Aspects of IKEA HR Management - Prime Academic Study

Table of Contents

Introduction
HR Strategic Partner
Main HR Management Challenges
Innovative Solutions
Conclusion
References

Introduction

IKEA is a multinational conglomerate and retailer best known for selling furniture, home appliances, and other décor, goods, and accessories for the space. Being founded in Sweden in 1953, it has since then grown to be a global brand with a reputation for simple but stylish designs, utmost level of quality, and affordability in home furnishings (IKEA, n.d.). Human resources is a strategic asset and key element to fulfilling the company’s mission and maintaining a successful business model.

HR Strategic Partner

IKEA maintains a vision which is “To create a better everyday life for the many people” (IKEA, 2021). Unlike many other businesses, one of the key principles of the company is to take care of its employees with just as much care and attention that it dedicates to customers. Therefore, the people in that statement certainly includes employees and staff working at or with IKEA. The company maintains a close culture where employee needs are taken care of and there is consistent communication with staff on the ground to determine how the company can best navigate the internal dynamic. Some of the values that IKEA emphasizes as part of its culture are trust, leading by example, positive change, simplicity, innovativeness, and empowerment of others (IKEA, 2021). This must reflect in the various human resource activities that HR management must undertake. Leadership at IKEA realizes the importance of recruiting, engaging, and retaining employees that will help to grow the business sustainably and share in a similar value system as to maintain a healthy corporate culture which will then facilitate the process of attaining strategic goals.

IKEA has a range of strategic goals as expected for a business of its size. First it seeks to maintain a modernized and lean supply chain as well as customer-oriented management and approach. The firm’s operations focus on creating a satisfying experience for the consumers, while being in-sync with supply chains processes to respond to consumer demands. The firm must ensure its retail operations use the best practices and procedures, including continuous implementation of innovative quality and technological standards. Significant capital investments are aimed at development and improvement of both the iconic IKEA retail experience as well as flexible and adaptable supply chain that is widely diversified and follows scheduling procedures with the diverse range of products that the brand offers (Sadler, 2003).

An HR manager is expected to serve as a strategic partner to IKEA as any other major organization. HR departments must not operate isolated, facing the potential of programs being misaligned with strategic goals, instead the HR leadership must be actively involved in cooperating, communicating, and working with the business side of the company. While a regular HR manager is focused on daily tasks, policy, and administration, a strategic partner works with senior leadership to develop and communicate the organizational strategy, in the forms of advisor, mentor, problem solving, and leadership (Wickham, 2021). At IKEA, as evident, maintaining a particular company culture is vital to the unique perception that the organization holds for people, and the employee approaches and attitudes are reflected in aspects of consumer service, product design and services, and even the more ubiquitous atmosphere of IKEA stores. HR as a strategic partner takes that into consideration strongly during the recruitment process, maintaining a policy of hiring based on values and cultural fit as a strong indicator alongside competency and experience. A strong focus is on values and beliefs to ensure consistency in the workforce (MITSloan Management Review, 2012). It is up to HR managers to develop a system that can effectively identify, recruit, train, and maintain such employees, effectively assessing personalities and values through expression and superficial knowledge of the candidates.

Main HR Management Challenges

In late 2017, IKEA introduced the “organization for growth” or O4G policy at all of its US-based locations. Until then, IKEA was almost an ideal employer, having some of the best rankings on job review websites and generally highly praised for its company culture, treatment of workers, and job benefits. The O4G policy was an organizational restructuring, aimed to shift the ways that employees work within IKEA and meet consumer expectations in a multichannel retail environment. Prior to the change, stores operated around the departmental structure in stores, with specific roles ranging from specific categories to sales workers assigned to different departments to cashiers, inventory, or security as well as internal HR, IT, and interior design departments. Employees would gain significant expertise within the department working there with co-workers for years, forming an understanding of their roles and responsibilities as well as tight bonds. However, the issue was that customer interactions were few and far in-between, and many felt like that there was no one to help them (Cain, 2018).

Figure 1: Changes in roles at IKEA based on the O4G policy, left many gaps in service as well as dissatisfaction of both employees and consumers

The O4G policy was created as a redesign aimed towards a customer-centric approach by creating new roles, but also shifting employees and sometimes combining roles and departments to create efficiency and responding to technological modernization of some tasks (Cain, 2018). However, the policy was incomplete in many ways and unintentionally created multiple HR management challenges. There were multiple miscommunication issues such as employees being told they were promoted, given additional responsibilities, but being reduced in salary. Several levels of pay bands began to form, with the new ‘active seller’ positions making significantly than back-end workers in the same departments at the same level of experience. Some anecdotal evidence suggests that new hires and young workers were also paid at higher rates than the previously employed professionals (Castro, n.d.). There was evident divisiveness in the company culture, both overall and in specific stores, regarding the new policy, generating conflict. Furthermore, the policy largely exacerbated the issues it was meant to address. Due to staff downsizing, then mass quitting, and now high turnover, consumers service at levels, ranging from floor sales to cashier checkouts is suffering since employees are left balancing multiple responsibilities (Harrison, 2019).

The O4G policy is linked to several human resource issues. First, are retention issues, with staff, including many veterans of the company, leaving in large numbers after the changes have been implemented, and since then IKEA has high turnover rates at its retail locations. Unfortunately, no official statistics are available on turnover rates, but it is known that the company has announced a wage raise of nearly 10% after the changes to address high turnover, resulting in a decline of 5% and attracting more qualified candidates (Li, 2020). The second issue is job satisfaction, as the article by Cain (2018) highlights multiple anecdotal examples of employees being highly dissatisfied, not enjoying the work and culture, and facing significant pressure from both management and customers. Employees were given significantly more duties while decreasing training, working hours, and general support from the team. Statistics to support this can be based on Glassdoor reviews (one of the leading websites for employee reviews and opinions), with IKEA’s near perfect score of 4.7 in 2015 dropping to 4.1 in 2017, and positive reviews dropping from 90% to 70% (Castro, n.d.). Finally, there is the issue of salary, classified as employee queries. The O4G policy called for salary reductions across levels and created pay bands that were seen as unfair. It could be seen as a rejection of high-income employees; however, this will have a negative effect on employee cognition and morale, working the working environment and harmony (Li, 2020).

Innovative Solutions

HR solutions exist to address these identified issues. Employee turnover is a prevalent issue, and certain strategies can be undertaken to address it. Retention begins early, starting with the recruitment stage. It is necessary for HR to be selective in its recruitment, since the company has transitioned to a more skill-based organizational structure, than its recruitment should also now focus more on competencies than values. Furthermore, it is critical that HR is clear in job descriptions and responsibilities, truthfully emphasizing the pressures but also the benefits of the position. The employee should be fully aware of what is expected from them, and be provided with proper training to fill the position competently. While the onboarding process is important, retention depends strongly on the culture and connections (Tarallo, 2018). IKEA must bring back its unifying culture, making efforts to create teams across all levels of the retail experience and emphasize the values that have underlined the company operations since its founding.

Job satisfaction is a complex issue to address but certain targeted strategies can be effective. First, one of the primary issues based on anecdotal evidence suggests that IKEA employees are given too many and too diverse of responsibilities. Some of this was justified, such as instead of a dedicated employee making cardboard boxes, they are now part of a bigger department team, making them on a ‘as-needed’ basis. However, at other sectors this attempt at efficiency led to angry customers as one employee attempts to deal with multiple customers as well as responsibilities at a time (Harrison, 2019). IKEA needs to increase its workforce in retail to ensure adequate division of responsibilities, and it also needs to re-examine its roles, potentially finding a compromise between the departmental system previously and the current free-flow system. Nevertheless, extensive stress and pressure combined with the feeling of being overworked leads to eventual dissatisfaction in employees. While income discussed in the next paragraph has an impact, job satisfaction, and in turn, retention, often depends on other factors such as strong leadership, supportive organizational culture, and working environment. Employees should be engaged and have ‘fun’ to some extent, at least from a social perspective (Chan, 2019). The previous approach that IKEA had allowed for that engagement since employees were highly skilled in their respective departments and worked together in teams, without which the satisfaction expectedly plummeted.

Finally, there is the aspect of compensation. IKEA made a significant misstep by cutting employee salaries, as there is almost never a reason to do that unless there is a significant reduction in employee hours and responsibilities, which in this case was the opposite. Benefits were largely cut as well for most of the hourly retail workers. Cost-saving measures may be necessary, but IKEA was experiencing annual growth. Such changes also drastically undercut its cultural values including communication and trust, despite the company indicating that employee feedback was collected at each stage of O4G development. The recent wage hike is a step forward in decreasing retention and attracting more competent talent. However, IKEA needs to re-examine its pay structures. First it should provide fair wages based on level of responsibility. Second, it should not drastically differentiate between the positions of active seller and the back-end jobs, as this decreases morale and is largely unjustified since both positions matter. The company can establish a percentage of sales compensation as a bonus for sales employees as a stimuli, but base pay should remain similar across the board based on experience and responsibility. Finally, benefits should be re-established to the max extent possible, as these often matter to employees while most do not create exuberant costs.

Conclusion

In the end, all of these three aspects of turnover, satisfaction, and compensation are closely connected. HR management must carefully navigate policy and work with leadership on organizational structure for the best outcomes and balance among all three while keeping the company’s strategic goals in line. While IKEA is seeking to modernize and achieve that level of efficiency seen in warehouse retailers such as Amazon, by compromising its own culture and workforce that has been the backbone of the company’s success and unique culture, it follows a dangerous path of alienating its customer and employee bases.