The great resignation hits Ikea, revealing a $5,000 per employee loss

At the core of its workforce troubles, the Swedish furniture giant Ikea was hemorrhaging employees at an unsettling pace.

In America, a third of Ikea's workers jumped ship each year, while across the pond in the UK and Ireland, half the new recruits bailed before their first anniversary. Globally, this mass exodus of talent landed a staggering blow, forcing Ikea to cough up $5,000 or more to replace each worker who walked out the door.

As the pandemic labor crunch took hold, Ikea found itself in a precarious position, with 62,000 employees - a third of its entire workforce - leaving per year by 2022.

"Workers suddenly became very scarce," says Jon Abrahamsson Ring, chief executive officer of Inter Ikea Group, the umbrella entity overseeing Ikea's global operations. Recognizing the urgency, Ikea set out on a mission to address the factors fueling its employee retention crisis.

Retail gigs often involve a toxic mix of low wages, erratic schedules, and irate customers - the perfect recipe for driving workers away. A 2022 McKinsey report revealed that the quit rate for US retail workers was over 70% higher compared to other industries. Half of the retail employees are considering leaving their jobs, with half seeking an exit from the retail sector altogether.

"Attracting, developing, and retaining frontline talent must become a top agenda item for retail CEOs," the McKinsey report warned, highlighting the mounting challenges amid inflation and a resurgence of labor unions.

With 473 stores across 63 markets employing nearly 200,000 people, Ikea had historically kept more workers than competitors, thanks partly to its Nordic corporate culture. However, the Swedish retailer faced new realities in managing a global workforce in an era where work-life balance is non-negotiable.

In 2018, a coalition of unions accused local Ikea managers of suppressing organizing efforts in the US, Ireland, and Portugal, filing a complaint alleging that senior leadership had ignored red flags about workers' rights violations. This sparked a wave of worker protests worldwide, with employees in Poland decrying wage hikes below inflation rates, and unionized workers in South Korea claiming subpar treatment compared to their international counterparts.

Even in the US, Ikea courted controversy after serving fried chicken, collard greens, and watermelon at a Juneteenth event for Atlanta employees, prompting the company to apologize.

As union talks dragged on, disgruntled Ikea workers started eyeing opportunities elsewhere. COVID only poured gas on the fire, overnight transforming stores into online fulfillment warehouses, while supply hiccups and soaring prices left customers taking out their frustrations on frontline staff.

Recognizing the severity of the crisis, Ingka Group, the Netherlands-based franchisee operating Ikea stores in 31 countries, launched a comprehensive campaign to lower turnover rates. The approach targeted the biggest pain points in each market, improving pay and benefits, streamlining scheduling processes, revamping new-hire orientations, and even redesigning employee uniforms.

"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. "But at Ikea, we want people to grow and develop."

In the UK, where onboarding processes were poorly organized, leading to high turnover among new hires, Ikea introduced more flexible schedules and remote work opportunities. Additional hours working remotely and answering customer calls were offered for part-time staff, who make up about two-thirds of the UK workforce.

"Small things make a big difference," said Darren Taylor, people and culture manager for Ikea UK/Ireland.

In India, where workers were quitting when they became parents due to meager child-related benefits, Ikea introduced subsidized daycare, 26 weeks of parental leave for both mothers and fathers, and a five-day workweek – a rarity among Indian retailers.

In the US, one of the most impactful changes was moving Ikea's shift scheduling tool online. This allowed workers to swap shifts without a manager's approval - a process previously bogged down by paperwork. This flexibility addressed the issue of unpredictable schedules, which can have ripple effects on workers' well-being, leading to higher turnover and economic hardship, according to studies.  

Ikea's multi-pronged approach yielded tangible results. Voluntary turnover in the US dropped to about a quarter of employees by the end of 2023, down from a third a year earlier. Globally, across Ikea's more than 600 stores and warehouses, the quit rate fell to 17.5% in April from 22.4% in August 2022 – a remarkable achievement in an industry still grappling with high attrition rates.

While challenges persist in certain regions, and some workers remain dissatisfied, Ikea's efforts have demonstrated the power of listening to employees and addressing their concerns head-on. As Natasha Williams, a 22-year-old sales associate in the UK, attests, "For the foreseeable future, definitely," she plans to stick around, having benefited from Ikea's new flexible scheduling policies.

By tackling the $5,000 per worker loss and prioritizing employee retention, Ikea has not only stemmed the tide of its workforce exodus but also reinforced its commitment to creating a great place to work – a fundamental prerequisite for being a great place to shop.