Your budget is decided and it’ll be a stretch to deliver all that’s expected of you with such limited resources. Then comes the ‘unfunded mandate’ – that project you don’t have money or staff for, but can’t say no to.

“Sure, we understand it’s not in your budget. But we need it,” your boss tells you. You smile, grit your teeth. Oh, in that case, I guess all my staff will work for free to get it done, you think. Not!

“You’re an exec. I know you can find a way to do it,” he continues. Now there’s a great pep talk.

“It’s not like we have a choice,” you hear next. “This comes from the top.” Ah, well then, no problem, since it’s mandated by someone up top who can create hours and money out of thin air!

Whether a business unit went off and bought a system that needs IT support, or the company decides to expand operations into a new region (with the consequent need for a network and email), unfunded mandates are common and they all add up to the same thing. People, whether your boss or your clients, expect something for nothing and blame you when you can’t deliver. The only thing you can do is to get them to decide which other projects to delay.

How not to respond
You can’t say no. No matter how unreasonable it seems, this unfunded mandate really is important to the executives at the top. Perhaps it’s a real mandate coming from government regulations or law. Maybe it’s imperative because of the business landscape. In any case, it’s not negotiable.

A good leader knows that it’s not right to simply pass an unreasonable mandate down to subordinates with the same insensitivity as that which was imposed from above. The ramifications of that poor choice are obvious. Staff individually set their own priorities, choosing which other commitments they’ll postpone in order to fulfil the mandate. As a result, other projects fail randomly. Maybe everything comes in late. Maybe staff cut corners on quality. Or maybe they completely fail to deliver on some promises.

Meanwhile, the CIO loses respect among their staff and builds a lot of animosity because they have not protected them from unreasonable demands. Setting the staff up for failure is not going to get the job done and it’s just not nice.

Another response, hardly better, is to instruct staff to sacrifice sustenance activities like training and process innovation projects. One may think giving up training or process improvement is only necessary to satisfy a temporary, short-term exigency. But the truth is, this is a slippery slope. Do it once, and you’ll have reinforced the belief that your organisation can absorb more work without more resources. You’ll be expected to do it again and again. As a result, there will never be enough time for anything but urgent projects.

Of course, this is myopic. Any IT organisation that’s willing to do without training, innovation, process improvements, client relationship building and other “keep-the-business-viable” activities is only postponing its inevitable demise. Over time, IT becomes difficult to do business with,inefficient and out of date.

Another possibility that’s not much better is for the CIO to decide which client projects to postpone or cancel. A CIO may be honest about their decision, explaining to clients that the unfunded mandate has bumped their priority on the organisation’s resources. However, although open communication protects the integrity of the organisation, it doesn’t do much for its customer focus or client relationships. It’s like saying to a client, “As your CIO, I have decided that the project you requested isn’t all that important to the enterprise.”

Worse, if decisions are made behind closed doors and clients don’t know what’s going on, IT gains a reputation for being untrustworthy.

So what else can a CIO do? The answer is found in the business-within-a-business paradigm.

Solution: act like a business
If you think of IT as is a business within a business, the IT budget doesn’t really belong to the CIO. Instead, it’s a prepaid account – money put on deposit with the IT organisation in order to buy products and services throughout the fiscal year.

I am not talking about charging back. I’m simply describing a governance process that matches expectations to available resources. As a business, IT has many expenses such as compensation and vendor services. IT earns revenue to cover those expenses by delivering the products and services that clients choose to buy. Clients use their prepaid account to pay for those purchases. And the cost of their purchases cannot exceed the resources they have in that account. Typically, clients make purchase decisions through a committee with a name like ‘IT steering committee’ using a process such as portfolio management to decide what to buy with that prepaid account.

An unfunded mandate can’t force IT to do something for free. That’s impossible. Nothing is free. Rather, an unfunded mandate forces clients to use their prepaid accounts to buy something they didn’t intend to buy – something they don’t necessarily want. As a result, less remains in the prepaid account. It’s up to clients to reset priorities and decide what they won’t buy to pay for the unfunded mandate.

Remember this: unfunded mandates force the hand of the clients, not the IT organisation. The only reasonable way a CIO can respond to an unfunded mandate is to present the situation to the clients who control the prepaid account, and let them either find more funding or decide what IT products and services they’ll do without.