Question: Pushing back on low-priority projects

As a leader of a large IT department, I see first-hand the effects of cutbacks in many support functions.

With fewer employees and contractors, we now handle more projects (and changes) as the business leaders seek new ways to use technology to drive P&L performance. On one hand, we want to be true partners to the product managers, while at the same time signal that we no longer have the same bandwidth to support them.

We are thinking of an "IT chargeback" model to drive prioritization of resources. The idea is to make product managers feel the financial cost of their projects.

Please advise on the effectiveness of such a measure, and maybe suggest other options.

Thank you!

4 Expert Insights

The best way to answer this question might be to first look at IT through the traditional lens of the C-suite.  IT, from an enterprise strategic perspective, is almost always seen in the same category as HR - as a cost. The reason cutbacks occur is because success, from this lens,  is interpreted as 'lowering costs'.

Ironically, the better the enterprise does in its market, the bigger incentive the C-suite has in looking for ways to lower costs.

The "IT Chargeback" model is used by a number of large organizations. I have seen it quite often in insurance companies, for example. The benefit of the "IT Chargeback" model is that it aligns internal performance metrics. We always get what we measure, not what we want - and the chargeback system does allow for the IT department to more accurately and consistently display true cost of service for the enterprise.

The drawback of the "IT Chargeback" model is that it further reinforces the perception of IT as a cost within the enterprise. If cutbacks in support functions are already taking place, the "Chargeback" model may backfire at some point in the near future.

The ONLY way to have a chargeback system that works and that reverses the trend of cutbacks is to FUNDAMENTALLY alter the role of IT within the enterprise from that of a cost to that of a revenue generator. This is specifically why a number of IT companies have begun looking extensively at extracting analytics business packages from day-to-day operations.

The most effective strategy for the IT department to undertake is to conduct an internal audit of analytics business opportunities resident in auto-generated operational data sets.

The elephant in the room is that your company probably doesn't hold IT in much regard these days. (Nothing personal -- most companies don't hold IT in much regard these days!) So while you certainly CAN use a charge-back system to dissuade low priority requests, you might find you can actually earn greater company-wide support for your major initiatives (and staffing) by working more of those lesser priority items.

On the other hand, whether you charge-back, or not, a reasonable way to vet incoming requests is by requesting the "business justification" for the work in question. Likely a good number of them will fail to provide a clear and compelling connection between the work being requested and the company's bottom line. Which buys you some time until they do.

But what percolates to the top for me in this is the question as to what kind of reputation are you trying to build for yourself and your IT shop? Because while creating a formalized process to justify your saying no may provide you with some relief, it likely won't (for a variety of reasons) provide as much relief as you hope. And when it doesn't, then what? You've alienated the people you most need to be your line-of-business advocates.

So you are talking openly and honestly with your peers about this conundrum, yes? And you are soliciting their collegial advice as to how best to cut their babies in half, right?! Same with challenging/supporting your direct reports, employees, and consultants to be more effective? Admittedly, very little of this is easy. But it IS important.

How real you are with others -- whether you treat them like objects you do not respect, or actual people who, like you, are also trying to do their best while struggling with limited resources -- will determine your reputation and success far more than any major priority you deliver. No doubt it's a balancing act. But whether you think so or not, it is why you get paid.

Your IT Department provides a limited supply of a valuable, even indispensable, resource.  All limited resources require some sort of rational allocation system.  How is a project’s priority established in the present system?  Is it political, bureaucratic, or competitive?

It sounds as if the current allocation system is not very discerning as to 1) which requested projects will contribute the most to profits and 2) the opportunity costs associated with the projects left in queue.

I suggest a meeting of all the product managers (your customers) and ask them to agree upon the method they perceive would be the best for determining a project’s priority.  Let them be your advocates for increased IT capacity if your department’s limited capacity is limiting profitable opportunities.

Work with the product managers to create a system for allocating your department’s limited resources so it is making its optimum contribution to the organization’s profits.  This builds on your partnership philosophy.  The fatal flaw in an “IT Charge back” pricing system is that it only considers the cost of each project, not its potential contribution to profits.

I have led & participated in successful charge-back processes in several companies.
Charge-back lends itself well to single, transactional, low cost decisions (like training.)
It does not lend itself well to large capital expenditures with long term payback that must be implemented consistently across the company (like IT projects.)

I think a better option is a client advisory board that helps you fit the highest priority projects to your budget.