Chapter 2: Formalizing Coordination
Coordination between agencies can occur through either informal or formal means. Each level of formality is associated with benefits and drawbacks; therefore, the most appropriate form of coordination will be situation specific.
Informal coordination involves efforts between agencies to work together in either verbal or written form, without official contractual agreement. Informally coordinated actions may take place on a regular and planned basis or may occur in an ad-hoc manner. A major benefit of this form of coordination is the relatively low transaction costs (e.g., time, effort, and financial obligations) associated with negotiating coordination. These lower transaction costs may allow informally coordinated actions to begin sooner than through formal coordination. Another benefit of informal coordination is adaptability, as where change is needed, terms and conditions do not need to be renegotiated through a structured formal process. Lastly, withdrawal from informal coordination does not require navigating legal or administrative processes.
A significant disadvantage of informal coordination is that the roles, rights, and responsibilities of each agency are not always fully delineated and there are risks of change, defection, or withdrawal. The lack of well-specified roles and responsibilities may lead to confusion or miscommunication that negatively impacts how efficiently the parties can complete their agreed-upon actions. It may also result in resentment or a loss of trust between the parties if the informal nature of the agreement leads to mismatched expectations. Further, a lack of legally defined consequences, makes it easier for defection – during which one agency fails to follow through on a commitment – to occur.
Formal coordination entails a concrete commitment between agencies, with details that are negotiated, written, and verified by signature from each party in the agreement. A key benefit of formal coordination is that the roles, rights, and responsibilities of each party are clearly defined. By specifying the details of the commitment, formal coordination can help to minimize or avoid miscommunication, confusion, or mismatched expectations. Therefore, this form of coordination may increase the efficiency at which the agreed-upon actions are executed. Formal coordination is also enforceable; there is a consequence for parties that do not act in the agreed-up manner, and this consequence is legally enforceable if necessary.
The drawbacks of formal coordination are primarily related to transaction costs. Time, effort, and in some instances, resources, are needed to negotiate and draft the terms of a formal agreement. In additional, formal agreements are less adaptable than their informal counterparts, either because of the high transaction costs associated with re-negotiating the terms or because the original terms prevent modification to the agreement.
Whether formal or informal coordination is merited in any given situation will depend on factors such as the number of parties included in the coordination effort, the prior relationships between the parties or their desired relationship in the future, the transaction costs for coordination, the projected duration of the coordination, and the consequences should a party fail to comply with the terms of the agreement. Informal coordination may be an ideal way to begin a partnership between agencies because it can help establish trust while minimizing transaction costs. It might also be the simplest way for agencies with a history of working well together to accomplish shared goals. In contrast, formal coordination might be the most effective method when many parties are involved, when the nature of the coordinated action is complex, or if the parties want the option to legally enforce contract noncompliance. When selecting the form of coordination to use, agencies will need to consider the goals of the coordination effort as well as the benefits and risks of each form. Even within formal coordination, a variety of options exist. The remainder of this module examines the key characteristics of formal agreements and the potential structures used within them.