Creating a Memorandum of Agreement for your business

Last month I shared with you an example of a real world negotiation – a Memorandum of Agreement between the Canadian security agency and the Mounted Police. These government bodies had used an MOA to formalize a relationship that was rather complicated.

But MOAs aren’t only valuable for governments. In my work as a negotiator, I’ve helped implement MOAs for companies of various sizes – and am going to share with you today a quick guide to how you can create an MOA for your own business.

When would you use an MOA?

You’ll likely want to turn to an MOA if you’re entering into, or already participating in, a business relationship with another firm or individual. Taken out of the business world, it may be helpful to think of an MOA as a ‘roommate agreement’. In contrast, a full contract is more along the lines of a prenuptial agreement – it would be more formal, cover a longer period of time and contain a broader array of subjects than an MOA.

What are the key elements in an MOA?

Who: Who are you? Who is your counterpart? A business? An individual?

What: What is your relationship? Vendor + Customer? Competitor? Industry partners?

Why: Why are you looking to do an MOA? What are you doing with each other or for each other? Sharing information? How are you sharing it? Is one of you doing the other a favour? Are you agreeing to enter into a serious negotiation on a contract and this MOA will help set ground rules and expectations?

How: How are you going to interact with one another? How often will you meet? Communicate? Are emails ok, or do you require face-time?

Achieving your MOA

1) After deciding to start on an MOA, I suggest that both parties come up with their own list of what these key elements are, and then meet to compare notes and refine. It’s an interesting exercise to let you know how closely aligned your expectations are from the get go. This alignment (or lack thereof) is an indication of what roadblocks are likely to arise during your negotiation. Collaboration is the name of the game – so even if these first few alignment sessions are difficult, stick with it.

2) Once you’ve compiled and agreed on a list of the essentials for your MOA, start drafting. And drafting. And drafting. Because this MOA is going to impact the way your team (and you) conduct your daily work, it’s important that the language be comfortable for you. I highly recommend engaging all stakeholders – commercial, finance and legal teams – in your internal reviews. The various subject matter experts will be able to let you know if something in the MOA isn’t possible for them to execute on – and more importantly, they’ll be able to offer suggestions to improve the deal.

3) When it comes time to sign, enjoy the moment! Take some time to ensure that everyone in your team effected by the MOA understands how they’ll operate with their counterparts going forward. It can even be beneficial to have a joint kick-off meeting or call between the groups so that these relationships formalized by the MOA can start being forged off of the page as well.

Tips

Although an MOA may be more limited in scope than a contract, the negotiation of it can be just as involved. It’s important to keep in mind that collaboration is key – you’re forging a formal relationship with another individual or firm – this isn’t the time for positional tactics or strong-arming agreement.

If you’re having a tough time bringing together the details, it may be helpful to bring in a third party Negotiation Consultant to provide guidance on how to get back on track, identify the core items of importance, and coach both of you on how to implement the terms of the MOA in your business.

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Have you implemented an MOA? Any lessons learned? Would it be helpful if I posted a sample MOA to highlight these key concepts?

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Devon Smiley is a Negotiation Consultant, and is passionate about helping businesses achieve best possible results in their procurement contracts. For more information on how a Negotiation Consultant can help you visit What is Negotiation Consulting? or get in touch at devon@informedstyle.com