Cost and Efficiency of the Managing Agency System of Management: Its Future

Industrial development in India has been up to the present entirely bound up with the managing agency system of organization and control, and except in regard to joint-stock banking, no important industrial activity has been carried on independently of that system. It is therefore necessary to discuss in some detail the efficiency of this system of industrial management and to examine how far the system has been economical. At the outset it is necessary to distinguish the merits and defects of the system as such from those of the entrepreneurs represented in India by the managing agents. For while it is perfectly true that a reorganization and adaptation of the system to changed industrial conditions in India may promote efficiency, it should not be forgotten that, in so far as Indian industrial organization depends for its ultimate success upon the capacity and integrity of the entrepreneurs, it will have to rely for a long time to come upon the very same persons who are now directly or indirectly associated with the several managing agency firms. In one way or another they represent the quintessence of the industrial ability and experience available in the country, and whatever be the form of industrial control that is devised, they will undoubtedly remain the “captains” of industry. It is necessary to stress this aspect of the matter, for it is popularly supposed that if the managing agency system is abolished and industry controlled by Boards of Directors, with a managing director, secretary, or president as the chief executive officer, as in other countries, every difficulty will be resolved. That, surely, is not the case. In so far as inefficiency in India is due to the lack of ability, experience or character on the part of the men who are now managing agents, it can only be improved when a higher level of intelligence and integrity is secured.