Succession Plans and Operating Agreements By Dr. Mark L. Vincent

Know How Operating Agreements Impact Succession Plans

Does your succession plan include your operating agreements with other organizations?

Many CLA member organizations have one or more arrangements that fall under the broad category of being associational or networked. For example:

• joint venture
• franchisor/franchisee
• club charters and chapters
• IP licensing and white labeling
• holding company under which can be found multiple 50c(3) sub-organizations
• partnerships-formal and informal
• operating agreements for specific and jointly offered services
• associations with member organizations

These arrangements, whether sophisticated or not, are made so that more can be accomplished together than any entity could have done alone. The intention is to pool resources and achieve a better result across a broader range of locations, serving a larger group of people.

Potential Problems

Almost without exception, problems arise almost immediately after an agreement is reached to operate together, and certainly when people who were not involved in forming the operating arrangement are now responsible for it.

It is as if two ships came so close to each other that they cannot see they are actually on a slow course to collision. They don’t notice because they focus on how their specific need is met by the other at the moment, rather than how it will not be met in the future.  They cannot remain mutually self-centered without colliding sooner or later! Instead, they must do the work to create a way to keep the spirit of cooperation alive. Over and over. Not assuming that the work of coming together is done once the ink is dry on the agreement.

The moment that brought them together, a mutually self-interested one, leaves bruises on each other when they collide. And it will happen. If the only goal was coming together, then there is no remaining momentum to help them find new alignments. Achieving renewed alignment can be more complex than deciphering the legal language in the franchising contract or the memo of understanding. 

The Conceptual Framework

Fortunately, there are ways to approach this conceptually that offer wise guidance. Consider the diagram below.

Its graininess is proof that it has been around for a while!  It essentially draws on Luft’s Zucchini Connection to demonstrate that the ongoing viability of a franchised (networked, associational, or partnered) arrangement begins with a mutually derived and constantly agreed-upon understanding of the customer’s or client’s decision for what they need. This intended result (often economic) becomes a new reason for a franchisor, franchisee, and even vendors with whom they must work to strategize and strengthen the organization they build and adapt together, continuing to meet customer needs.

Recognizing Difficulty

Forming these relationships is difficult. This post, thus far, has been about the greater difficulty of maintaining and building upon them. We chose this level of difficulty because without it, the service we want to bring to the world would not be possible.

So, imagine an even greater difficulty: transferring these arrangements to a new leader when succession planning and leadership continuity are underway. If successors must discover these associational arrangements and are not onboarded to them, they quickly become ineffective and endangered.

Get a Head Start

Maestro-level Leaders, a Christian Leadership Alliance initiative, addresses these complex dynamics within the series of issues that successful succession entails. We are recruiting for the next cohort, with an intended start date in the fall of 2025. Now is the time to express your interest. You benefit. Your organization becomes more capable of propelling a successor into the future. And those much-needed and hard-to-manage associational relationships gain some new life.

Dr. Mark L. Vincent is the Founder of Design Group International and the Society for Process Consulting. He hosts the Third Turn Podcast and facilitates Maestro-level leaders. Discover the Maestro-level cohort that is waiting for you! Click the banner below to learn more!

A new cohort is forming this fall. Use your third turn to create a lasting legacy. Join a cohort!

Find out more