Ikea's Innovative Innovative Human Resource Management Practices and Work Culture Case Study Analysis

IKEA's innovative Human Resource Management practices and Work Culture case study analysis

IKEA, the world's largest furniture retailer, is a privately held, international home products company that designs and sells ready-to-assemble furniture, appliances and home accessories. The brand name IKEA is the acronym for Ingvar Kamprad - the founder - and Elmtaryd Agunnardyd, the names of the farm and county where he was born respectively. Ingvar Kamprad has always had a clear vision for his company - "To create a better everyday life for the many people" - not only the customers but also the life of each and every employee.

Three major goals were established that set the company's culture: the creation of a simple and essential line of furniture, the development of low priced high diversified line of products and finally the fostering of the client/employee relationship, not only as a measure of retention but one also able to attract new customers. But to whom are these goals intended to? In other words, who are these clients and what segment do they target? Essentially, IKEA pretends to catch the eye of young people and young families that have low/medium income or/and have an appetite for change at low-hanging costs.

IKEA's core values allowed the company to gain a huge competitive advantage all over the retail industry. As mentioned many times on the case study, Ingvar believes that equality, openness, diversity, flexibility, creativity and cost consciousness are the main contributors to IKEA's success. These core values have strengthened IKEA's market position and made the company stand out amongst all others.

Established in 24 different countries and with more than 200 stores all over the world, the international strategy of IKEA is a determinant issue and it should be well defined. How can IKEA strike the balance between integration and differentiation? To internationalize successfully, the company acted upon two fronts - Exportive and for reasons later disclosed and in a smaller scale, adaptive. The first front refers essentially to the company's culture, core value and products. Following an exportive orientation, where affiliates are very similar to the parent company, IKEA achieved subsequent product standardization - creation of the same range of products for all stores, regardless the local - and increased production celerity and effectiveness allowing for diverse and cheaper commodities. This approach however, shows low consistency with the local environment where it is established. Turning to the adaptive realm instead, what we mean is that although IKEA doesn't intend to adapt per se, the company is bound to do so for very different reasons - employee legislation, store manager (since stores have a high degree of independence) and more important, local culture. Take for example the case of Japan and the United States - As a result of the "one fits all" modus operandi, the international strategy fell apart. It is impossible to satisfy different needs with the same product portfolio everywhere - If it's not Sweden, do not be Swedish! If one spends a little bit of time analyzing IKEA's human resource policy and systems, it will stand out the absence of one, IKEA rules itself by guidelines (set by Ingvar Kamprad) and continuous cooperation and learning symbiotic relations. Yet, the notion that is important to grasp and keep in mind is that the lack of a global human resources policy is substituted by an immensely strong corporate culture and values.

IKEA's successful recipe embodies a flat structure that helps building an employee attitude of job involvement and ownership1 as well as increases moral and motivation. This type of hierarchical organization decentralizes decision-making process, gives employees autonomy and empowerment and reduces reporting lagging. Improving some aspects, such as: Cost reduction - fewer management levels and positions reduce overall salary expenses since managers are usually better paid than front-desk workers; Faster turn-around time for decision making - This eliminates the delays and lags time of waiting for decisions from busy managers and keeps the work of the organization moving smoothly forward; Improved Communications - With a flat organizational structure, there are fewer managers to process the information thus increasing communication quality and promptness .Due to the diminished number of layers the possibility of distortion is sharply decreased. Managers and employees that work more closely tend to be more efficient - saving time, money, and improving decision making and communication processes; Improved customer responsiveness - A wider pyramid base, constituted nearly grossly by store employees, plus a narrow relationship with customers enables IKEA to respond faster to market demand changes as well as client's needs. Bill Gates sums it perfectly - "people who stay closer to customers can respond faster to changing customer demands, make decisions faster, unlock employee creativity and manage ideas better"2. A flat structure organization will create better team spirit; develop greater need of satisfaction for employees and greater levels of self-actualization3. Out of curiosity, it is this team spirit and employee empowerment that turned IKEA in what it is today. Some of the best known features like nursery rooms and children kindergarten are a result of store employee empowerment, creativity incentives and some level of competitiveness amongst stores. The flat structure, despite its enormous success at IKEA has some disadvantages

On the negative side the flat structure poses some limitations4. This construction may unwittingly limit the growth of the organisation when it comes to advancement opportunities. To make it clear, when promoted, the employee will have a limited range of options since there are fewer managerial positions available. Another concern is tied with security needs of employees which are better satisfied in the presence of tall structures. Vertical organizations tend to increase the sense of job security since higher positions are more clear and stratified.

But, how do employees benefit from flat structure organizations? Flat structures are more flexible and less sticky than taller structures, they are able to adapt faster and better, thus pushing employees to take charge, feel responsible for the company's success feeling integrated and important. Being motivated is a key success factor to keep high moral. Instead of reward post performance IKEA's philosophy works the other way around - Incentives come first and as a consequence results show up.

The recruitment process is crucial to match the needs of a flat structure. As aforementioned, this type of structure leads to high number of low level employees

...