IKEA CASE STUDY SUMMARY QUESTIONS 1. How have IKEA’s.docx

IKEA CASE STUDY SUMMARY QUESTIONS
1. How have IKEA’s efforts to provide an environment of
continued learning
positioned them to remain viable, given the trends of cost
containment and speed
in market change described in our textbook?
2. How might IKEA’s “Partners for Growth” mentoring program
provide them with an
effective knowledge management tool.
3. What are your feelings about IKEA’s “I Want Your Job”
program? Is this
something that you would endorse as an HR practitioner? Why
or why not?
4. Given what you know about the retail industry, what other
ideas do you have
regarding strategic employee development at IKEA?

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ICMR Case Collection
ICFAI Center for Management Research
This case was written by Shirisha Regani, under the direction of

Sanjib Dutta, ICFAI Center for
Management Research (ICMR). It was compiled from published
sources, and is intended to be used as a
basis for class discussion rather than to illustrate either
effective or ineffective handling of a management
situation.
IKEA’s Innovative Human Resource
Management Practices and Work Culture
H R O B 0 6 6
reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet,
or transmitted in any form or by any means- -
electronic or mechanical, without permission.
To order copies, call 0091-40-2343-0462/63/64 or write to
ICFAI Center for Management Research, Plot # 49,
Nagarjuna Hills, Hyderabad 500 082, India or email
[email protected] Website: www.icmrindia.org
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HROB/066
IKEA’S INNOVATIVE HUMAN RESOURCE MANAGEMENT
PRACTICES AND WORK CULTURE
“Maintaining a strong IKEA culture is one of the most crucial
factors behind the continued
success of the IKEA concept”.
-Ingvar Kamprad, founder of IKEA.1
“IKEA values the individual. We make people comfortable here
and enable people to grow.”
- Jaime Martinez, Head of Human Resources at IKEA North
America, in 2003.2
BEST EMPLOYER
In January 2005, Fortune, a prominent international business
magazine, published its annual list of
the ‘100 Best Companies to Work For’. IKEA North America
(IKEA), a major furniture retailer

and the American subsidiary of the Sweden-based IKEA Group,
was 62nd on the list. IKEA won
points for its innovative human resource management practices
that emphasized flexibility and
welfare while focusing on employee development. The
company’s unique work culture that
supported coworkers (as employees were called at IKEA) and
encouraged creativity and diversity
was also applauded.
Pernille Spiers-Lopez (Spiers-Lopez), IKEA’s President, said
the company was thrilled at being
recognized as one of the best companies to work for. “We’re
delighted to be among Fortune’s
‘100 Best Companies to Work For.’ At IKEA, we live by the
philosophy that when coworkers
have the support and flexibility to make their personal lives a
success, they thrive in the workplace,
too,” she said.3
A few months earlier, in September 2004, IKEA was listed as
one of the ‘100 Best Companies for
Working Mothers’, in a study conducted by Working Mother
magazine. It was the second time that
IKEA was so listed. Working Mother appreciated IKEA’s
efforts at creating a workplace that
accommodated the needs of mothers. Three issues were
particularly stressed in this study –
flexible work scheduling, time off for new parents, and
childcare facilities.
IKEA’s popularity as an employer was noteworthy primarily
because of the fact that the retail
sector, especially in the United States, was not known for being
employee-friendly. Many large
retailers paid low salaries and offered negligible benefits while

expecting employees to work long
hours. This accounted for the fact that the sector had one of the
highest turnover rates of all
industries. Consequently, it also suffered from high human
resource (HR) costs, as companies had
to recruit and train replacements at frequent intervals. In this
context, IKEA stood out for its
employee-friendly policies and generous benefits, which made it
the preferred employer in the
retail sector.
1 www.ikea.com.
2 www.rehwoldt.com.
3 www.ikea.com
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IKEA’s Innovative HRM Practices and Work Culture
3
IKEA was one of the largest furniture manufacturers and
retailers in the world and was well

known for its stylish and innovative furniture designs. Almost
all IKEA’s products could be
dismantled and packed in flat packages, making it easy to
transport them. In the early 2000s, IKEA
was one of the largest privately held companies in the world. It
was rumored that Ingvar Kamprad
(Kamprad), IKEA’s founder, was the richest man in the world,
beating even Bill Gates, the
founder of Microsoft. (This however, could not be confirmed, as
IKEA was a private company and
so was not required to disclose its financials). Calculating the
true value of IKEA was made more
difficult by its complicated ownership structure consisting of
several holding companies and
subsidiaries (Refer Exhibit I for IKEA’s ownership structure).
IKEA expanded using the
franchisee model.
BACKGROUND
Kamprad was a born businessman. As a young boy, he started a
business selling matches to
neighbors on his bicycle. He bought the matches cheaply in bulk
and sold them at low prices,
making a tidy profit. He reinvested his profit in the business
and soon diversified into selling a
variety of articles including Christmas decorations, stationery
items, fish, and seeds.
In 1943, when Kamprad was 17, he formed IKEA (an acronym
made up of his initials and the first
letters of Elmtaryd and Agunnaryd, the farm and village where
he grew up), using the money he
received as a gift from his father for doing well in school.
IKEA4 sold an assortment of goods from
pens and pencils to watches, jewelry, picture frames, wallets,

and stockings. By 1945, business had
increased so much that it was no longer possible to make
individual sales calls. Kamprad,
therefore, set up a mail order catalogue and shipped orders
using the local milk van.
In 1947, furniture was introduced for the first time in IKEA’s
product line in the form of
armchairs. Craftsmen from around Kamprad’s village made the
furniture using wood from a
nearby forest. IKEA’s furniture became very popular and the
line was extended to include more
products. By 1951, furniture sales had increased so much that
Kamprad decided to discontinue all
other products and specialize exclusively in low priced
furniture. In the same year, the first IKEA
furniture catalogue was published.
IKEA opened its first furniture showroom in 1953. The
showroom allowed customers to see,
touch, and feel the items they were buying, so that they could
assure themselves of the quality of
the items. The showroom was the result of an intense price war
that IKEA was engaged in with its
main competitor at that time.
In 1955, the company introduced its best and most successful
innovation – furniture that could be
dismantled. This concept had its origin in an observation by an
IKEA employee that a table could
easily fit into a car if its legs were removed. This would not
only make transporting furniture easy,
but also prevent damage due to bad transportation. Inspired by
the idea, IKEA started designing its
own furniture, featuring items that could be easily dismantled
and packed into flat packages. This

made it convenient for buyers to carry the furniture home.
Besides, it also reduced the overall cost
of the furniture, as buyers had to assemble the items themselves
at home using instructions
provided by the company.
In 1959, Gillis Lundgren (Lundgren), one of IKEA’s earliest
employees, designed home storage
systems, which were named ‘Tore’ (IKEA traditionally gave a
name to each of its products, Refer
Exhibit II for an indicative list of IKEA’s product names).
Lundgren had got his inspiration from
4 In the background note, ‘IKEA’ refers to the original
Swedish company. However, in the rest of the case
study, it refers to IKEA North America.
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kitchen storage systems and applied the same concept to the rest
of the house. Tore became one of
IKEA’s biggest successes ever. Over the years, several other
innovative ideas from IKEA’s
employees were converted into products. Notable among these
were the MTP bookcase, the Olga
chair and the Privat sofa. Kamprad believed that companies
existed not only to improve people’s
lives, but also to improve people themselves. Therefore, he
encouraged employees to be creative
and independent.
IKEA began overseas expansion in 1963, opening its first store
in Norway. In 1975, the company
opened its first store in Australia. In 1982, Kamprad put in
place the ownership structure of IKEA
by establishing several trusts, foundations, and holding
companies. It was reported that he did this
to protect the company from breaking up due to family
infighting after his death. In 1984, IKEA
introduced a range of furnishings called Stockholm. This range
featured high quality furnishings at
low prices. Stockholm won the ‘Excellent Swedish Design’
award in the year it was introduced. By
the mid-1980s, IKEA had over 6000 employees around the
world.
The first IKEA store in the United States was set up in 1985. In
1986, Kamprad officially retired as
Group President, but continued to play an active role as Senior
Advisor. Anders Dahlvig took over
from Kamprad as President. In the late 1990s, the company
introduced ‘Children’s IKEA’, a range
of children-focused furniture. The company worked extensively
with child psychology specialists

as well as children themselves to make the range completely
suitable for the target market.
Extensive testing was done before this range of furniture was
commercialized.
In 1999, IKEA announced the ‘Big Thank You Event’ as a
millennium bonus to IKEA’s
employees. The total worldwide sales amount on October 9,
1999 (which was traditionally the
busiest day for IKEA), amounting to $80 million, was shared
equally among all IKEA employees.
For many, this bonus exceeded their total monthly pay.
In 2004, IKEA’s annual sales worldwide totaled $15.5 billion.
In 2005, the company employed
over 84,000 people in 205 stores across 32 countries.
HUMAN RESOURCE MANAGEMENT PRACTICES
IKEA’s vision was “To create a better everyday life for the
many people.”5 ‘People’ included
employees, customers, as well as the community. The
company’s human resource philosophy
subscribed to the belief that employees were more productive
and committed when the company
took care of them and their needs.
IKEA adopted a paternalistic stance toward employees and their
needs (as did many other Swedish
companies) and promoted employee empowerment. However,
although the company had a
positive HR philosophy and offered generous benefits, their
application was more or less
standardized and policies applied uniformly to all employees.
This did not always work well, as
different employees had different needs.

In the late 1990s, when Spiers-Lopez became the HR head at
IKEA North America, she realized
that employees were not able to derive the maximum benefit
from IKEA’s generous HR policies,
as the policies did not always match individual needs and
requirements. She felt that employees
would benefit more if there were a greater amount of flexibility
in benefits administration.
5 www.ikea-group.ikea.com.
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With a view to developing a system that was more in keeping
with employees’ requirements,
Spiers-Lopez conducted comprehensive employee surveys,
asking them detailed questions about
their needs, expectations, and preferences. In the course of this

activity, she concluded that while
all of IKEA’s employees believed in and were committed to the
IKEA culture, each had different
needs and expected different things from the company. In order
to accommodate these different
needs, Spiers-Lopez created a set of initiatives that supported
‘life balance and diversity’.
Flexibility was the cornerstone of IKEA’s human resource
management philosophy. The company
made a conscious effort to accept and accommodate the
different needs of its people. One instance
of this was the flexible holiday schedule. IKEA traditionally
observed six holidays every year.
Initially, the company had a structured holiday schedule, with
six standard holidays for all
employees. However, in the late 1990s, IKEA implemented a
flexible six-holiday schedule, which
allowed employees to decide which six days they chose to
observe as holidays every year.
Flexibility extended to work design as well. IKEA gave due
importance to the fact that employees
had a life beyond work. Therefore, it made an effort to
incorporate policies that would help
employees achieve life balance. IKEA introduced flextime,
which allowed employees to choose
when they would start and end their workdays, subject to the
requirements of the store or office in
which they worked.
IKEA also introduced condensed work-weeks, job sharing, and
telecommuting to allow employees
to do justice to both their personal lives as well as careers. Lori
Schilling (Schilling), an IKEA
employee from California, said IKEA’s flexibility policy was a

major help to her when she
adopted a child in 2003. After the adoption, Schilling wanted to
spend more time at home. She
worked out an arrangement with her bosses and direct reports,
which allowed her to work every
alternate fortnight. She reported that this arrangement worked
very well for her and that she did
not encounter any problem with the company or her bosses.
“They rarely call me at home. At what
other company could you do that?” said Schilling.6 The
company even adopted videoconferencing
in a big way to help employees avoid excessive business travel
at the cost of family time.
IKEA allowed its employees to coordinate their schedules with
their spouses’ work hours,
especially if they had small children and one of the parents was
required to be home at all times.
The company was also open to transferring employees between
locations, provided there was a
matching opening for the employee at the place he or she
wanted to move to. This especially
worked in the case of young employees who wanted to spend a
year or two working at a different
location, sometimes even abroad.
IKEA’s flexibility policy ensured that employees did not have
to sacrifice their careers due to
personal commitments. “If an IKEA co-worker needs to take
time off to find a nursing home for an
aging parent, be home to kiss their child before bed, or
telecommute to better juggle caring for a
newborn, they can actually do that without feeling guilty or
worrying about risking their career
aspirations.” said Spiers-Lopez.7 Besides, this had a positive
impact on the company as well. As

the company was open to accommodating their requirements,
employees were motivated to
contribute their best. It was estimated that, by 2004, sixty five
percent of IKEA’s full-time
employees and 10 percent of part-timers had taken advantage of
the company’s flexible
work policy.
6 “Success Scandinavian Style,” Workforce Management,
August 2004.
7 www.rehwoldt.com.
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Under the guidance of Spiers-Lopez, IKEA introduced several
initiatives that improved the quality
of work life of the employees. The company invested
substantially in making its stores more

comfortable for employees during nonworking times and breaks.
Several IKEA stores had ‘quiet
rooms’, where employees could go to pray or meditate.
Lactation rooms were also built for the
benefit of nursing mothers. Many stores had onsite childcare
facilities managed by IKEA or
outside contractors and entertaining rooms where employees
could receive visiting friends and
family members. Employees also received substantial discounts
at IKEA’s onsite restaurants for
themselves and their families.
To keep employees updated, several IKEA stores set up
resource rooms, where employees could
access computers to browse IKEA approved websites containing
health information, and self-
improvement tips. They could also access employee websites,
which listed benefits information,
details of forthcoming training and development programs, and
jobs openings within the IKEA
system.
IKEA was well known and applauded for its benefits policy,
which was among the most generous
in the retail industry. The company gave full medical and dental
insurance to all employees
working 20 hours or more per week. The company also gave its
employees substantial discounts
for weight reduction and smoking cessation services, as well as
free subscriptions to health and
wellness magazines.
IKEA offered significant parental benefits as well. Women were
eligible for seven weeks’
maternity leave with full pay, while men and adoptive parents
received one week with full pay. In

addition to this, they could take paid time off for family
commitments such as marriages and
deaths.
All employees were eligible for between two and five weeks of
annual paid vacation, depending
on the length of their service at the company. Unlike many
other companies, leave accruals began
on the first working day itself and employees could carry
forward vacation time to the next year
(although they were encouraged to take a vacation every year).
All employees were eligible for a 15 percent discount on IKEA
merchandise and could purchase
anything at IKEA’s restaurants at highly subsidized rates. IKEA
even had an annual ‘Coworker
Appreciation Day’, when employees could get a discount of up
to 40 percent on store purchases
depending on the annual performance of their store. This
discount was extended to family
members as well. Employees also received a credit card with no
interest for 90 days and could
choose to join the company’s 401(k) policy8.
Additional benefits included tuition reimbursement for graduate
and undergraduate courses for all
employees regardless of how many hours they worked.
Employees were encouraged to pursue
courses that had potential application in the retail sector, such
as general management, accounting,
and interior design. Study of languages was also encouraged.
IKEA paid 75 percent of the course
fee upfront and the remaining 25 percent after the course was
completed. The company reimbursed
up to $2,500 per year for undergraduate courses and up to
$5,000 a year for graduate courses. As

an added benefit, IKEA gave a special bonus of $1000 to
employees who stayed with the company
for one year after completing the course.
Analysts said IKEA’s tuition reimbursement policy was the
most generous in the industry and
reflected the company’s commitment to contributing to the
continuous development of its
employees. This policy offered significant benefits to the
company as well, as IKEA believed in
promoting from within, and therefore required skilled
candidates for future promotions. In 2003,
about 1500 employees utilized IKEA’s tuition reimbursement
program.
8 A tax saving fund to which employees contribute a certain
percentage of their pre-tax salary, with a
matching or proportionate contribution by the employer as well.
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What was distinctive about IKEA was that not only full-time
workers, but also part-timers were
eligible for the company’s benefits program. Another
noteworthy aspect was that the company did
not lay any minimum service conditions for employees to
become eligible for benefits. In other
words, most employees were eligible for benefits from the day
they joined the company.
Analysts estimated that in 2004, only about 15 percent of retail
workers received any manner of
benefits from their employers. Besides, following the economic
downturn of the late 1990s and
early 2000s, there was a general trend of cutting down benefits.
Most retailers also excluded part-
timers from their benefits policies.
IKEA’s commitment to the ongoing development of its
employees was reflected even in the
company’s policies on training and development. The company
put in place an extensive training
and professional development program to promote the
advancement of employees. Employees
could use several resources including books, classroom
sessions, and online instruction to meet
their requirements in sharpening their skills or acquiring
advanced knowledge. The company also
had specialized training programs in areas like diversity, health
and safety, and environmental
consciousness.
Mentoring formed an important part of IKEA’s employee
development program, as Spiers-Lopez
was a strong believer in the benefits of mentoring. In 2001,
IKEA launched a program called

‘Partners for Growth’, which was a formal one-year mentoring
initiative that teamed junior
managers with senior managers from different locations of
IKEA. Mentoring was expected to train
and prepare junior managers for positions of greater
responsibility in the future, and to help IKEA
meet its leadership needs in later years. Spiers-Lopez said
mentoring made employees feel
supported, and helped them grow within the company.
Another program, ‘Paddle Your Own Canoe’, was a self-
assessment tool that trained employees to
take responsibility for their own careers and gain the knowledge
they required to move into higher
positions within the IKEA system in the future. Employees sat
down with their managers to
discuss their career path within the company, and to identify the
additional skills and knowledge
they required to progress on the chosen career path. Employees
first conducted a self- assessment
of their capabilities and then identified their training
requirements in coordination with their
managers. Employees could also access the employee website,
which listed all the development
tools offered by IKEA, and choose those most suitable to their
needs. “There are no limitations on
what you can achieve by working with us,” said IKEA store
manager, Max Hedberg. “Your career
path is laid out.”9
‘I Want Your Job’, an employee development program, was
launched in early 2003. This program
allowed employees to train actively with the person whose job
they would like to hold in the
future. All of IKEA’s employee development programs were
designed to provide a ready pool of

qualified candidates for IKEA’s future growth and expansion
programs. Typically, between 10 and
15 percent of IKEA’s store employees went on to manage stores
of their own.
IKEA subscribed to the belief that all employees must be given
the chance to advance within the
company. Therefore, all training and development programs
were two-way activities, where
managers and subordinates worked together. The idea behind
this was to ensure that managers did
not exercise arbitrariness in deciding which of their
subordinates would get training or be
promoted.
Toward this end, IKEA launched an initiative called ‘Open
IKEA’, which was designed to update
employees on new job openings within IKEA. Job openings
were posted on the employee website
as well as the company intranet. One innovative method of
advertising jobs was by putting up
9 “IKEA’s Ideas”, St Paul Pioneer Press, July 11, 2004.
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catchy stickers and slogans where employees would see them.
IKEA put stickers on mirrors that
read: “Find a job that really reflects your interests.” Those on
soft drink machines would read,
“Refreshing Opportunities,” and so on.
IKEA launched ‘Enterprise’, a global application tracking
system in late 2003. Enterprise was an
e-recruiting system designed to reduce the delays in the hiring
process by facilitating faster
communication with candidates around the world, thus taking
the IKEA recruitment system to a
global level. Using Enterprise, employees could track openings
in the places of their choice and
apply immediately online. Enterprise was also designed to put
the responsibility for hiring in the
hands of store managers rather than IKEA’s HR recruiters.
IKEA took care to ensure that it recruited the right kind of
people. The company focused on
practical skills, and an ability to understand and get along with
people in its recruitment activities.
Another important attribute in future employees was the ability
to ask questions and give input.
Communications played an important role at IKEA. The
company encouraged employees to
question the decisions of the management and to openly express
their ideas and beliefs.

In the early 2000s, IKEA initiated a program called ‘Why
Sayers’, which encouraged employees to
express their ideas to improve their stores. These ideas were
generally channeled through
supervisors and tested in some stores. If they worked, they were
made standard practices. The
company gave so much importance to this practice that it placed
an advertisement inviting ‘Why
Sayers’ to join the company (Refer Exhibit III for the
advertisement).
Spiers-Lopez initiated another program called ‘Express
Yourself’, through which IKEA employees
could share complaints or concerns with her directly, either
through e-mail or through postcards
earmarked for her. IKEA insiders said this program greatly
improved morale within IKEA, as
employees felt important when the president herself personally
sought and responded to their
concerns.
IKEA had a comprehensive communications system in place for
employee communications. IKEA
Radio was a short news program that was aired over public
address systems in the stores. This
usually broadcast communications of a general nature. The
company intranet was another effective
tool for communication. IKEA also reached out to employees
through printed material like
newsletters and brochures.
WORK CULTURE
IKEA’s positive HR policies were supported by a strong and
nurturing culture that promoted
diversity and creativity. Spiers-Lopez said IKEA’s culture was

characterized by a family-like
quality that made relationships between employees strong and
open. “At IKEA, we think of
ourselves as a family. Just as one would look after their parents,
siblings or children, our coworker
family is encouraged to and excels at supporting and taking care
of each other,” she said.10
Kamprad had once written in a manifesto that “the true IKEA
spirit is still founded on our
enthusiasm, on our constant will to renew, on our cost
consciousness, on our willingness to assume
responsibility and to help, on our humbleness before the task
and on the simplicity in our behavior.
We must take care of each other, inspire each other.”11 These
values became the core of IKEA’s
culture and were regularly reiterated in training programs and
staff meetings (Refer Exhibit IV for
IKEA’s values).
10 “Ikea Named To Working Mother Magazine’s ‘100 Best
Companies for Working Mothers’ for Second
Consecutive Year”, www.ikea-group.ikea.com, September 21,
2004.
11 www.benefitsnews.com.
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Openness and equality were important values at IKEA. To
emphasize equality, IKEA called all its
employees, regardless of rank, ‘coworkers’. “We’re all co-
workers because we all make a
difference. It doesn’t matter what we do, whether in an office or
on the sales floor. We all affect
the customer in very different ways, and all of our efforts are
appreciated the same way,” said
Hope Bear, a deputy HR manager at IKEA.12 Equality was
important as it helped create an
informal atmosphere at the company and promoted
communication between employees.
With a view to promoting open communication, IKEA adopted a
flat structure with no hierarchical
distinctions. At most of the stores, there was an open plan
office structure where managers and
employees sat together and shared the same facilities. They also
dressed alike in yellow shirts and
blue trousers (IKEA’s uniform) and usually addressed each
other by their first names.
IKEA’s employees were encouraged to express their opinions
and ideas directly to the top
management. “There's an open and friendly climate with many
nice colleagues,” said one IKEA

employee of the culture at the company. “You can speak your
mind, and there are no obvious
hierarchies. One telltale sign is that department managers sit at
desks among everyone else in an
open office landscape,” she continued.13 She added that the
openness and flat structure allowed
employees to speak out, and when their suggestions were
considered seriously, to feel rewarded.
Another feature that made employees feel rewarded was the
high level of empowerment at IKEA.
The company never gave its employees detailed instructions
about their job activities and
behaviors. It gave them general instructions on what they were
expected to achieve, and allowed
them to choose their own methods in achieving that, within
reasonable limits of cost and ethical
behavior. “The main part is freedom of responsibility,” said
Spiers-Lopez. “In every job, there’s
always some freedom you can take. You don’t have people
watching you every minute.”14
Cost consciousness was a value that was deeply embedded in
IKEA’s culture. This supposedly
stemmed from Kamprad, who was notorious for his tight-fisted
attitude toward spending money.
According to Kampard, IKEA’s business goal was to “offer a
wide range of well-designed
functional home furnishing products priced low so the largest
number of people possible will be
able to afford it.”15 Therefore, economy was ingrained in every
action of the company. All
executives flew economy class or on low cost airlines for
business trips. They also stayed in
budget hotels and commuted by public transport on their trips.
Kamprad himself had a frugal

lifestyle for a person rumored to be the richest man in the
world.
Cost was the basis of all decisions. Product development was
done on the basis of the expected
price of the product. Before any new plan was implemented, the
costs were weighed carefully.
IKEA sold furniture at prices that were 30 to 50 percent lower
than those of its competitors.
Therefore, it was imperative for the company to have a cost
structure that supported its pricing
strategies.
12 “Best Practices in HR”, www.blr.com, December 20, 2003.
13 www.itnetcentral.com.
14 Karen Lee, “Care Without Coddling,” Employee Benefits
News, June 1, 2000.
15 Oscar Halpert, “Why IKEA is the business customers - and
cities - clamor for,” Renton Reporter,
October 29, 2004.
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IKEA’s culture promoted diversity. The company believed in
respecting employees’ personal
beliefs and choices and benefiting from cultural diversity. In the
early 2000s, IKEA instituted
several diversity-focused programs, which helped employees’
accept and promote diversity at the
work place. In one of the programs, IKEA’s hiring managers
were trained to be aware of the
possible cultural biases that they may have and to help them
avoid bringing these biases into the
hiring process. “Our goal is to hire the right people for the job,
not those who click with the hiring
manager,” said an IKEA spokesperson. 16
The company instituted a diversity drive, in which it trained HR
personnel and individual store
managers intensively in diversity related issues. Trainees were
given extensive information about
which organizations to contact to find qualified minority
candidates and how to adjust
interviewing techniques to make the interviewing process more
comfortable for minority
applicants, among others. Managers were evaluated annually on
the amount of ethnic diversity
they managed to incorporate in their workforce. In 2004, nearly
50 percent of IKEA’s employees
were women while minorities constituted 52 percent of the total

workforce.
IKEA was a highly competitive company and strove to be the
best in every region that it had
operations. The company was in favor of competition, as it
believed that this stimulated
improvement and kept everyone on their toes. It was constantly
in touch with its competitors’
products and strategies and expected all the employees to be
conscious of these too. However,
despite being an aggressive competitor, IKEA was ‘humble’
toward its competitors and ‘respected
their proficiency’.
Openness to change and adaptability were stressed at IKEA. The
company understood that change
was the key to continuous success and therefore encouraged
employees to keep coming up with
newer ideas and methods to do things. Analysts said IKEA’s
commitment to change was probably
rooted in the fact that many of its successful innovations were a
result of experimentation. The
natural consequence of being open to change was the
enhancement of employee creativity. The
value IKEA placed on employee creativity was reflected in the
fact that the company usually
credited individual employees for furniture designs.
IKEA created a sense of belonging among its employees by
creating a set of distinct values and
norms they could identify as IKEA standards. The company
maintained an obvious Swedish
atmosphere, so that people did not lose touch with the roots of
its culture. It even celebrated a
Culture Day when it familiarized employees with Swedish
customs and traditions. Another

innovative practice at IKEA was to give all the products
Scandinavian names. This created a
strong sense of identity and association among employees.
All managers were required to attend a week-long orientation
program in Sweden on the ‘IKEA
WAY’, which was generally attended by Kamprad himself. All
employees were also given “The
Testament of a Furniture Dealer”, a book written by Kamprad
describing IKEA’s business
philosophy. The book outlined the basic tenets on which IKEA’s
culture was built. Some of them
were; “Waste of resources is a mortal sin at IKEA”, “Only while
sleeping one makes no mistakes,”
“Mistakes are the privilege of the active person who can start
over and put things straight,” and
“Happiness is not to reach one’s goal but to be on the way.”
THE PAYOFF
No doubt IKEA’s generous policies involved substantial costs
for the company (sometimes they
seemed to be the antithesis of the company’s cost conscious
culture), but the pay off far
outweighed the costs. For one thing, IKEA’s employee turnover
fell drastically, from 76 percent in
2001, to 56 percent in 2002 and 35 percent in 2003. The
company’s turnover was also almost half
16 www.rehwoldt.com.
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the average industry rate, which hovered around 60 percent.
This substantially lowered the
company’s costs in recruiting and training replacements.
(Analysts calculated that the replacement
cost of one person was between one and 1.5 times his salary). It
was reported that most of IKEA’s
employees in the early 2000s had high morale and were looking
at long-term careers in the
company. IKEA’s profit margin was also relatively high, at
around six percent for 2004, which
was almost double the margin of its competitors.
Analysts said the general opinion among retailing companies
was that lower level employees were
easily replaceable, and so they did not have to make a special
effort to retain these employees. For
this reason, they were often indifferent toward employees,
paying minimum wages and negligible
benefits. In contrast, IKEA understood the importance of a
committed workforce and made an
effort to retain people, and this turned out to be its major
competitive advantage.

QUESTIONS FOR DISCUSSION:
1. IKEA was well known for its positive human resource
management practices. Critically
examine the important elements of IKEA’s human resource
management policy and their
effect on employee morale.
2. Employee development is one of the most important aspects
of human resource management.
Examine IKEA’s employee development programs and comment
on the advantages of these
programs to the employees as well as the employer.
3. Culture plays an important role in fostering innovation.
What, according to you, are the
important cultural elements that promote innovation? What are
the reasons for IKEA’s
innovativeness?
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EXHIBIT I
IKEA’S OWNERSHIP STRUCTURE
The IKEA group was owned by the Stichting Ingka Foundation,
which was registered in the Netherlands and
owned by the Kamprad family. Stichting Ingka Foundation
owned Ingka Holdings BV, the holding company
for the IKEA Group. The IKEA Group consisted of several
companies from the Swedwood Industry Group
to various sales companies.
A total of nine staff units based in the Netherlands provided
support functions to the IKEA Group
companies. Inter IKEA Systems B.V., was the owner of the
IKEA concept and trademark, and had
franchising agreements with all the IKEA stores in the world.
The IKEA Group was the biggest franchisee
of Inter IKEA Systems B.V.
Source: www.ikea.com
INGKA
HOLDINGS

B.V
Purchasing
Range
IKEA of
Sweden
Distribution
and
Wholesale
The IKEA
Group Support
Functions
Inter IKEA
Systems BV
STICHTING
INGKA
FOUNDATIO
Retail
Industry
Swedwood
Group
Franchising Agreements

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EXHIBIT II
AN INDICATIVE LIST OF IKEA’S PRODUCT NAMES
Beds Meldal, Robin, Dalselv, Tovik, Loen, Malm, Noresund.
Bookcases And Storage Systems Billy, Kilby, Enetri, Hensvik,
Heri, Lack, Agerum,
Gaxa, Hejan Jutis, Benno.
Chairs Olga, Jules, Sixten, Roger, Patrik, Runar, Trassent.
Cookware Slom, Reda, Burken, Koloni, Grunka, Idealisk,
Trojka,
Mixa.
Lighting Lock, Alikvot, Edsta, Pult, Nittio, Iresud, Fado.
Children’s Ikea Vikare, Blimp, Ateles, Trofast, Glis, Apa, Nosa,

Diktad, Tassa Svans.
Sofas Klippan, Tylosand, Ektorp, Karlanda, Lillberg.
Armchairs Poang, Lyby, Lillberg, Tullsta, Rolig, Pello,
Emmabo.
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EXHIBIT III
IKEA’S ADVERTISEMENT
Source: www.dijest.com
We're Hiring
Why

Sayers
People who want to make things better. Make things
more fun. More clever. People who aren't restricted by
convention, but challenged by it. People who fit perfectly
at Ikea. Because it's the why that makes us successful.
Just give us a call and submit a voice application. We'll
be in touch with you as soon as possible.
Call (866) 831-8611
or visit us on the web at
www. IKEA.com.
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EXHIBIT IV
IKEA’S VALUES

Togetherness and enthusiasm
This means we respect our colleagues and help each other in
difficult times. We look for people who are supportive, work
well in teams and are open with each other in the way they
talk, interact, and connect. IKEA supports this attitude with
open plan offices and by laying out clear goals that co-workers
can stand behind.
Constant desire for renewal
We expect people to look for new, better ways of doing things
in every aspect of their work. We like change and encourage
people to look for constant improvement. People in the IKEA
Group are often more stimulated by finding ways to achieving
their goals, than by the goal itself. They take inspiration from
discovery and are constantly “on the way” to the next
challenge.
Humbleness
More than anything, this means respect. We are humble
toward our competitors, respecting their proficiency and
realizing that we constantly have to be better than they are to
keep our market share. It also means we respect our co-
workers and their views, and have respect for the task we have
set ourselves.
Willpower
Willpower means first agreeing on mutual objectives and then
not letting anything stand in the way of actually achieving
them. In other words, it means we know exactly what we
want, and our desire to get it should be irrepressible.

Cost consciousness
This value goes hand in hand with our business idea. It is
impossible to have low prices, good quality, and good
profitability if you don’t have low costs. So cost-
consciousness is part of everything we do, from constantly
finding better ways to produce home furnishings, to
purchasing wisely and traveling cost-effectively.
Simplicity
Behind this value are ideas like efficiency, common sense, and
avoiding complicated solutions. Simple habits, simple actions,
and a healthy aversion to status symbols are a part of IKEA.
Leadership by example
No method is more effective than the good example. It means
leaders at IKEA are expected and encouraged to behave the
way they expect their co-workers to behave. It means pitching
in when there’s more than the usual work to be done,
respecting those around you, and encouraging the initiative
and achievements of everyone in the group. A leader at the
IKEA Group can accomplish more by creating a feeling of
well-being and a good working environment than any other
means.
Diversity is part of this
We encourage an environment where people of different
views, age, nationality, gender, and ethnic background feel
welcome. We believe that a diverse workforce will improve
business results, strengthen our competitiveness and make
IKEA a better place to work.

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ADDITIONAL READINGS & REFERENCES:
1. IKEA of Sweden, www.geocities.com, January 12, 1996.
2. Sami Kuusela, Offline. On Target? Business 2.0, December 1,
1998.
3. Karen Lee, Care without Coddling, Employee Benefits News,
June 1, 2000.
4. Bob Chaundy, Ikea's self-assembled billionaire,
news.bbc.co.uk, July 28, 2000.
5. Lisa Margonelli, How Ikea Designs Its Sexy Price Tags,
Business 2.0, October 1, 2002.
6. Jonathan Haycock, Swedish Customs - internationally noted
for innovation, Sweden
Today, November 11, 2003.
7. Best Practices in HR, www.blr.com, December 20, 2003.
8. Milton Moskowitz and Robert Levering, 10 Best Companies

to Work For In Europe:
IKEA, Fortune, January 26, 2004.
9. Furnishing Good Benefits Along with Sofas,
bizneworleans.com, March 28, 2004.
10. Tee Hun Ching, Having a Baby? Here's a Bonus from the
Bosses, Digital Scanning
Corporation Pte Ltd – News, March 29, 2004.
11. Bill v Ingvar, The Economist, April 7, 2004.
12. Cora Daniels, Create Ikea, Make Billions, Take Bus,
Fortune, May 3, 2004.
13. Rob Gowland, Talking of greed, The Guardian, June 16,
2004.
14. The miracle of Älmhult, The Guardian, June 17, 2004.
15. IKEA’s Ideas, St Paul Pioneer Press, July 11, 2004.
16. Success Scandinavian Style, Workforce Management,
August 2004.
17. Ikea Named to Working Mother Magazine’s ‘100 Best
Companies For Working
Mothers’ For Second Consecutive Year, www.ikea-
group.ikea.com, September 21, 2004.
18. Oscar Halpert, Why IKEA is the business customers - and
cities - clamor for, Renton
Reporter, October 29, 2004.
19. Athena D. Merritt, 3 Pennsylvania companies make
Fortune's 'best' list, Philadelphia
Business Journal, January 10, 2005.
20. Company Philosophy Unleashes the Potential of Employees,
Hispanic PR Wire,
February 22, 2005.

21. IKEA: The World's largest furniture retailer,
http://www.scandinavica.com, March 1,
2005.
22. Lynda Gutierrez, What’s the Big IKEA? Plain Talk
Archives.
23. Scott Allen, Profile: Ingvar Kamprad - IKEA Founder and
One of the World's Richest
Men, entrepreneurs.about.com.
24. Ikea Culture, www.celemi.com.
25. www.dijest.com.
26. www.itnetcentral.com.
27. www.wikipedia.com.
28. www.ikea.com.
29. www.rehwoldt.com.
30. www.ikea-group.ikea.com.

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