The cost of onboarding and training new employees isn’t junk drawer change, with companies spending thousands of dollars on each new employee they onboard. With these high investment costs in new employees, it is important for companies to retain their staff members—a need that has proven to be challenging for many companies, including Swedish company Ikea, which is undergoing changes to address the staggering number of employees jumping ship.
Employee retention is crucial for companies for reasons beyond the high costs of onboarding. High employee turnover rates can threaten a company’s growth, negatively impacting a business’s success. Since the pandemic, more individuals are seeking a better work/life balance and happiness in their line of work, causing companies to reconsider issues that can lead to whether or not an employee stays with them, including issues like pay, benefits, potential for advancement, and company culture.
Addressing High Turnover Rates at Ikea
Ikea experienced waves of employees leaving the company in 2022, with a quitting rate of 22.4 percent in August of that year. Jon Abrahamsson Ring, the chief executive officer of the umbrella company that oversees Ikea’s store franchising, product design, and supply chain, discussed the previously high quit rate, stating that workers “suddenly became very scarce.”
According to Ring, in 2022, Ikea endured more than 62,000 employees departing the company for various reasons, with half of these employees leaving before their first anniversary with Ikea. This opened the company’s eyes to the realities of the costs that came with each departure—with each employee leaving the company costing about $5,000.
Not only was Ikea experiencing a significantly high turnover rate, but many new hires were quitting the company within just a few months of starting, with just 60 percent staying for at least three months. At the time, the company’s onboarding process desperately needed to change, with Ring stating that infrequent feedback from managers and employees feeling left unclear on who to reach out to for help contributed to employees quitting.
After the pandemic, employees valuing a strong work-life balance “required a big change in terms of how [Ikea] positioned [themselves] to attract people into retail,” according to Ring. But Ikea employees weren’t just leaving due to low pay or a poor work-life balance; several employees left after finding the process of swapping shifts too difficult, and employees in India needing child-related benefits were quitting due to the meager benefits they were offered.
Implementing Changes to Improve Employee Retention
The number of employees fleeing Ikea led the business to make changes to rectify the unhappiness and address the needs of their staff. Ring stated that the company began paying staff more, raising starting rates and bonuses, and closing gender pay gaps across all locations. In London, Ikea raised its base pay from £11 ($14) an hour to £13.15 ($16.75), adding a new starting pay for stores outside the city, where the cost of living is much higher. In the U.S., the company upped its base pay from $16 an hour to $18 depending on location.
Beyond pay increases, the firm responsible for the company’s staffing implemented an online tool to support changing schedules and last-minute adjustments. Ikea also offered parental leave and five-day work weeks to employees in India. For part-time employees, Ikea made changes in how they can work more hours, offering opportunities for remote roles and call answering work.
While some staff have still left, citing the changes as simply not enough, system changes are showing to make a difference, with more employees opting to stay a little longer.
