Last month we looked at procurement stakeholders and what they want. This month – how to control those that just do what they want? And how you can manage them better by balancing stakeholder and company needs? Jonathan Dutton FCIPS offers some helpful suggestions for Supply Clusters members:
In the previous article, we asked who are your stakeholders and what do they want exactly? Yet this is often a slightly misleading question for busy procurement people because most do not start from the luxury of this question. In fact, most often a procurement professional has started from a quite different question altogether – more like “they did what?” This is often because of maverick buying…
What is maverick buying?
Maverick spenders are people in the organisation (often relatively senior people) who make commitments with suppliers on behalf of your organisation without going through the approved procurement process and without the necessary authorisation to do so.
You may think that they shouldn’t do that or even that they can’t do that. But they can, and they do. And they can deploy real ingenuity to get things done, even be surprisingly brazen in doing so, or unapologetic, or just feign ignorance when queried.
Maverick buying is when an employee purchases goods, parts or materials by going outside of the official or accepted buying channels of their organisation to make commitments on behalf of their organisation without specific authorisation to do so.
How do they do it?
Primarily, they just work directly with a supplier and just discuss and agree on their requirements and delivery needs. Price, if it is discussed at all, is last in their consideration. Follow-up e-mails confirm the worst.
Or they can just use their corporate credit cards to order minor supplies. Or call and order on the ‘phone. Or just take liberties with online ordering and requisitioning through the ERP or P2P system. They can even just keep receipts or delivery notes and put them on their corporate expenses list. The most usual way is just to order verbally, and by email, and get “the invoice sent to bought-ledger”
The most insidious behaviour is when stakeholder managers engage others to do their bidding. Usually junior staff. Almost bullying staff to place orders for them “just get it, now” or emotionally blackmailing them “I’ll just tell everyone it was you who held us up” or threatening them “it will be all your fault” or pulling rank “I am running this department, you have to do as I say” or even careering them “I’ll tell the CEO it was you who said no.” Even if passive-aggressive, these are horrible behaviours and more common than we know. The role of corporate culture is critical in both the development and curtailment of such behaviours.
The cost of mavericks
Most mavericks are often genuinely blind to the costs and the risks of how they operate. They believe they know best. They serve the greater good and that justifies their approach to them. Smaller factors are ‘petty’ they feel.
Yet, apart from the missed discounts, savings and efficiencies of circumventing corporate procurement deals, they are exposing the organisation to significant risk. Sometimes indirect risk – but a risk nonetheless. Risk of non-compliance, risk of non-delivery, risk of sub-standard quality, risk of liability, missed duty of care. Indeed many of the benefits of professional procurement are undermined by maverick buying – as explained in the JD Strategic Procurement Masterclass, of course.
But maverick buying also compromises reporting. It leads to inefficient work, correcting past errors. It creates inter-departmental conflict. Poor service. Confused suppliers. It is all bad.
Why do they do it?
Maverick buyers are often in a position of responsibility within your organisation. A responsibility for getting things done. The most righteous are customer-facing or focused on the corporate mission and their department’s or project’s role in its fulfillment.
Often they think they are in the right. That they are really ‘saving’ the organisation time & money, or being more efficient doing things themselves, or genuinely are not commercially aware enough to think that purchasing processes would be in place. Or, at their worst, they willingly just disregard the bureaucracy of process as a petty hindrance.
However, such maverick buyers are also driven. Even obsessed with their own endeavour for the business. They are goal-focused, tenacious and quite entrepreneurial in their work.
These are admirable qualities in the main – when well directed, and there is the clue for procurement success faced with maverick buyers. Direction.
Making it easier to do the right thing
The key to controlling maverick spenders is to make it easy for them to do the right thing. Why transgress, if it is actually easier and quicker to comply?
And, sometimes, that means we in procurement have to yield a little too. We have to devise simpler processes, ones more stakeholder focused, more client orientated.
And there are many different ways to do this nowadays. Most large companies have developed ERP or P2P systems that can be managed to offer a better service to requisitioning managers and users. Almost all can integrate with new functionality and systems, especially cloud-based ones, that offer better-faster-easier client interfaces. Intuitive even.
At home, we all enjoy ‘one-click’ ordering on Amazon, shopping-cart technology and, even, verbal ordering through Alexa. Why not in the office? Our users want the same buying-experience in the office as at home. Better even.
How we provide real-time user experience, balanced with the good governance our organisations now demand, is a new area of challenge for professional procurement: And to get it right, we have to weigh many factors, not least speed.
7 ways to quickly control maverick buyers
Building this control framework today is easier than ever for procurement leaders; with different options to suit your mix of need, systems availability, budget and corporate culture – listed here in order of ease, perhaps:
1. Go over their heads – get their boss to control them
This can be risky and can alienate your stakeholder colleagues. And there is often no guarantee that their boss doesn’t feel as they do. They believe in the worthiness of their goals – not your process. Approach with care.
A variant on this is to get your boss (or CPO, or CFO) to do your dirty work, and tell the offending Department to toe the line. But there are no guarantees here, and things can slip back to normal quickly. And it hardly reflects well on you at the outset, or during ‘implementation’ or even the long-run. Persuasion is better than instruction.
2. Spending limits – to enable small ordering, but stop large orders outside the process.
Just provide your stakeholders or users with an ‘approved’ individual spending limit. Often designed to be just under what they’d want. So by design, the key purchases have to go up the chain for approval. This keeps people mostly onside but introduces an element of control.
Such a methodology can be combined with the famous “Get three quotes” rule or a range of administrative requirements, policies and processes.
3. Blanket orders – for ongoing regular supply of goods
A manual process, that can be used in the absence of any systems (how it was done before integrated cloud-based software); although often frowned upon today:
Simply, agree a rate card, discount and terms with a supplier or suppliers and ask users to order directly by manual form, purchase order or email, or even verbally. At month’s end reconcile the delivery notes collected by users with the supplier’s single monthly invoice at a ‘review meeting’ with the users. Issue one order retrospectively to cover the monthly requisitions.
4. P Cards – managing decentralised spend
In a culture of maverick spenders with little compliance and few systems, Purchasing cards can help. Corporate credit cards. Especially where many minor purchases across geographic range are needed to keep the wheels turning.
Many CFOs, and entrepreneurs, believe that corporate cards encourage spending. But if you manage implementation properly, they can be very effective tools to manage and contain spending. They have been used effectively for travel spend for years. Even as lodged cards (a single corporate card, which many people spend against, lodged with a single supplier).
The big benefit of cards is actually – spend visibility. The card companies (Visa, Mastercard, Amex, Diners) or even the card retailers (banks, retailers, airlines, fleet companies) offer excellent information on spending. Better than most P2P systems do. They can also be easily coded into categories and spend departments.
Once you have issued cards to users, within weeks you will have a very clear picture of spend patterns built on solid data. Then begin closing down the excess within the usage. Apply spend limits by card, by month, by the day even. Apply only selected spend categories. Apply only selected merchants. This sort of control framework by card is easily possible nowadays. So cards enable people – but only within the rules you agree.
5. Aggregators – outsource the deal-making and the technology
Using aggregators also brings benefit quickly to a maverick buying scenario. Supply Clusters have pre-set deals with around 37 vendors for 37 or more categories. Pre sourced and pre-negotiated contracts agreed on industry-relevant terms. Users simply order directly with the vendor and discounts built on other members’ volume apply – with rebates quarterly set against spend thresholds.
Importantly, aggregators like Supply Clusters invest a great deal in technology. Their payment & rebate tracking system ports directly into their vendor’s selling systems – for the most accurate data. Once you have a clear picture of spend profile, you can make better-informed policy (and sourcing) decisions as the procurement manager.
6. Web catalogues – replicating the Amazon experience
In the old days, we used to just literally hand out catalogues and a customer order code to approver spenders.
Today, it is building private websites with approved login rights for key people to access an online web catalogue with pre-agreed options at pre-agreed prices from pre-agreed suppliers. These can be built in-house, hosted in the cloud, or just be “punch out” catalogues selected from the supplier’s own existing online purchasing website.
7. Guided buying – the new way to self-serve using systems
Implementing new cloud-based systems (or amending older legacy systems already in place) with new software functionality can easily offer a guided-buying facility for users. The system presents a “follow-the-bouncing-ball” intuitive process that requires minimal training and offers either firm instructions or just ‘hints on play’ as the user works through the process online towards pre-approved goods & services with pre-selected suppliers or, even, directly to their portals.
“Guided buying helps users get it right”
Effectively, with this approach, you are opening specified buying-channels so users can self-serve quickly and easily. This is ideal for operationally critical regular spend, and even for ongoing indirect goods requirements. Not so much for capital projects, large spend items or key one-time investments – which should be the domain of the procurement team.
“Establishing easy buying channels is the key”
Finding the balance
Truthfully, at the end of the day, everyone in the organisation wants the same thing – the fulfillment of their mission, a successful organisation and a satisfied customer. Maverick buyers, in a way, are more committed to this vision as they take short-cuts to try and achieve it quicker – by taking service standards into their own hands.
Procurement managers have to find ways to make the buying easier, and faster, and yet still protect their organisation against risk and ensure policy compliance against both internal and external policies.
Finding the balance between service levels and the required governance is the challenge facing procurement managers today – thankfully there is more help than ever at hand to accomplish this.
February 2020 Procurement Supply Clusters
Jonathan Dutton FCIPS is the former founding CEO of CIPSA - the procurement peak body in this region. He now works as an independent management consultant specialising in procurement and has a non-executive role at Supply Clusters www.jdconsultancy.com.au