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Purpose: The purpose of this study consisted of an organisational development intervention in a growing small and medium-sized enterprises (SME) where the top management’s objective was to become an attractive workplace for the next generation of employees. The central problem is how to develop a smart working environment (SWE) based on the needs of this target group. The aim is both practical and theoretical.

Design/methodology/approach: The action research (AR) approach was used as a frame for the organisational learning process. The problem identification, targets and activities were developed in an iterative process together with the management team and employees. Starting from the main problem, a methodological plan was outlined for the intervention, including several instruments for collecting both qualitative and quantitative data. AR is an emergent process in which data, researchers and participants are equally contributing in deciding on the next steps to be taken.

Findings: The theoretical findings pertain to the definition of what an SWE is in this specific context and how it evolved during the intervention period. It is identified as expansive learning of the concept, which is illustrated through the iterative phases allowing for the expansion of understanding and implementing new ways of being, doing and relating in the organisation.

Research limitations/implications: The results are based on a limited and contextually specific sample and are thus descriptive in relation to the organisation subjected to study. Further research is needed to see how the findings are transferable to other contexts.

Practical implications: This study highlights how participative approaches and managerial sensitivity to employees’ needs are valuable for defining and implementing an SWE and how this approach can improve organisational dynamics and contribute to organisational learning.

Originality/value: The study gives insight into factors that the new generation of employees finds most important at work. While prior research on SWE mostly focuses on efficiency and effectiveness framed by digitalisation and workspace, the present findings emphasise the importance of working with the socioemotional dimension at work for ensuring employee sustainability.