HLTH 8465 Week 7 Partnership Agreement Analysis Example

What the Memorandum of Understanding Actually Requires: A Clause-by-Clause Analysis of the Crisis Center Agreement

Student Name

Walden University

HLTH 8465: Strategic Planning: Collaboration, Cooperation, and Coordination

Instructor Name

Month Day, Year

What the Memorandum of Understanding Actually Requires: A Clause-by-Clause Analysis of the Crisis Center Agreement

Introduction

The four partners in the composite county's adult crisis receiving center have signed a memorandum of understanding. A signature can promise very little, and this analysis reads the memorandum clause by clause to find out how little. It sorts each clause by the behavior it actually requires, shows how the conditions attached to resource commitments let partners decline without breaching anything and uses transaction cost reasoning to explain why the partners wrote so many clauses that require nothing. The memorandum is composite; its twelve clauses are summarized here in the order they appear.

The Twelve Clauses

Clause 1 states the partners' shared commitment to reducing emergency department and jail use by adults in crisis. Clause 2 states their shared values of dignity, recovery and least restrictive care. Clause 3 commits the partners to meet monthly. Clause 4 establishes a steering group of one senior representative from each. Clause 5 commits the authority to fund operating costs "subject to annual appropriation." Clause 6 commits the larger system to provide psychiatric clinicians "as staffing permits." Clause 7 commits the independent hospital to provide space "on terms to be agreed." Clause 8 commits the sheriff to "encourage" deputies to use the center. Clause 9 commits partners to share data "to the extent permitted by law and partner policy." Clause 10 commits partners to resolve disputes "in good faith." Clause 11 allows any partner to withdraw on 90 days' written notice. Clause 12 states that the memorandum is not legally binding.

Sorting the Clauses

Table 1 sorts the clauses into four categories by the behavior each requires.

Table 1

Clauses Sorted by the Behavior They Require

How the Conditions Work

The five resource clauses carry the memorandum's substance, and each contains a condition that lets the partner decline without breaching anything. The authority's funding is "subject to annual appropriation": if the county commission does not appropriate, the authority has not broken its word. The larger system's clinicians are promised "as staffing permits": in a tight labor market the system decides when staffing permits. The independent hospital's space is offered "on terms to be agreed": until terms are agreed, nothing is owed. The sheriff will "encourage" deputies: encouragement has no measure. And data will be shared "to the extent permitted by law and partner policy": each partner writes its own policy.

None of this is bad faith. Each condition reflects a real constraint: appropriations are a commission's decision, staffing is uncertain, a lease needs terms, a sheriff cannot direct every patrol decision in advance and privacy law does limit data sharing. But read together, the five conditions mean that the memorandum commits no partner to any specific action, and that the center could fail to open without anyone breaching the document.

Why the Partners Wrote It This Way

Transaction cost reasoning explains why. Williamson argued that the costs of drafting, negotiating, monitoring and enforcing agreements shape how parties structure their relationships, and that under uncertainty and the risk of opportunism, complete contracts are often too costly to write (Williamson, 1981). Here, specifying staffing levels for the larger system would have required agreeing on patient volumes no one yet knew; monitoring them would have required data the hospitals were reluctant to share with each other; and enforcing them would have required remedies none of the partners wanted to invoke against a neighbor. Writing "as staffing permits" avoided all three costs at signing. The partners, in effect, deferred those costs to later, when they would know more.

Williamson also emphasized asset specificity: when one party makes an investment that is worth much less outside the relationship, it becomes exposed to the other party's opportunism, and it needs stronger protection than a general agreement provides (Williamson, 1981). The independent hospital's renovated space is exactly such an asset. Once it has converted part of its campus into a crisis unit, the space is worth little for any other purpose, and the hospital depends on the authority's funding and the larger system's clinicians to make it useful. Resource dependence theory points the same way, predicting that an organization in that position will try to secure its dependence through formal terms (Pfeffer & Salancik, 1978). Yet Clause 11 lets any partner leave on 90 days' notice, which protects the partner that has invested least and exposes the one that has invested most. The memorandum's withdrawal term is the clause most out of line with the partners' actual positions.

That deferral was rational. The danger is that it was also invisible: the memorandum looks like a commitment, and partners who did not sign it, such as the county commission or the public, may read it as one.

What Beyond the Document Holds the Partners

If the memorandum requires so little, what makes the partners act? Ring and Van de Ven argued that cooperative relationships between organizations develop through repeated cycles of negotiation, commitment and execution, and that over time informal understandings and personal relationships come to supplement or even substitute for formal agreements (Ring & Van de Ven, 1994). In this county, the steering group's monthly meetings, procedural clauses that require almost nothing, may matter more than any resource clause, because they are where the informal commitments that actually move staff and money are made and tested.

The analysis therefore recommends two things. First, the partners should treat the memorandum as a statement of intent and negotiate specific operating agreements, starting with the independent hospital's space terms and the larger system's staffing levels, before the center's opening date is announced. Second, the steering group should record, at each meeting, what each partner has actually done since the last one, so that the informal commitments the memorandum cannot hold are at least visible.

References

Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. Harper & Row.

Ring, P. S., & Van de Ven, A. H. (1994). Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19(1), 90-118. https://doi.org/10.2307/258836

Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American Journal of Sociology, 87(3), 548-577. https://doi.org/10.1086/227496