Germany: Hands-on management boosts productivity in small businesses

Small business owners who actively engage in key management tasks can significantly improve their company’s productivity, according to a new study by the German Institute for Economic Research (DIW Berlin). The study, based on data from the Socio-Economic Panel (SOEP), is the first systematic analysis of how management practices in Germany’s small and micro enterprises influence business performance.

The findings show that many small business owners, particularly solo self-employed individuals, often focus primarily on operational tasks such as production and sales due to time and capacity constraints. As a result, activities like monitoring competitors or managing supply chains are frequently overlooked, which limits productivity potential. In contrast, business owners who take on a broader range of management responsibilities—including strategic planning and supply chain coordination—achieve noticeably higher productivity levels.

According to the study, when an entrepreneur in a small business performs one additional management task each day that was not previously part of their routine, productivity can increase by nearly 12%. Among solo self-employed individuals, the productivity gain is even higher, at around 14%.

“Professional management is not just relevant for large companies,” said Alexander Kritikos, DIW Executive Board member and head of the Entrepreneurship Research Group. “Structured and forward-looking management also provides clear benefits for small businesses.”

The study’s authors—Alexander Kritikos, Knarik Poghosyan, and Alexander Schiersch—emphasize the importance of improving management competencies in the small business sector. They call on business associations and chambers of commerce to provide more targeted support and training to address the specific challenges small businesses face.

“Better management skills can unlock significant productivity gains,” said Schiersch. “More focused initiatives from support organizations are needed to help small business owners develop these capabilities.”