Motivation work from IKEA - Case Study Example

IKEA: Giving a Better Life at Work Introduction All companies, may it be may local or international, are fueled by the people behind it. These people whom we call employees are given salary for their group and individual services, although not always enough. Companies are very much aware that in order to keep the people who run their businesses, they have to compensate for the inadequacies of the work environment of their workers. Now what method could they possibly use to do such a thing The answer to that is motivation. We define motivation as the process that counts for an individual's intensity, direction, and persistence of effort toward attaining a goal. (The IKEA Way of Motivation 2004) Motivation actually happens when a being encounters a certain situation or instance that triggers his/her drive to do something. Now, employees need motivation because it gives them more reason to work, other than the fact that they need to earn their fixed salaries. They need to have more reasons to get up everyday, go to work and try their best in their tasks. It is important to understand employee behavior because without this, companies would definitely lose profit and gain a deficit in their output. This is why companies use motivation. As an example, later in this paper, the structure of a famous company would be analyzed and their methods of motivation shall be discussed. What IKEA is IKEA, a Swedish home furnishings retailer, is known as the world's largest designer and retailer of well-designed, inexpensive, and functional furniture for the home. (IKEA: A Natural Step Case Study 1998) A Dutch-registered organization runs IKEA and it has put in 15% improvement annually in this past ten years. INGKA Holding BV (the umbrella company of IKEA) is wholly owned by the Stitching INGKA Foundation, a non-profit foundation registered in the Netherlands. Millions of customers visit their 378 stores in about 36 countries, with 30 more set to open this year. Most of these stores are located in Asia, Europe, Canada, Australia and the United States. About 11, 000 products in IKEA's line are shown in the 80 million catalogues that they distribute. As for the manufacturing itself, IKEA does this in their own production facilities with the help of their 2400 suppliers in 65 countries. IKEA also boasts of having a hold of employees totaling to 36, 400. In 1943, IKEA was founded by Ingvar Kamprad, then a 17 year-old boy in Sweden. IKEA is an acronym comprising the initials of the founder's name (Ingvar Kamprad), the farm where he grew up (Elmtaryd), and his home county (Agunnaryd, in Smland, South Sweden). (Wikipedia 2008) Kamprad shortly transformed his venture into a mail order service which sells furniture. In 1953, he opened the first IKEA showroom. His primary strategy was to allow for the creation of ground-breaking furniture which would give customers the ease to construct the products themselves and purchase them at an affordable price too. Now, the IKEA employees are at the customers' disposal for inquiries and such but the customers are free to select, order, take and construct what furniture they pick. The money saved by IKEA in expenditures was used to give customers discounts. Not long after, the stores got bigger and eventually started to carry eating places like restaurants and recreational facilities for children like play areas. Kamprad distinctively said in December 1976 that "What is good for our customers is also good for us in the long run." (IKEA: A Natural Step Case Study 1998) What IKEA does Since 1990, IKEA has shown interest and action in putting forth an environmental thrust. With their Natural Step Framework, they aim to create a proper environmental plan. The said plan in effect brings about changes in IKEA's products and services in order to conform to their frameworks principles and demands. In 1992, the environmental policy was transformed into an Environmental Action Plan describing concrete and practical measures for the mid-1990s. (IKEA: A Natural Step Case Study 1998) As part of the changes 25 of IKEAs top managers went to the two-day seminar that featured the president of the Swedish Greenpeace Karl-Henrik Robert. The managers then talked about the steps for the environmental action plan and detailed measures were formed. This is done in a regular manner in order to evolve at par with the times. Six categories constitute the plan, namely: Management and Personnel, Products and Materials, Customers, Suppliers, Buildings Equipment and Consumable Materials, and Transport. With these, IKEA clearly set its eyes to focus on structural changes in order to bring about a better effect on their business units. Aside from their environmental action plan, IKEA is also adept on keeping employee efficiency in the best shape possible. IKEA does this by the use of variable-pay programs such as piece-rate plans, wage incentives, profit sharing, bonuses and gain-sharing. (The IKEA Way of Motivation 2004) Having such kind of programs would definitely raise the spirits of one's employees and make them want to increase their productivity. The employees of IKEA's home furnishing store in Renton definitely found these programs refreshing and benefitting. Another example is when almost 40,000 employees of IKEA's stores got shares of the entire day profits in 1999. The profits, which could amount to $1500 for each employee, came from 152 IKEA stores. "It was just an honest way to say thank you," said Jan Kjellman, IKEA's North American division president. The company also offered customers free chocolate and complimentary massages, and extended store hours. (Buckley 1999) Here, not only did the employees get extra money but the company got rewarded after that by being able to double up their sales. This kind of gesture would not only motivate the employees but would also create a better position for the company since the fixed labor costs would then become variable costs which could cushion expenses if ever work performance decreased. It's actually pretty simple, improve the input and you would definitely get better output. As for how the bonuses are determined, IKEA takes into consideration the number of hours put in and years served by the employee in the company plus of course, assessment of the management. It clearly outlines what IKEA values most: industry, loyalty and efficiency. This is clearly more illustrated by IKEA's concept of employee relationship and treatment: The IKEA way is to give down-to-earth, straightforward people the opportunity to grow, both as individuals and in their professional roles, so that together we're strongly committed to creating a better everyday life for ourselves and our customers. IKEA co-workers are the single most important factor behind the long-term success of the IKEA Concept. The IKEA way is to have a unique company culture - firmly grounded in values such as simplicity, respect, development, responsibility, innovative thinking, diversity, humility, and leadership by example. We can offer an environment with no barriers between management and coworkers, where everyone is part of the team. For those hungry to learn and develop, a job in the IKEA world can be a great place. IKEA's Group Website Another perk for working for IKEA is that qualified employees may choose what work they want based on their skills. IKEA is also keen on killing two birds with one stone because they are set on maintaining employee satisfaction and at the same time taking action for their environmental plan. A concrete example of this was when they gave each of their staff a fold-up bike for Christmas in 2006. Not only did they make their employees happy, but they further reinforced their environmental plan by creating an alternative way of coming to work and lessening air pollution. Aside from this, they gave a 15% discount on travel tickets for public transport so that employees would be convinced to not go to work by their own car. IKEA UK country manager Peter Hogsted said that other employers should follow their example. "The bike is a fun present but there is a serious message. We all have the responsibility to do what we can to protect the environment," he said. (Fuller 2006) With such perks on hand for their employees, IKEA has started to build a pleasing work environment for their employees and attempt a way to save the earth at the same time. How IKEA does it A good company knows if its employees need to improve or if they have the ability to improve. Companies must attempt to bridge the gap between the actual performance and the desired performance of the employee by the employer. This is where motivation comes in. IKEA's ways are not actually unique, but are practical. They set the goals of productivity and efficiency at a high level with actually minimal effort. Motivation Theories (1995) outlined by the Faculty of Information Studies of the University of Toronto listed a few theories that could very well explain the phenomenon of IKEA's employee motivation. The first is the Hierarchy of Needs Theory (1964) by Abraham Maslow. It showed a pyramid. From the base up is physiological, safety, social, esteem and self-actualization on top. IKEA somehow follows this pattern. Regarding the physiological and safety aspect, they assured their work environment is one where they are not in danger and are being employed properly. IKEA is able to give the social aspect by encouraging their employees to cooperate and be in harmony with their co-workers. Esteem and self-actualization comes in when the employees get their benefits and they become satisfied with their work and they clearly identify themselves with the company completely. This is also when loyalty is formed. Another theory that would fit IKEA is the Theory X and Theory Y (1960) by Douglas McGregor. It highlights three major assumptions under Theory X and Theory Y. Theory X lists all the wrong assumptions about employee behavior, namely (1) people inherently dislike work (2) people must be coerced or controlled to do work to achieve objectives and (3) people prefer to be directed. It is of course common sense people wouldn't want to be forced to do anything nor would want to do something while being dictated and monitored closely. On the other hand, IKEA follows the three assumptions under Theory Y which are (1) people view work as being as natural as play and rest (2) people will exercise self-direction and control towards achieving objectives they are committed to and (3) people learn to accept and seek responsibility. By properly understanding human behavior and adjusting company policies according to them, IKEA was able to put into action such assumptions. They are aware that benefits and a fun work environment would allow employees to feel at ease and aim for a higher goal. Another theory that could come into mind is the Equity Theory (1965) by J. Stacey Adams. It clearly said that if an employee senses an inequity, such shall result to: (1) lower productivity, (2) reduced quality, (3) increased absenteeism and (4) voluntary resignation. IKEA seems to be fully aware of these things and in order to prevent it, they offer bonuses and benefits to the employees. In return, they get higher productivity and double their usual shares. And the last theory to be cited is the goal-setting theory which allows workers to set high goals for high expectations of one's efforts reaping its just rewards. It is clear that IKEA's method may also be qualified under this theory since their employees may be performing well even after the one-day extravagant bonus in order to prepare for the coming incentives that their company may offer. In the end, no matter what theory IKEA used or uses, their method is undeniably successful and beneficial to their employees. Conclusion IKEA is a really interesting company. So many things led to the state of this international success. First of all, their founder Ingvar Kamprad worked with a businessman's perspective but also as a community member. Second, IKEA's homelad, Sweden, pushed it to go global because of the local tax regulations. Third, the company's philosophy of frugality transcends into its employees, suppliers and customers. Fourth, its overall system of manufacturing, distributing and selling has a scientific approach to it. Fifth, it's not that accountable to the public because it is a private company. And lastly, it is able to respond to trends and problems because of its relationship with the suppliers and customers. (Van Wylick 2008) In addition, its environmental action plan receives great feedback from their employees and customers. Their staff is encouraged to volunteer for their environmental activities. Employees want to work for such a company and customers want to shop in such a franchise. But of course, in every method, there is a downside. One example is that IKEA must make more profit in order to give more bonuses or at least control the cash outflow. They must figure out a proper system in order to not lose too much by trying to gain too much. Second, although employees may be inspired by those extravagant one-day bonuses, that is only one day of the 365 days in a year. Maybe they could distribute the bonuses evenly in order to maximize its effect. There are actually many more ways that they can motivate their employees that are not expensive or that do not require monetary compensation. For example, they can offer benefits for the employees' children or family. They can also have regular recognition programs for employees with exemplary work performance. Employment experts say companies have to stand out to attract and keep talented workers. "It really is an employees' market out there," said Gail Corvette, with Hewitt Associates. "Companies are competing for talent, so whenever somebody can do something innovative and creative that will get employees' attention and help share the company's success with employees, it should get noticed," Corvette added. (Buckley 1999) Bibliography Buckley, F. 1999, IKEA gives employees a day's profits, Cable News Network, viewed 1 July 2008, Employee Motivation: Theory and practice 2008, ACCEL Team, viewed 1 July 2008, Fuller, G. 2006, Ikea environmental initiative provides staff with bicycles, Personnel Today, viewed 1 July 2008, IKEA: A Natural Step Case Study 1998, Oregon National Step Network, viewed 1 July 2008, IKEA 2008, Wikipedia - the free encyclopedia, viewed 1 July 2008, Motivation 1995, Faculty of Information Studies, University of Toronto, viewed 1 July 2008, Van Wylick, V. 2008, Some final notes about IKEA's business, Sounds + Food 'n' Retail, viewed 1 July 2008, Read More