It is a term that everyone in Germany constantly uses for what is known elsewhere as an SME, but even in Germany, hardly anyone can clearly define it. So it is time for a concise explanation.
The German Mittelstand: something between a family business and a global corporation
Small and medium-sized enterprises stand for pragmatism, responsibility and a culture in which everyone knows each other. Nevertheless, there is no single binding definition for the German Mittelstand. Instead, several perspectives have become established, all of which are valid – depending on whether you take a scientific, political or practical approach.
1. The qualitative view of the IfM Bonn
When it comes to German Mittelstand research, there is hardly any way around the Institut für Mittelstandsforschung (IfM) in Bonn.
According to the IfM‘s definition, a company is considered Mittelstand if:
- up to two natural persons or their family members hold (directly or indirectly) at least 50% of the shares of the company,
- these natural persons belong to the management.
The IfM thus summarises terms such as family business, family-run or owner-managed company in practical terms.
Special feature: size is irrelevant. A global market leader with several thousand employees can be considered a medium-sized enterprise – as long as the owners manage the company.
2. The EU’s number-based definition
At European level, a clear, quantitative distinction applies – the well- known SME definition. It is often used as an approximation for Mittelstand, even if, strictly speaking, it is not entirely accurate.
According to the EU Commission SMEs are companies with:
• fewer than 250 employees
• and a maximum turnover of €50 million or a balance sheet total of €43 million.
This results in three categories:
• micro-enterprises
• small enterprises
• medium-sized enterprises
This definition is used by Destatis, KfW and numerous support programmes, among others.
3. The “slightly larger” SME definition of the IfM Bonn
The IfM also uses a second, purely quantitative definition for SMEs. And this is noticeably more generous than the EU version.
According to this definition, SMEs include:
• Companies with fewer than 500 employees
• and a maximum turnover of €50 million.
This means that companies with 250–499 employees are also considered medium-sized, whereas according to EU logic they would already be classified as large companies.
4. What politicians, associations and chambers of commerce mean when they say “Mittelstand”
Many German institutions use the term pragmatically:
- The Federal Ministry of Economics usually links Mittelstand policy directly to SME promotion.
- The Federal Agency for Civic Education even largely equates Mittelstand with SMEs in its economic dictionary.
- Business associations such as the BVMW emphasise that over 99 per cent of German companies are SMEs – and thus Mittelstand.
- Chambers of commerce and industry, such as the IHK Frankfurt am Main, often refer to the qualitative IfM definition and focus on owner management.
What does this mean in concrete terms?
Which companies are considered Mittelstand depends largely on the perspective taken:
1. IfM Mittelstand (qualitative):
family-owned and owner- managed companies, regardless of size.
2. EU SMEs (quantitative):
companies with fewer than 250 employees and ≤ €50 million in turnover.
3. IfM SME (quantitatively expanded):
companies with fewer than 500 employees and ≤ €50 million in turnover.
All three variants are used – depending on the issue, statistics or funding logic.
Conclusion: Mittelstand is more diverse than many people assume
Whether it has 30, 300 or 3,000 employees: depending on the definition, a company can be considered Mittelstand or have long since outgrown this category. It is therefore not only size that matters, but often structure – and this is precisely where practical experience comes into play.
My personal classification
I mainly support companies with between 30 and 500 employees – regardless of how they are officially classified. And as an HR manager, I have worked in much larger companies that nevertheless functioned very much like Mittelstand.
For me, however, there is a clear turning point:
As soon as the HR organisation is divided up according to the Dave Ulrich model, personal support disappears and contract management ends up in an HR service centre (possibly in a low- wage country or outsourced), HR loses its heart.
Then it is no longer about people, but about processes. And that is not the world I want to work in.
If you share this view and need temporary HR support, I’m just a phone call away!
Inken Schneider – TALENT PUZZLE
Temporary HR for the German Mittelstand
kontakt@talent-puzzle.com
+49 151 67337785
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