May 24th, 2012
10:59 AM GMT
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London (CNN) – Are European Union governments missing a trick by taking small and medium-sized firms for granted?

In Germany, such businesses - the Mittelstand - have been nurtured, and in return significantly boosted the country's economy.

As our regular viewers will know, over the last few months Marketplace Europe’s travels have taken us inside small and medium-sized companies around the region.

We’ve talked about the way they run their businesses, the bigger macro environment and prospects for Europe and the single currency.

The common theme of each conversation is concern that well-intentioned incoming governments - from France, Greece and the Netherlands - will tax smaller firms out of business rather than offering incentives and protection to keep growing in such challenging economic times.

They believe such firms will drive growth and set Europe on the road to recovery. This is the mindset of Mittelstand, the army of family-run firms which make up around 60% of the German workforce.

From kitchen firms and plastics mouldings firms in Alsace (both sides of the French/German border), to pencil makers in Bavaria, Germany: Small and medium businesses are core to the German way of doing business.

Firmly rooted in their local regions, Mittelstand companies tend to be solid and dependable local employers, fostering a community loyalty which serves them well in both prosperous and difficult times. Dismissed as boring in the past, these companies are having the last laugh, helping keep Germany's economy afloat as Europe drags itself through the crisis.

Take Faber Castell, which has been making pencils on the outskirts of Nuremberg since 1761. The factory sits alongside the castle where eight generations of the Faber Castell family have sketched out plans for the brand to go global.

Today they have 15 manufacturing plants around the world, producing a 6th of the entire world's pencils.

When I met Count Anton Wolfgang von Faber Castell, chairman and chief executive of the company, he told me: “If I look back 30 years, Mittelstand, family companies were not so much in fashion. People would say 'oh, he is the son of the Count von Faber Castell, he has no clue about business.'

"[But] the big advantage we have as Mittelstand is that we are not a public company. As soon as you list you need to adhere to rules - among others, quarterly earnings results. With this short-term view over your head - I don't say as a threat, but as a challenge - there is not so much time to think for the far future.”

True to Mittelstand form, they do not chase quick profits or high risk investments. They invest in their people - another Mittelstand trademark and something Faber Castell pioneered. It was one of the first firms to offer staff benefits like health cover, back in the nineteenth century.

“Partially it is being far sighted and smart. My great grandfather was an outstanding entrepreneur who educated the workers and built them homes to make them better workers. And if you have better workers that automatically makes you more competitive,” the Count told me.

Mittelstand thinking is entrenched in the German way of running a company. To them, it's common business sense. And as the rest of Europe looks on with interest, Faber Castell could be just the place to find what they need to start taking notes.

soundoff (4 Responses)
  1. Rachel

    From the Netherlands: what are these special incentives that Germany gives to small companies? To my knowledge the overall tax burden for German and Dutch companies is practically the same.

    The main difference is that in Germany the owners of small companies are responsible for debt. In the Netherlands bankruptcy is relatively painless for the owner(s). A Dutch company can go bankrupt and the owner can start a new company without debt that serves the same clients within a week.

    Another big difference: complicated constructions where one person owns several small companies who are all intertwined, set up specifically to avoid paying the normal tax rate and safeguard the owner in case of bankruptcy are quite common in the Netherlands.

    May 24, 2012 at 2:41 pm |
  2. Jim Hausch

    Aren't there some special rules about board membership and governance. I think I recall reading something in The Economist about bankers being on the boards and offering "patient capital".

    May 24, 2012 at 7:23 pm |
  3. Richard Schrama

    Small & medium sized family owned businesses provide for a much better community asset than large public companies, which show no loyalty to staff. Staff (treated as a number) show limited loyalty to the large public companies, and generally drive short term profits for short term bonuses for short term speculative shareholders. This is generally at the expense of long term losses.

    Sadly, most governments have been corrupted by forces of evil. Most people do not have the maturity or personal discipline to think long term, and have bought into the people who own the money system. People should start bartering again, and put government out of business.

    May 29, 2012 at 10:53 am |
  4. Shahid

    I like the image, but I can tell that humans are not your snotrg point like you said. It is really easy to improve though. Do you know the average proportions of a human head? I usually start out by sketching the proportions as guide lines, then I add detail to the face to make it look more unique. Also, if you want to improve on drawing people I suggest you get a small sketch book and carry it around with everywhere and when you have a willing model make a quick sketch of them. The more you do the better you will get at it. That is what I do. Also, do some of the sketches in pen. It helps because you can erase your mistakes, so you can waste time and erase them, but you are forced to make the mistake work in the sketch.I hope that I didn't offend you by this post; just trying to help you.

    June 21, 2012 at 6:19 am |

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