South-Western - Management  
Ikea's Unusual Benefits, Attitude Scores Hit With Workers
Topic Human Resource Management
Key Words Benefits, career development
InfoTrac Reference CJ119274917
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News Story 

The retail industry has been shaped by cutthroat price competition and constant Wall Street pressure, which keeps wages low and benefits lean. Ikea stands out with its generous employee benefits and development programs.

The company is guided by a philosophy that workers whose basic needs are taken care of tend to be more productive and engaged in their jobs. Ikea has an egalitarian culture, shunning executive perks and treating all of its workers alike. Ikea's employee turnover rate is 37%, compared to an industry average rate of more than 60%. Having a stable work force tends to result in better customer service and lower costs. To replace one person costs between one and 1 times the person's salary, by one estimate. Consequently, even a slight improvement in turnover rate can have an impact on business performance.

Ikea incorporates training at all levels, striving to fill management positions internally when possible. Its personal development program allows workers to work with managers to figure out their career path with the company and develop an action plan to achieve it. Development and career advancement can be powerful incentives for retention.

Questions
1.

Name 3 reasons why Ikea has a better retention rate than the industry average.

2.

Why do many managers focus on pay and benefits to retain employees? Why is this not an effective strategy?

Source "Ikea's Unusual Benefits, Attitude Scores Hit With Workers," Knight Ridder/Tribune Business News, July 14, 2004.
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