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The German Mittelstand - some thoughts

February 10, 2014

Michael Skinner provides some thoughts on the German Mittelstand model. German Mittelstand companies are typically family-owned and mid-size. They are usually highly specialised advanced manufacturers and are a significant part of the German economy.

By Michael Skinner on Monday 10th February 2014.
The following article is a modified version of an article by the same author that previously appeared on the Made in the Midlands website.

Swindell & Pearson has been helping businesses and individuals protect and defend their ideas, innovations and brands for over 130 years. With its head office in Derby, the firm also has offices in Stoke, Wolverhampton, Stafford, Sheffield and Burton. To find out how Swindell & Pearson can help you with any intellectual property requirements please get in touch via [email protected] or by telephone on 01332 367 051.

Michael Skinner recently spent a day at a UKTI conference to “Meet the Mittelstand”. The aim was to explore what UK manufacturing can learn from the German Mittelstand model. German Mittelstand companies are a significant part of the German economy. They are typically family-owned and mid-size, usually highly specialised advanced manufacturers. We probably can’t copy the Mittelstand model in the UK, for cultural and other reasons, but we can probably learn from it. Here are some of the themes which recurred throughout the day, and struck Michael as valuable for further thought:

Family ownership allows Mittelstand companies to take a long-term view, when planning. They don’t have external shareholders or stock markets demanding instant returns. The financial services environment is very different to the UK. This also contributes to the ability to take a long-term view. Unfortunately, there is some scope for problems arising as the family increases in size over time, possibly diluting ownership. However, this presumption of stability is echoed by the workforce, who tend to remain loyal to the business for long periods of time. Being a middle sized company is highly prized. Being a large company is not an ambition. Engineering and manufacturing is prized and nurtured in the German business culture. There is no sense of it being a second-class occupation. Companies and their employees (the whole “family”) are obsessive about their products and about quality. Mittelstand companies wish to remain highly specialised - they grow by exporting, not by diversifying. Expenditure on R&D is typically at least 5 to 10% of profit. They make good use of the patent system. The long-term view of the Mittelstand companies enables them to see education and training as a combination of their self-interest and their social responsibility for their surrounding community and its future. Continuous training of the workforce is a high priority to keep their skills up to date. Emphasis on training also leads to apprenticeship schemes which are highly organised, managed by chambers of commerce (to which membership is compulsory). The apprenticeship schemes recognise several hundred different professions. Skills such as toolmaking are considered to be professions and a successful apprenticeship is seen as a professional qualification. In other words, being professional is a question of having the right attitude and a good level of skill, rather than the nature of that skill. All professionals, whatever the nature of their skill, appear to be given respect and status on that basis. Note that this comment comes from the viewpoint of a professional qualification in the traditional UK sense. Annual investment in an apprentice may be €15,000. A company employing an apprentice provides a mentor with the appropriate skill, who is also trained in training. Companies are required to maintain their apprenticeship training schemes during a downturn. State aid is provided to assist with this.

Does the UK do any of this? Could the UK do more of this? Should the UK do any of this? What can UK industry learn from the German model? If you have any thoughts on the above, please feel free to get in touch with Michael Skinner by telephone on 01332 367051 or by email at [email protected] Michael divides his time between our offices in Derby and Wolverhampton.

Swindell & Pearson has been helping businesses and individuals protect and defend their ideas, innovations and brands for over 130 years. With its head office in Derby, the firm also has offices in Stoke, Wolverhampton, Stafford, Sheffield and Burton. To find out how Swindell & Pearson can help you with any intellectual property requirements please get in touch via [email protected] or by telephone on 01332 367 051.