Mr. Auinger, today we are talking about the underestimated topic of Maverick Buying. To begin with: How can the cooperation between the procurement department and the functional departments be improved to effectively prevent Maverick Buying?
Let me briefly explain the concept of Maverick Buying for those who don't work with this term every day. The term "Maverick" originally comes from the Wild West. Its namesake is Texan cattle rancher Samuel A. Maverick (1803-1870). Unlike other ranchers of his time, he did not brand his cattle. Calves without a brand have since been called "mavericks" in English. In today's usage, the term "Maverick" has also become firmly established for outsiders, rebels, and non-conformists. "Maverick Buying" describes a procurement process that excludes the involvement of the procurement department, where functional departments take matters into their own hands for various reasons, even though it should ideally be conducted by or in collaboration with the procurement department.
So, how can the cooperation between functional departments and procurement be improved? First and foremost, it is important to work together with the functional departments (and the management) to identify the adverse consequences that Maverick Buying can have on the company. Once this awareness is established, we can focus on preventing Maverick Buying or at least reducing it to a "necessary minimum." Sustainable improvement in the collaboration between the procurement department and the functional departments is typically achieved by establishing clear communication channels and responsibilities.
Regular meetings at the strategic and operational levels enable open exchange of information and needs. A shared understanding of the company's goals and the procurement strategy aligned with those goals promotes collaboration and helps the functional departments integrate procurement into their decision-making processes.
Last but not least, positive experiences from procurement (e.g., successful negotiations with external service providers, resolving scheduling issues by presenting alternatives) help generate acceptance from the functional department's stakeholders and usually result in early involvement of procurement in their decision-making processes.
Konrad Auinger | Senior Procurement- and SCM Executive
LinkedIn Profil from Konrad Auinger
What role does transparency in costs and procurement processes play in reducing Maverick Buying and strengthening trust between departments?
Transparency in procurement processes and costs is the essential factor that enables trust between the parties involved.
The procurement department should inform all relevant functional departments about the procurement processes applicable within the company. This information should cover not only the mandatory aspects, such as generating a purchase order ideally before the supplier invoice is received in the system but also the advantages that the functional department gains from collaborating with procurement (e.g., price reductions, budget underspending, competition, time advantage).
Clear and proactive information about prices, supplier contracts, and budgets helps avoid misunderstandings and make better decisions. The functional departments can recognize the cost efficiency and value contribution of procurement because trust is built through openness and transparency.
How can incentive systems or rewards for employees contribute to preventing Maverick Buying? Can you provide us with three successful approaches in this area?
Considering compliance rules, I generally view direct rewards for employees rather critically.
However, the following three incentive systems can contribute to preventing or sustainably reducing Maverick Buying:
1. Training and Awareness Building
Employees are informed about the impact of Maverick Buying through training sessions and workshops. Providing alternatives and best practices, as well as knowledge about the costs and risks associated with it, can help employees act responsibly. The practical relevance in the training sessions is essential for success. In departments where an acceptable "Order Quote" is not achieved despite training, awareness can be created by consciously escalating individual cases, such as withholding payment to suppliers without an order or having the employee personally pay for the ordered goods/services. However, these measures need to be comprehensively evaluated and coordinated in advance with the responsible departments (e.g., Legal/Compliance, C-Level) and then implemented as binding actions.
2. Best Practice Sharing
Implementing an internal best practice sharing program where employees can share their successful approaches to cost savings and procurement efficiency. This can be done through management information sessions, the intranet, or other communication platforms where employees can showcase their achievements (public recognition). By presenting and acknowledging these contributions, other employees are encouraged to adopt their colleagues' best methods and learn from their experiences. Learning from peers or like-minded individuals is generally easier than simply following directives "from above."
3. Regular Feedback Sessions and KPIs
Implementing a regular feedback mechanism where employees, particularly stakeholders from different departments, can express their concerns, challenges, or improvement suggestions related to the procurement process. In addition, Key Performance Indicators (KPIs) are valuable for introducing an objective dimension. For example, in the past, we introduced a KPI called "SAP Order Quote" and measured it monthly for each department. This KPI measures the percentage of transactions that went through the ERP system (in this case, SAP) and compares it to the total number of transactions (with and without orders).
Through open, transparent, and constructive communication, employees are encouraged to address potential issues early on, improve the KPIs, and find solutions together instead of resorting to "voting with their feet" or becoming "Mavericks" themselves.
How can technological solutions like digital platforms support companies in detecting and preventing Maverick Buying?
Technological solutions such as digital platforms can help companies in detecting and preventing Maverick Buying. By implementing procurement software with integrated approval workflows and budget controls, purchasing processes can be automated and standardized. Real-time data and analytics tools enable early identification of deviations and Maverick Buying. Additionally, digitalization promotes transparency and improves collaboration between departments.
However, alongside the technological perspective, individual employees should not be forgotten because ultimately, their actions determine the success or failure of the tool implementation. Specifically, this means providing employees with a simple and intuitive software solution that offers a "shopping experience like Amazon" while ensuring compliance with procurement and compliance rules in the background.
You would like to know how SCALUE could help to optimize your procurement?
Can the proven ROI (Return on Investment) of Maverick Buying be measured?
This is a challenging question and much depends on the company's policies and, in particular, the CFO's perspective. However, I believe that the measurable ROI of Maverick Buying or its reduction to an appropriate minimum can be determined. For instance, one approach is to analyze the costs and impacts of Maverick Buying incidents. By comparing actual expenses with planned (budgeted) or negotiated costs, savings or additional costs (losses) can be identified. Other factors such as additional workload, risks, quality compromises, or legal consequences should also be taken into account. A comprehensive analysis allows for quantifying the actual financial and operational (income statement) impact of Maverick Buying, thereby enabling measurement of the ROI.
Thank you for the interesting insights. Is there anything else you would like to add on the topic?
Let me share one final thought: By using the term "Maverick Buying," we are highlighting the "black sheep" or the "unbranded cattle" and putting the focus on "deviation." In my opinion, it is much better to label it as "correct buying" and emphasize the "desired" or the "good practices" that, together with procurement, ensure that companies handle their money responsibly.
The corresponding KPI would then be called the "correct buying" ratio, representing the percentage of compliant purchasing transactions out of the total number of purchasing transactions. Target values would typically range from 90% to 95%, depending on the industry or the maturity level of the company.
How SCALUE can help you? Schedule a free demo now!
Learn more on our blog: Get More Insights
Follow us on LinkedIn: Get more Content