Disadvantage of Managing Agency Systems
A managing agent is a person or company appointed by the freeholder of a property, or a management company, to manage that property. When a person, a firm, or a company takes responsibility to handle the company management under an agreement, he is known as the managing agent. Though managing agent has many advantages, it has some demerits also. It is not altogether out of any kind of disadvantage. Some common disadvantages are described below:
- Under the agreement of managing agent got the sole power to control the company which creates dictatorial management.
- In this process of Managing Agency, the company has to expand its working premises that are not suitable for the company.
- Approximately the whole control is taken by the managing agent. That sometimes opens the door of nepotism.
- Sometimes managing agency misuses the surplus of the company by making unnecessary cost.
- A managing agent makes management expensive. They are appointed under the agreement to manage against salary. It demands extra commission and chares that increase expenses of the company.
- There is too much dependence on the managing agents for the finance, it creates many problems. It can misinterpret the accounts and blackmail with the company.
- There is a financial domination of the managing agent of the company which leads to malpractices.
For above-discussed demerits, the company sometimes avoid managing agent. To maintain the management Agency Company’s cost is usually increased. Sometimes it is also time-consuming for the companies.
