IKEA’s business model works very well, with its focus on low cost, flat packing, and distinctive style. However, there’s something else at IKEA that’s working very well — their employee compensation model. In 2015 IKEA raised its minimum wages.
IKEA is committed to providing its employees with a living minimum wage. It also understands the benefits of performance bonuses. Recently, the company created an employee loyalty program it called Tack!, which is Swedish for “thank you”. The following milestones suggest IKEA is doing something right with its Tack! program:
- IKEA has increased its total revenue from 20 billion euros to over 36 billion euros
- It is the number 1 furniture retailer in the world
- It is the number 5 retail brand in the word.
David Hood, Country Retail Manager of IKEA Australia, describes the program as “build[ing] something for the future and giv[ing] something back … by building a long-term relationship with employees.”
IKEA’s basic compensation program has wages that are above the jurisdiction’s minimum wage — they provide benefits and now, with the expansion of the Tack! program, all full time and part time employees with over 5 years’ service will get an annual bonus based on IKEA’s performance in that country of operations.
In Canada, the Tack! program has paid out $145 million to its employees this year.
IKEA is an excellent example of an organization that understands that compensation, benefits, and bonus systems are key tools in a successful business.
- Identify the pros and cons of paying front line retail workers a minimum living wage when it is above the minimum wage required by law.
- Research and identify the cost of high staff turnover and the relative benefits of employee retention in the retail environment. Summarize your findings by creating a 5-minute presentation.