IKEA's $5,000 loss per worker exit led to pay hike
What's the story
IKEA, the Swedish furniture giant, has been grappling with a significant turnover of employees in the US, UK, and Ireland. The company was losing over 62,000 workers annually due to various reasons, which accounted for about a third of its workforce. This high turnover rate was costing IKEA over $5,000 per employee departure. To address this issue, the company implemented measures to improve worker satisfaction and retention.
Steps
Strategy to reduce employee turnover
Jon Abrahamsson Ring, CEO of Inter IKEA Group, the parent company of IKEA, highlighted the company's response to the high turnover rate. He stated that the pandemic-induced labor shortage had made workers "suddenly become very scarce." In response, IKEA focused on increasing pay, enhancing flexibility for frontline workers, and leveraging new technologies to improve working conditions for employees and customers. These measures were aimed at reducing the high turnover rate.
Success
Results of employee retention strategy
The results of IKEA's strategy to improve employee retention have been significant. In the US, voluntary turnover decreased from a third of employees in 2022, to about a quarter by the end of 2023. Globally, across IKEA's over 600 stores and warehouses, the quit rate dropped to 17.5% in April 2024 from 22.4% in August 2022. This is a notable achievement considering that retail sector employment has been on the rise in recent months.
Industry challenges
Retail sector challenges and IKEA's response
The retail sector is known for its low wages, unpredictable schedules, and challenging customer interactions. A 2022 report by McKinsey & Co. revealed that the quit rate for retail workers is over 70% higher than in other US industries. The report also found that half of retail workers are considering leaving their jobs, with half of those considering leaving the retail sector altogether. This underscores the challenges faced by IKEA and other retailers in retaining their workforce.
Worker rights
IKEA's response to worker protests and unionization
IKEA has faced worker protests over wage increases, treatment disparities, and inappropriate event catering. In 2018, local IKEA managers were accused by unions of obstructing organizing efforts at shops in the US, Ireland, and Portugal. After years of negotiations, IKEA agreed in principle last year to allow workers to organize and permit union representatives access to stores. However, an agreement could not be reached regarding allowing labor representatives into US stores.