the way to the bottom line.