Your budget is decided, and it'll be a stretch to deliver all that's expected of you with such limited resources. Then, the absurd happens -- the "unfunded mandate."

"Sure, we understand it's not in your budget. But we need it."

(Oh, in that case, I guess all my staff will work for free to get it done. Not!)

"You're an exec. I know you can find a way to do it."

(Now there's a great pep talk.)

"It's not like we have a choice. 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!)

Then, it gets worse. A business unit went off and bought a system without working with you. Now, their project is in trouble. You're expected to come to the rescue, and to support it in the future.

"Incremental funding? What are you talking about? We just need you to do this. It's your job to do this."

And, just when you think things can't get worse.....

"We're expanding the business into a new region, and we need you to extend the network and supply email to 27 new field offices. Funding? Come on, you're already budgeted for email and desktop support."

Unfunded "mandates" come in a variety of forms, but they all add up to the same thing. Whether it's your boss or your clients, people expect something for nothing and blame you when you can't deliver.

What Not to Do

You can't say no. This unfunded mandate really is important to the executives at the top, or perhaps it's a real mandate coming from government regulations or laws, or from 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 fulfill the mandate. As a result, things 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 a great deal of respect among staff and builds a lot of animosity for not protecting them from unreasonable demands.

Setting one's staff up for failure is not going to get the job done, and it's not nice.

Another response, hardly better, is to instruct staff to sacrifice sustenance activities like training and innovation.

One may think this is only 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 organization can absorb more work without more resources. It will be expected again and again. As a result, there will never be enough time for anything but working directly on urgent projects.

Of course, this is myopic. Any IT organization 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 his or her decision, explaining to clients that the unfunded mandate has bumped their priority on the organization's resources.

While open communications protect the integrity of the organization, 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.

The Solution: Act Like a Business

The solution is founded on the following premise: If IT is a business within a business, then the IT budget doesn't really belong to the CIO. Instead, it's a "pre-paid account" -- money put on deposit with the IT organization in order to buy products and services throughout the fiscal year.

I am not talking about chargebacks. I'm simply describing a governance process that matches expectations to available resources. This concept was discussed in more detail in my column on allocations.

As a business, IT has many expenses. It spends money on compensation, vendors services, etc.

It earns revenues to cover those expenses by delivering the products and services that clients choose to buy. Clients use their pre-paid account to pay for those purchases. And they can only buy what they can afford -- that is, the cost of their purchases cannot exceed the resources funded by the budget.

How do clients make these purchase decisions? Typically, they form a committee with a title like "IT steering committee" and establish a process with a name like the "portfolio management process." Demand management is nothing more than a process for deciding what to buy with that pre-paid account.

So back to the unfunded mandate. It's not a mandate that forces IT to do something for free. That's impossible. Nothing is free. Everything has a real cost to shareholders/taxpayers/donors.

An unfunded mandate simply forces clients to use their pre-paid account to buy something they didn't intend to buy. In other words, clients' chain of command have mandated that clients buy something from IT that they didn't necessarily want.

As a result, less remains in the pre-paid account. It's up to clients to reset priorities and decide what they'll "not buy."

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

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