What Can IKEA Teach Us About Employee Retention?
To say that employee turnover is notoriously high in retail is a bit like saying the Earth is round. Yet I’m writing today to point out that IKEA has cracked this nut. Faced with a growing retention problem and skyrocketing costs to replace departing workers, the Swedish retailer implemented a culture shift focused on innovative strategies to improve working conditions and reduce turnover. By addressing key pain points—wages, scheduling flexibility and onboarding—IKEA has managed to keep more employees from quitting, leading to better overall performance.
The Growing Retention Problem Over Time
Retail jobs have long been associated with low pay, irregular hours and high stress. In the U.S., retail workers leave their jobs at a rate that’s 70% higher than workers in other industries, according to a 2022 report by McKinsey & Co. The situation is similar globally, as IKEA discovered. In countries like the UK and Ireland, half of all new hires were quitting before their first anniversary – that is a 50% turnover (churn) rate! The impact of those departures wasn’t just a logistical headache; each departing employee cost the company an estimated $5,000 to replace.
While workers were already unhappy before Covid-19 due to erratic schedules, low pay, and stressful working conditions, the pandemic only made things worse. The surge in demand for online shopping turned many stores into makeshift fulfillment centers, placing even more pressure on employees. IKEA realized that urgent action was required to keep its workforce stable and engaged.
IKEA’s Culture-Centric Approach to Employee Retention
To address this pressing issue, IKEA launched culture-focused initiatives to improve working conditions and provide incentives for staying. These efforts included wage increases, enhanced scheduling flexibility and a more organized onboarding process for new hires.
- Fair Pay Across Markets
We call this, “making money a non-issue.” Pay people fairly (51st to 55th percentile, for their role in your geographic area), competitively and at a level that affords them a decent lifestyle.
One of the first steps IKEA took to reduce turnover was to raise wages. In many regions, starting wages were increased, and bonuses were sweetened to give employees a more competitive compensation package.
- Flexible Scheduling
Every employee wants flexibility. Why? Because human beings want agency. We want the decisions that impact our lives to be in our hands, not someone else’s.
In traditional retail, rigid and unpredictable work schedules are a major reason workers quit. IKEA made significant changes to its shift scheduling process, moving it online to give workers more control. The new system allows employees to swap shifts without managerial approval, easing the stress of last-minute life events like sick children or car troubles. This small change had a massive impact, as it allowed workers to better balance their personal and professional lives.
- Structured Onboarding and Training
Onboarding is the first experience new employees have with your organization – and you have COMPLETE CONTROL to shape that experience. Leverage it! Make sure that every experience you offer employees is well thought out and intentional. This is the first time they will get to experience your culture beyond what they were told during the interview process.
At IKEA, prior to their changes, onboarding lacked structure, and new employees often found themselves lost and unsure of where to turn for help. This issue led many workers to quit shortly after they were hired. To address this, IKEA revamped its onboarding process, offering more frequent feedback and better communication between managers and employees.
IKEA’s efforts to improve employee retention are paying off. By the end of 2023, voluntary turnover in the U.S. had dropped from one-third to one-quarter of its workforce. Globally, the quit rate fell from 22.4% in August 2022 to 17.5% by April 2024. Although the company still has some regional challenges, its proactive approach has significantly improved working conditions for thousands of employees.
Such transformations are never easy, but IKEA has shown a commitment to making its stores better places to work and set a new standard for the retail industry. Do you really think a retailer can be a great place to shop if it’s not a great place to work? IKEA has demonstrated it knows that answer.
IKEA will likely continue to adapt its culture and strategies, through listening to employee feedback. For the rest of us, it’s clear that cultural changes—like flexible schedules, better pay and a structured onboarding process—can make a big difference. A culture-based approach to employee retention is likely to keep more employees around for the long haul.
Do you want to improve your retention? This is the work that we do. Let us know how we can help.
I’d love to hear your questions and comments. If you would like to discuss this topic further, just drop me a note.
