The emerging democracies and market economies in Central and Eastern Europe rely on small- and medium-sized enterprises (SMEs) to drive their economy. The successful reform of this sector is a key issue for transitioning democracies.

Hungary offers a good example of the positive role government can play in providing support for SMEs, as the government has partnered with international organizations on a program to support the development of SMEs. The program has several components, including improved access to capital, streamlined procedures for establishing SMEs, various tax and legal reforms, and technical assistance provided by local enterprise associations.

Partners-Hungary has also played a leading role in assisting SMEs. By introducing market mediation to the country, Partners-Hungary has helped to save small businesses and jobs. For example, Tomasz Sandorfi, a classic entrepreneur, started a small furniture painting business in Pomaz, just outside of Budapest. The business began with the owner, two skilled workers and one unskilled worker. But the workplace was disorganized and the employees were unmotivated. Over time, the relationship between owner and employees deteriorated, and the business began to lose money. Sandorfi attempted to remedy the situation by changing the business hierarchy, but this backfired. Problems multiplied until the owner thought he would have to close the business and lay off the employees.

Instead, Sandorfi contacted Partners-Hungary. A mediation session was scheduled, in which the owner and all three employees participated. Although the employees were skeptical, the mediator focused on their common interest in keeping the business open and profitable. With the assistance of the trained mediator, the entrepreneur and his employees were able to come to a mutually satisfactory agreement that kept the business intact. Sandorfi was pleased with the mediation and felt that he learned a lot from the process, particularly the importance of good communication and negotiation skills.

Mediation is especially well suited for SMEs because it is an inexpensive and quick process and works to preserve relationships. An SME is less able than larger businesses to survive a prolonged dispute or pay the legal costs associated with a lawsuit. In fact, many of the disputes SMEs face are not of a legal nature and cannot be solved in the courts. Mediation can thus play a major role in shaping reforms that will foster the health of small businesses.