The post-COVID landscape was dominated by The Great Resignation and themes around employee satisfaction. Ikea experienced a higher-than-average employee turnover rate, peaking at roughly 30% at the height of their crisis.
Ikea employees had started to air grievances as early as 2018, and the heightened pressure of COVID-19 brought their situation to a boiling point. Frustrated, burnt out, and on the front line of customer service during a challenging time, staff resigned in their masses.
Just two years later, Ikea has managed to turn their situation around and has implemented changes that truly reflect the demands of their staff. Here’s how they solved their global “unhappy worker crisis” through responsive leadership:
Unhappy workers, a costly crisis
Ikea knows firsthand the true cost of unhappy workers, and it turns out that number is $5,000. That’s how much they had to spend each time an employee quit and had to be replaced. Taking into consideration that resignations in 2022 exceeded 62,000 worldwide, they’ve worked hard to address the issues at hand and employed a regional approach to solutions.
By listening to their workers, they’ve made several policy adjustments, including increasing wages, improving parental leave, and using AI to predict when/if employees will quit. These measures, tailored to each region’s needs and requests, have demonstrated the power of responsive leadership. In just two years, the quit rate has dropped from 22.5% in August 2022 to 17.5% in April 2024.
A tailored response
Where Ikea really excelled is in their tailored approach. Rather than making top-down blanket adjustments, they invested time in understanding the contexts of different workers in different parts of the world.
In India, for instance, workers with children found it difficult to manage childcare costs and required additional benefits like parental leave. In the UK and Ireland, they found that part-time workers make up 66% of the workforce, and their main task is answering customer calls. To accommodate their needs, they introduced remote hours. In the US, employees experienced difficulties with micromanagement and the stringent rules for changing shifts; in the event of an emergency, staff couldn’t easily swap shifts or hours. To increase employee autonomy, they’re piloting new software with the Shift Project. This is a new tool that allows staff to schedule their hours and shifts according to their availability.
The retail industry’s talent retention problem
The issues Ikea faced are not unique to the furniture retailer but are symptomatic of a broader culture within retail, on the part of both employees and employers.
“Attracting, developing, and retaining frontline talent must become a top agenda item for retail CEOs,” a McKinsey report said. The report outlines how inflation has exacerbated the challenges businesses face, alongside growing pressure from labor unions.
Ikea’s work culture, influenced by its Nordic roots, has traditionally experienced a lower quit rate than its American counterparts. With 473 stores across 63 markets, Ikea employs 200,000 people. With the sheer scale of their operation, not even a warm and fuzzy “meatballs for all” approach can assuage the rising demand for work-life balance.
Workers rights
Their battle with unions pre-dates COVID-19, when a union coalition accused Ikea managers of suppressing workers’ efforts at organizing. This occurred in several key regions, including the US, Portugal, and Ireland. A joint complaint was filed with the Organization for Economic Cooperation and Development (OECD), accusing senior leadership of “ignoring red flags” related to the violation of workers’ rights. Nancy Goetz, an employee in the Stoughton (Massachusetts) store, said that she “never thought that Ikea would allow supervisors to intimidate and interrogate” staff.
This led to a wave of worker protests, with disgruntled employees around the world raising their various grievances. In Poland, wage increases were below inflation, while in South Korea, workers felt they weren’t treated as well as their counterparts in other countries. Ikea also came under fire in the US for their controversial Juneteenth menu.
Working through a number of issues, their talks with the union coalition spanned several years, and the company agreed in principle to let workers organize and allow store access to union representatives. Notably, though, the parties couldn’t come to terms with allowing labor reps to enter US stores.
“IKEA respects the rights of co-workers to join, form or not to join a union of their choice without fear of reprisal, interference, intimidation or harassment,” a spokesperson said. “The company is committed to maintaining an environment of mutual respect and ensuring all co-workers’ rights are protected irrespective of their preference and choice concerning unionization.”
While the talks dragged out, unhappy Ikea workers started looking elsewhere. Then, the pandemic hit, and labor shortages made finding and holding onto people even more challenging. “There was a shortage of staff for entry-level jobs,” said Ring.
The so-called Great Resignation impacted all industries, but few gave workers more reasons to flee than retail. Stores had to transform into online fulfillment centers overnight, while supply-chain bottlenecks and record inflation made everyday necessities scarce and more expensive, angering shoppers, who often took out their frustrations on employees. So-called “hero” bonuses soothed the pain but didn’t last. Workers became disgruntled and started leaving for other jobs.
“You cannot be a great place to shop if it’s not a great place to work,” said Philip Moscoso, a professor at Europe’s IESE business school who has studied the company.
When Ring took the CEO job at Ikea in September 2020, the retailer had an alarming retention problem. In the US, UK, and Canada, employee turnover had crept well above 30%, and swapping shifts was a cumbersome process.
“Many times, people come into the world of retail thinking that this is a role I will take on until I find something better,” said Neena Potenza, who oversees HR in the US for Ingka, the company that manages Ikea’s franchising. “But at Ikea, we want people to grow and develop.”
There’s still a long way to go, particularly when it comes to supporting employee mental health and workers with disabilities. In Japan, turnover has actually gone up amid a stubbornly tight labor market. In France, a push to convert temp workers to full-time status has also led to outsized employee departures. And in Puerto Rico, more than 50 Ikea warehouse employees just voted to unionize over complaints about pay and worker treatment.
Concluding Thoughts
Senior leadership across industries can learn a great deal from Ikea’s response to their global worker crisis. While some may attribute the swift changes to the steep cost of employee resignation, many have commended their tailored response that paid attention to their employees’ contexts.
The plight of entry-level workers is often overlooked in large organizations, but their immense value was highlighted during the pandemic. With the severe cost of replacing staff, Ikea embarked on a journey to truly understand the various issues affecting workers and have reaped the benefits of their work.
Using a blend of benefits and changes, Ikea’s responsive leadership efforts have seen an increase in employee retention and a return to its Nordic values—free meatballs and great furniture for all!
