Bonus – HRM Now! by Top Hat

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.

Click here to read about IKEA’s wage boost.

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.

Click here to read more about IKEA’s Tack! program.

In Canada, the Tack! program has paid out $145 million to its employees this year.

Click here to read about the Tack! program in Canada.

IKEA is an excellent example of an organization that understands that compensation, benefits, and bonus systems are key tools in a successful business.

Discussion Questions:

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.

Performance incentives may do more harm than good.

backfired Amazing drift car — Kárpáti Tamás/Shutterstock

In the summer months I drive a 40-year-old British sports car and occasionally it will backfire. A backfire happens when the car’s internal combustion engine decides to have a moment of external combustion and the whole neighborhood hears about it.

There can be many reasons for a car to backfire: wrong air/fuel mix, spark plug timing or just an exhaust problem. When it happens, I know the car is not performing at its best and something needs to be addressed.

The same thing can happen in the workplace with performance incentive plans. They sometimes backfire, and that backfire turns into real-world blow-back with significant consequences. Recent examples have happened in the banking industry:

Wells Fargo fined $185 million for pressuring employees to sell.

Click here to read about Wells Fargo

TD Bank faces allegations that its employees broke the law to meet sales targets.

Click here to read about TD and its selling tactics.

The purpose of performance incentives is to encourage employees to display behaviours that are above the basics of task behaviour. In the HR world, we call this organizational citizenship behaviour. When we think of the citizenship behaviour we default to a very positive image of workers going above and beyond the call of duty. But, in reality, going above and beyond the call of duty can have disastrous effects when it is linked to a poorly developed sales incentive program. Poorly designed programs can create very successful anti- citizenship behaviour that supports the dark side of business plans.

Both TD and Wells Fargo had well-intentioned sale incentive programs designed to raise organizational performance in terms of profit. However, for both organizations, the profit motive became unhinged from the organization’s ethics and negative things happened. Employees become whistle-blowers and companies now face the blow-back of legal action, ethical complaints and very bad public relations.

There is always a right and a wrong way to implement a performance incentive program in an organization. When the company gets it right there is recognition as a top employer. When the company gets it wrong, there is always blow-back.

Question

Do some research and find a workplace incentive plan that went wrong. Compare and contrast what went wrong to the Society of Human Resources Management (SHRM) suggestions on how to implement an effective incentive plan.

Tack You – You’re Welcome!