We’re all in the Mittelstand now - II

Following on my previous thoughts, I don’t think that most people have the breadth, the resources, the energy, the desire to be entrepreneurs.  So what are the alternatives when the corporate and government pools of positions are shrinking?

People do have specific skills, domains where their ideas, training, and experiences have made them successful.  They know the processes for doing things; they know who to call to get it done.  At a level of running projects, rather than businesses, they can be outstanding.

A recent article in the Dutch Daily proposes that temp jobs may be the right answer.  In 2010, 6.3 million people were employed in the Netherlands, 6 percent with a temporary contract and the prospect of a permanent appointment, and 9 percent flex workers (agency or standby).  The number of temp positions grew at 2% in the last quarter, while the number of hours worked by temps increased by 4%.

So, salad days for temps?    The Dutch blog Ernst’s Economy for You notes two contrary trends: continuing pressure on the price per hour for consultancy and the declining duration of consultancy contracts.   Both are probably driven by an excess supply of temp workers, allowing employers to choose frugally from a pool of qualified talent without making long-term commitments.

Still, I think that freelancing is probably the right answer, even if  temporary work is problematic.

The Dutch promote the idea of a Zelfstandige zonder personeel (ZZP: an independent without employees).  Until 2001, these independent workers had to register within specific professions and have diplomas in relevant fields; rules are now relaxed and ZZP-ers make up 10% of the Dutch workforce.  Their lot might further be improved by building guilds around groups of contractors able to encourage standards, develop reputational rankings, and act as a clearing house for employers seeking qualified labor.

But this is still a skill-centric exercise rather than product-centric one.  I know that when I look for skilled help with a project, I need someone who can design my component or validate my process, not just an electrical engineer or a clinical manager.  It may take a mix of people and skills to deliver on my specification, not an individual.

This is where I like the Mittelstand: small, often family-owned, enterprises which focus on doing one thing better than anyone else in the world (or, as Seth Godin phrases it, being the first, most natural people to call when faced with a particular problem). They gather craftsmen, professionals, and administrators who work together to deliver a focused, innovative, high value manufactured product or service.

The Mittelstand lie somewhere between freelance consultancy and angel-led entrepreneurship.  They focus on leveraging the specific skills and networks that individual workers have, while selling a B2B product as a business.  It seems to me that it may be a more tractable model of how someone could grow an undefined consultancy into a specialty business without taking on all of the distractions of creating and running a small corporation.

The Financial Times ran an analysis on these themes a month ago (A fix that functions: resilient German and Dutch Labor Markets) that I’ve been carrying with me and thinking about.  As always, I’m not claiming that any single economy has all the answers. But in difficult times, governments and markets need to look for new ideas and alternative examples.  A strategy to encourage formation of high-value, product driven Mittelstand, rather than entrepreneurial ventures, is worth exploring.