Ikea’s workers were quitting in droves in the US. In the UK and Ireland, half of all new hires were leaving before their first anniversary. Globally, each departure cost Ikea $5,000 or more to replace.
To stem the bleeding, the Swedish furniture behemoth needed to figure out what was making its store workers so unhappy — and fix it fast. By 2022, more than62,000employees were departing a year for various reasons, equating to about a thirdof its workforce, and the pandemic-era labor shortage made it difficult to replenish its ranks.
Workers “suddenly became very scarce,” said Jon Abrahamsson Ring, chief executive officer of Inter Ikea Group — the umbrella entity that oversees Ikea’s store franchising,product design and supply chain — in a recent interview in New York. Ikea focused on things that many businesses talk about doing but struggle to actually implement: Boosting pay, increasing flexibility for frontline employees and using emerging technologies to make things easier on workers and their customers.
The results were stark: Voluntary turnover in the US dropped to about a quarter of employees by the end of 2023, from a third a year earlier. Globally, across the parent company’s more than 600 stores and warehouses, the quit ratefell to 17.5% in April from 22.4% in August2022. Whilevoluntary attrition hasfallenin manywhite-collar occupations as hiringhas slowed, employment in the retail sector has continued totrend upin recent months, making Ikea’s progressnotable.
Retail jobs are often marked by low pay, erratic schedules and irate customers, which helps explain why the quit rate for retail workers is more than 70% higher than in other US industries, according to a 2022reportby McKinsey & Co. Half of them are considering leaving their job, McKinsey found, and of those, half want to ditch retail entirely. The situation isn’t better in other parts of the world: UK retailers typically need to replace one out of every two workers each year.
“Attracting, developing, and retaining frontline talent must become a top agenda item for retail CEOs,” the McKinsey report said, noting the challenge has only grown amid inflation and an environment where labor unions are increasingly flexing their muscles.
Privately held Ikea, whose 473stores in 63markets employ nearly 200,000people, historically lost fewer workers than its industry peers, thanks in part to a Nordic corporate culture that’s known for being warmer and fuzzier than, say, US discount giantsDollar General Corp.orWalmart Inc.But managing a sprawling, global workforce in an era where work-life balancehasbecome mandatory for many peopleisn’t easy, and signs emerged that it wasn’t all Swedish meatballs and bliss amid Ikea’s endless aisles of Billy bookcases and Stockholm rugs.
In 2018, a coalition of unions accused local Ikea managers of quashing organizing efforts at stores in the US, Ireland and Portugal. Theyfiled ajoint complaintwith a branch of the Organization for Economic Cooperation and Development alleging that senior leadership “ignored red flags” about claims that workers’ rights were being trampled. “I never thought that Ikeawould allow supervisors to intimidate and interrogate us,”Nancy Goetz, a worker in Ikea’s Stoughton, Mass., store, said at the time.“I expected more from Ikea.”
A wave of worker protests ensued. In Poland, employees werepeevedthat a wage hike was pegged below the rate of inflation. In South Korea, unionized workers saidthey received subpar treatment compared with their peers in other countries.In the US, the company had toapologizefor serving fried chicken, collard greens and watermelon at aJuneteenthevent for Atlanta employees. (One former Ikea workerwent viralby posting videosas“Angry Retail Guy” that mocked clueless managers and shoppers alike.)
After several years of talks between the union coalitionand Ikea, the company last yearagreedin principle to let workers organize and allow store access to union representatives. Notably, though, the parties couldn’t come to terms on 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,” aspokesperson 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-calledGreat Resignationimpacted all industries, but few gave workers more reasons to flee than retail. Stores had to transform into onlinefulfillment centersovernight, whilesupply-chain bottlenecksand recordinflationmade everyday necessities scarce and more expensive, angering shoppers, who often took out their frustrations on employees. So-called “hero” bonuses soothed the pain, butdidn’t last. Workers gotdisgruntled, and started leaving for other gigs.
‘Unhappy Workers’
It was a far cry from when 17-year-old Ingvar Kamprad founded Ikea, using his village’s milk van to deliver bargain-priced pens and picture frames. He began selling furniture made by local carpenters in 1948, and opened his first store in Sweden a decade later. Ikea created afrenzywhen it entered the US in 1985, and helped turn Kamprad into the world’s eighth-richest person.
For a service-driven company like Ikea, unhappy workers can quickly lead to unhappy customers. “You cannot be a great place to shop if it’s not a great place to work,” saidPhilip 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. In India, staff quit when they became parents, due to meager child-related benefits.
Ingka Group, the Netherlands-based franchisee that operates and staffsIkea stores in31 countries that employ more than 165,000 people, embarked on a campaign to lower turnover, targeting the biggest pain points in each market. The approach improved pay and benefits, scheduling, new-hire orientation and in some places included an AI-powered tool that alerts managers when a worker might be in danger of quitting. Even employees’ uniforms were refashioned.
“Many times people come into world of retail thinking that this is a role I will take on until I find something better,” saidNeena Potenza, who oversees HR in the US for Ingka. “But at Ikea, we want people to grow and develop.”
There’s still a ways to go, particularly when it comes to supportingemployee mental health and workers with disabilities. In Japan, turnover has actually gone up amid a stubbornly tight labor market.In France, apush to convert temp workers to full-time status has also led to outsized employee departures. And in Puerto Rico, more than 50 Ikea warehouse employeesjust votedto unionize over complaints aboutpay and worker treatment.
For one US worker, the changes haven’t been enough. The sales associate, who asked not to be identified, quit recently after a dust-upwith a colleague quickly escalated into disciplinary action, she said, with managers alignedagainst her. Rigid scheduling rules also forced her to miss critical medicalappointments. In employee surveys, other workers have complained about poor communication and micromanaging.
Wage Bumps
Compensation is often the biggest reason why workers leave, so across many regions Ikea raised starting wages, sweetened bonuses, or closed gender pay gaps. In London, base pay rose from 11 pounds ($14) an hour to 13.15. The UK also added a new starting pay band for a handful of stores outside London where the cost of living was much higher than in more remote areas.
A bigger problem in UK stores, though, was the tendency of new hires to quit within months of joining. The so-called onboarding process was poorly organized, with infrequent feedback from managers and newbies unclear where to turn to for advice. Ikea UK/Irelandstrives to hold onto 85% of hires after three months, but that figure had dropped as low as 60%, according to Darren Taylor, people and culture manager for that region, who oversees 9,500 retail workers.
“Coming out of Covid, people re-evaluated what was important to them, and work-life balance became more important,” he said. “So it required a big change in terms of how we positioned ourselves to attract people into retail.”
Those people includedNatasha Williams, 22, who got a job at Ikea selling kitchen fixtures last year. Ikea worked to smooth her transition: Getting from her home in Basingstoke to the Ikea store in Reading was a two-hour slog involving two buses and a train. So instead of six-hour shifts across four days, Taylor gave her three eight-hour shifts, and allowed her to start at 10am rather than 9am. “That changed everything — I was much happier at work,” Williams said.
Part-time staff, who make up about two-thirds of Ikea’s UK workforce, often don’t get enough hours to make ends meet, so Ikea is now giving some of them additional hours working remotely, answering customer calls. To retain students, Taylor has introduced shifts on weekends only, or just during school breaks.
“Small things,” saidTaylor, “make a big difference.”
In India, the things that matter to Ikea’sworkers arebenefits like subsidizeddaycare,26 weeks of parental leavefor mothers and fathersand a five-day workweek (six days is the norm for many Indian retailers). Those perks area game changerforShwetaSingh, a 39-year-old momwho was hired two years ago and runs the children’s furniture department in theHyderabad store.
And in the US, where Ingkaemploys more than 17,000 people, one of the most impactful fixes was moving its shift scheduling tool online.
Previously, inflexible schedulesdidn’t allow for life’s daily hiccups— a sick kid, a flat tire. Unpredictable shifts can then have a ripple effect on workers’ well-being, leading tohigher workforce turnoverandeconomic hardshipdue to income fluctuations, according to studies by the Washington Center for Equitable Growth and the Brookings Institution.
“There is this notion that workers’ time is not valued,” saidKristen Harknett, a professor of sociology at the University of California, San Francisco, who has researchedunstable work schedules.
Incollaborationwith a group called the Shift Project, Ikea US began testing the ability for workers in a few storesto swap shifts online, without a manager’s approval,replacing paper forms that had to be signed by both workers andtheir respective managers, which made swapping “particularly tedious,” Shift Project researchers found. Workers in the pilot program can also adjust their hours of availability more easily,and request to not be scheduled in certain blocks of time.
Also, aretentiontool dubbed “Stay” analyzes historical data on departed workers and flags worrisometraits – such as constantly fluctuating hours – to managers. Store managers who have used the toolreport turnover rates nearly three percentage points lower than those who don’t.
Now, more store workers like Natasha Williams are sticking around longer. She just got a raise after taking a two-week training class, and would eventually like to move from the kitchen department to interior design.
She’s not sure if she’ll work at Ikea her whole career, “but for the foreseeable future, definitely.”
