Sweden's IKEA treats its American emplyees well and profits therefrom [View All]

[dumpster_baby]

For IKEA stores in America:

1. "The tight-fisted retail industry has been shaped by cutthroat price competition and constant Wall Street pressure that tends to keep wages low and benefits skimpy. Ikea's approach stands out. The company is guided by a philosophy that workers whose basic needs are taken care of tend to be more productive and ultimately more engaged in what they do. Ikea also embraces an egalitarian culture, where executive perks are shunned, everybody's called co-worker, and store managers and sales assistants alike dress in the same uniform: a bright yellow shirt and blue pants."

1. "When it comes to turnover, Ikea North America beats the industry as a whole. At 37 percent, its employee turnover falls below the retail industry rate of more than 60 percent. Some service companies see employee turnover of 100 percent, according to Towers Perrin, a management-consulting firm. "From a customer service perspective, certainly there's an argument to be made that having a stable work force results in a more stable face to the customer," said Don Hay, a principal in the executive compensation practice at Towers Perrin in Chicago." ...."Though it doesn't publish profit data, Geoff Wissman, a vice president at Retail Forward, estimates that its profit margin is around 6 percent, about double what's typical for furniture retailers."

By treating its employees like human beings, the profit at IKEA is twice that of other retailers. If Wal-Mart doubled the pay of its employees, it might also double its profit. Amazing. The implication is simple: by treating its employees in such a radically poor way, Wal-Mart may actually short-change its investors by a factor of two on profit margin. Another company that operates this way -- treating its employees like human beings -- is Costco. See this post for details.


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