Running Smoothly

STEP 1  Operating Procedures

Do you remember watching Sesame Street? It’s okay, we’re all women here, you can admit it... you loved Oscar. You even thought Bob was kinda cute. Do you remember the episode where they talked about cooperation? I always thought it was so silly. Who wouldn’t want to cooperate? Who doesn’t know HOW to cooperate? Doesn’t everyone know how "get along"? Why did they have to devote a whole show to cooperating? (Okay, not the whole show, the letter C and the number 3 got their airtime too.) I just didn’t understand why they needed to tell us over and over again when it was so obvious.

That was the point: It wasn’t and isn’t obvious to everyone. What you may think is cooperating, might actually be hampering someone else. Even in an investment club, the rules have to be spelled out in clear sentences, and on paper. This way there is no misunderstanding as to how your club will operate. We call these rules our CO-OPerating Procedures (clever, huh?)

I wrote in the Forming a Partnership article that you would need to have a Partnership Agreement in hand before starting any club business. Partnership Agreements can take many forms. It can simply be a piece of paper called a Partnership Agreement that everyone signs agreeing to work together toward a common goal. It can be a set of by-laws governing the club, or it can be an Articles of Association... which combine the two. Articles of Association can also be known as Operating Procedures, but still unite the Partnership Agreement and the By-laws. We just changed it up a bit and called it The Chicks CO-Operating Procedures. It is our bible to getting along.

Our agreement spells out everything, from who rules the roost down to how much money per month we are investing. It states requirements of the members and what happens if someone decides to leave the club. It incorporates our investment philosophy and our selling approach. Did I already say it was our bible? Hopefully every situation we come across can be dealt with by looking at our Chick CO-Operating Bible. Feel free to look at it online as I highlight some important areas.

Attendance  Be sure everyone is clear on what his or her attendance should be. Define how many meetings can be excusably missed during the year before the club member is no longer an asset.

Dues  Be sure to have in writing which day your monthly investment is due to the treasurer. That means, IN THE TREASURER’S hand, not mailed that day. (This can get tricky. Giving the treasurer post-dated checks at the beginning of the year works best so there is no chance of being late. You may want to incorporate this into your Operating Procedures.)

Philosophy of Chicks  I wrote about this previously... To Spank or Not to Spank. It’s very very important that everyone is clear on what your investment strategy is going to be and that you put it in writing for all to sign.

Withdrawal of Partner  Make sure it is clear what happens if someone wants to withdraw from your club. Is there a fine if they leave within the first year? (I only say this because it would have been easier to start the club with people who really want in, and not people who are just "trying it out." If you put in a penalty for early withdrawal clause, then the person will be serious about joining.) Also be sure to make certain everyone knows the process they would go through if they want to withdraw, and the percentage of the club’s portfolio they are entitled to. Does the person get 1/nth of portfolio (n=number of members in club) when they leave or are they a duck out of luck in the first year? Then if you do decide they get 1/nth of the portfolio, you need to figure your club’s Valuation.

Valuation  We figure our valuation (what we are worth if we were to cash out) weekly, just because it is so easy when you have it all online. You need to know your valuation if a club member wants to cash out, or a new member wants to buy in.

Management  Make it clear what form of communication is acceptable to your club, and the process that should be gone through if a decision is to be made. Is an emailed vote official? You need to decide.

Additional Partners  Is there an ideal number of members you would like in your club? If so, include it in the agreement so no new nominations can be made until one member departs. What is the process for an incoming partner? Make it clear here.

Then all that is left to do is sign the document and you have an official Operating Procedure!! One document contains everything you need to legally cooperate. Thank God I didn’t have to bring up Big Bird and Cookie Monster’s disagreement over the Oreos to illustrate my point. So silly.

This report was brought to you today by the letters O and P... and by the number 10.