Transformation of German Owner Led Small and Medium Entities into Self-Managed Organisations

Small and medium enterprises (SMEs) are vital to the global economy, accounting for approximately 90% of businesses and more than 50% of the global workforce. In Germany, owner-led SMEs, often called the Mittelstand, constitute the vast majority of firms and are central to the country’s economic strength. However, SME owners can frequently experience high stress levels due to heavy workloads, limited managerial delegation, and a strong reliance on hierarchical decision-making, where the introduction of a self-managed organisations (SMO) might be a strategy to reduce managerial involvement (Lee and Edmondson (2017). Although self-management principles have existed since the mid-20th century, empirical studies on their application within SMEs, particularly in Germany, remain scarce. This study addresses that gap through a qualitative methodology, using semi-structured interviews with seven SME leaders who have undertaken such transformations and investigates how German owner-led SMEs have successfully transitioned from conventional hierarchical structures to self-managed organisational models. The research explores four central questions: the rationale behind transitioning to SMOs, how these transformations were planned and managed, the defining features of the SMO frameworks post-transformation, and reflections on what could have been done differently. Findings indicate that motivations include a lack of organisational structure and personal philosophies like a shared aspiration for more agile, human-centred work environments, often inspired by literature like Reinventing Organizations (Laloux, 2014). While some challenges arose and transformations were generally unstructured, most businesses were satisfied with the outcome. In all cases, the transformation process took longer than five years. However, some owners were partly disappointed that employee engagement had not increased as much as anticipated but still would not change much in the transformation process in the retrospective.
This study adds to the literature by addressing a significant research gap concerning the transformation of traditional, hierarchical, owner-led SMEs into self-managed organisations (SMOs), particularly within the German context. As a result, we now understand that such transformations are not linear nor uniform, but are instead diverse, emergent, and shaped by deeply personal and contextual dynamics.
From a practical perspective, this study offers valuable guidance to SME owners, transformation facilitators, and organisational consultants. It equips them with a realistic and experience-based understanding of how autonomy and transparency can be fostered within existing businesses, helping them to better navigate the complex shift toward self-management.