IKEA, a giant in the furniture industry, is also a pioneer across sectors regarding wage structure. Company executives at IKEA are committed to ensuring a high quality of life for their employees by providing them with a variety of benefits including a living wage. Leaders within the company are of the opinion that these commitments make sense from an ethical point of view and will also pave the way for the company’s continued commercial success.
Founded in 1943 by the late Ingvar Kamprad, IKEA has grown from a single store in southern Sweden into a multinational company with total revenue approximating 36 billion euros a year. IKEA attained this success by selling ready-to-assemble furniture in expansive stores that function as showrooms where customers can touch the items they are looking to buy. This business model contrasts with industry convention, by selling ready-made furniture through mail order catalogs. Today, customers across 49 countries shop at the 411 IKEA stores where they can purchase easy-to-assemble furniture that is flat-packed for convenience (another innovation brought to the furniture world by IKEA). These unique offerings, along with several others, are part of the reason that IKEA has established itself as the largest furniture retailer in the world.
However, equally critical to IKEA’s continued success is the culture fostered by leaders within the company. The company remains steadfast in its goal of making its furniture affordable and accessible to as wide a range of consumers as possible. This customer-facing cultural cornerstone mirrors an internal ethos of mutual respect that sees all company employees as “co-workers.” All co-workers are encouraged to feel as though their contributions have meaningful impacts on the success of the business, and as a result, they are invited to be looking for ways to improve the quality of their work. Leadership within the company inspires individuals to better themselves and the collective push to do so drives the company forward as a whole.
The emphasis placed on co-workers at IKEA stretches beyond the walls of its offices and showrooms. Executives see a commitment to bettering the quality of life of their employees as a crucial component in the company’s bid to remain competitive. The company affirms this commitment by offering a living wage to all of its employees across the US and UK. IKEA uses data from MIT Professor Amy Glasmeier’s Living Wage Calculator (LWC) to determine a living wage for their employees in various regions throughout the United States. The LWC provides information concerning the cost of living at different locations across the US for a variety of family compositions. IKEA uses LWC values for a single adult with no children to inform the minimum wage offered to co-workers at their sites. Within the UK, IKEA collaborates with the Living Wage Foundation to determine minimum wage rates provided to co-workers. IKEA also serves as one of the foundation’s accredited partners.
Over the last five decades, IKEA’s sustained success is due in part to its novel ideas and practices brought to the furniture industry. As executives look toward the future, they continue to innovate to remain successful. The focus of this innovation, however, has shifted slightly. IKEA is looking for innovative ways to retain the type of talent in its base of employees that have helped make the company a household name. Leaders at IKEA see providing a living wage to their employees as a significant stride toward achieving this goal, and if history is any indication, other companies will soon follow suit.