Posted: March 30th, 2022

IKEA Organizational Culture Term Paper

Organizational Culture

 

IKEA Organizational Culture

 

Strong and Weak Sides of Organizational Culture

 

Impact of Internal and External Factors

 

Leadership and Organizational Culture

 

IKEA Subculture

 

Values

 

Employees and Organizational Structure

 

IKEA Organizational Culture

 

Every organization has a unique culture that dictates how things are done — it defines the organization’s social and psychological behavior. Though there is no universally agreed definition, organizational culture essentially refers to the values, beliefs, attitudes, assumptions, principles, habits, and customs shared by members of a given organization (Schein, 2010). These behavioral aspects constitute the distinctiveness of the organization (Jain, 2005). Indeed, organizational culture can be an important source of competitive advantage for an organization as it determines its strategic orientation, personnel management approaches, and other aspects of organizational behavior (Schein, 2010; Mullins & Christy, 2010). One organization that has built a distinctive organizational culture is IKEA, a Swedish multinational firm involved in the designing and marketing of furniture as well as appliances and home accessories. Following is a discussion of the strong and weak sides of organizational culture, the internal and external factors that affect organizational culture, and the role of leadership in building organizational culture, this paper provides a description of the culture of IKEA.

 

2. Strong and Weak Sides of Organizational Culture

 

The importance of organizational culture cannot be overemphasized. Organizational culture is what gives an organization its unique identity — it distinguishes the organization from the rest. Literature extensively demonstrates that organizational culture can be a crucial driver of organizational productivity and performance (Schein, 2010; Mullins & Christy, 2010; Odagiu, 2013). This is because organizational culture determines the type of strategy the organization embarks on, how it treats employees and customers, the kind of employees it recruits, how communication is done, how decisions are made, which entities it partners with, how change is managed, the extent to which it pursues social and environmental objectives, management-employee relationships, and so forth. These processes create competitive advantage for the organization in one way or another — e.g. innovation performance, group cohesiveness, employee morale, employee productivity, and customer satisfaction (Jain, 2005). The positive association between organizational culture and competitive advantage explains why most organizations invest a great deal of time, effort, and resources in building a strong culture. They adopt and maintain values, structures, systems, and procedures that in turn propel the organization towards its strategic goals and objectives in an ever more dynamic environment.

 

While organizational culture is often portrayed as a positive aspect, there are usually negative aspects. First, whereas some aspects of organizational culture may be acceptable within an organization, they may be harmful or destructive (Mullins & Christy, 2010). For instance, some cultures may create a climate of fear and bullying within an organization. The management may view such an atmosphere as acceptable, but it may be detrimental to employees. Furthermore, even though an organization may have a general culture, sub-cultures may sometimes exist within the organization. For instance, two departments, branches, units or subsidiaries within the same organization may have different cultures. These sub-cultures may often conflict with the overall culture, resulting in detrimental consequences for the organization, such as conflicts as well as inefficiencies in task, process, and strategy execution (Schein, 2010). Another limitation is that organizational culture may keep on changing as top leadership and management changes. This is because different leaders tend to have different styles of leadership, which may often mean introduction of a new culture or abandonment of some cultural aspects.

 

3. Impact of Internal and External Factors

 

Organizational culture does not just happen — it is a phenomenon shaped by factors external and internal to the organization. External factors denote factors beyond the control of the organization such as national culture, technology, laws, industry, and socio-economic factors (Odagiu, 2013). National culture is a particularly important determinant of organizational culture (Mullins & Christy, 2010). Culture theory generally asserts that each country has its own unique culture. Countries exhibit differences in how they perceive relationships, power and authority, uncertainty, time, communication, space as well as success and achievement (Browaeys & Price, 2008). In a high-power distance society, for instance, immense value is attached to power, status, and authority. This orientation tends to affect organizational design and organizational behavior. Organizations in such a society would tend to have autocratic, authoritarian, hierarchical, bureaucratic, tall or centralized organizational structures. IKEA has a Swedish origin, which as per Geert Hofstede’s national culture comparison tool is a low power distance society (Geert-hofsted.com, n.d). As such, it would not be insensible to expect democratic or participative management styles at the organization.

 

Technology, politics, laws, industry, and socioeconomic factors shape organizational culture in that they influence an organization’s strategy, operations, processes, procedures, and systems (Jain, 2005). For instance, laws mandating or calling for diversity in the workforce may cause an organization to adopt diversity as part of its values. Further, increased competition in the industry may compel an organization to adopt a new structure in an effort to increase organizational efficiency and effectiveness. The impact of an industry on organizational culture is further evident in organizational culture differences across industries. For instance, firms in the banking industry may have a different culture from firms in the technology industry. Socioeconomic factors such as economic recession and consumer behavior may affect organizational culture by influencing decisions relating to aspects such as personnel management and products.

 

Organizational culture is shaped by not only external factors, but also internal factors. Major internal factors include leadership and management, size of the organization, and geographic dispersion (Jones, 2013). Leadership is arguably the most important determinant of organizational culture (Schein, 2010). Based on their personality, philosophy, and experience, leaders generally choose the kind of culture they desire in their organization. For instance, a leader that espouses participative leadership would create an organizational culture that embodies teamwork, collaboration, and inclusion. The size of an organization and geographic dispersion affects organizational culture by influencing the extent to which values and beliefs are shared across the organization. For instance, a small store with a small workforce and a single location may easily have a strong culture uniform across the organization. Nonetheless, an organization such as IKEA with hundreds of thousands of employees spread across hundreds of locations in tens of countries may not have an easily describable culture.

 

4. Leadership and Organizational Culture

 

As mentioned earlier, leadership significantly influences organizational culture. Indeed, leadership and organizational culture are heavily intertwined (Schein, 2010). In other words, organizations with strong or effective leaders tend to have strong or effective cultures. Leaders shape organizational culture by not only prescribing the values, beliefs, norms, and practices the organization should espouse, but also communicating and modeling those values and beliefs (Jones, 2013). They construct social and psychological behavior within the organization, initiate positive changes in cultural practices, and serve as role models for their followers. When leaders exhibit the behaviors the organization considers as acceptable, employees are likely to emulate those behaviors. Leaders also enforce organizational culture by rewarding positive behaviors and punishing negative behaviors (Mullins & Christy, 2010).

 

5. IKEA Subculture

 

With an understanding of what organizational culture entails as well as its origin and significance, attention is now paid to the culture of IKEA. Before proceeding, it would be important to have a brief background of the organization. Though it is headquartered in The Netherlands, IKEA was founded in Sweden. Originally established as a mail order business in 1943, the organization ventured into the furniture business five years after inception. Over the years, the organization has grown to a multinational organization with operations in Europe, North America, and Asia Pacific. In addition to self-assembled furniture, IKEA’s product portfolio includes home accessories, appliances, as well as retail outlets (Grol & Schoch, 2010). As of 2016, IKEA’s global sales exceeded $36 billion, a phenomenal success by any means. The organization’s unique culture, as described in the succeeding section, has been a phenomenon of admiration, providing valuable lessons to other organizations in assorted sectors and industries. The organization actually identifies its culture — which is heavily influenced by its Swedish roots and its founder Ingvar Kamprad — as one of the vital drivers of success for the period it has been in existence (IKEA, n.d.).

 

5.1 Mission

 

IKEA seeks to provide a better everyday life for its employees and customers (IKEA, n.d.). Driven by the belief that everyone should be in a position to create their dream home, the organization offers a broad array of creatively designed and affordable home furnishing products. The organization is motivated by not only success, but also the desire for durability (Clarke, n.d.).

 

5.2 Values

 

Founded in Smaland, Sweden, IKEA has over the years built a set of values that permeate its everyday processes and activities. These include respect (for customers, employees, and suppliers), humility and simplicity, leadership by example (managers serve as role models for employees), the desire to be different, collaboration and enthusiasm (teamwork), cost-consciousness (affordability), willingness to change (adapting to change), and delegation of responsibility (IKEA, n.d.). Evident in the customs and lifestyle of the place it began and the philosophy of the founder, these values are as fundamental at a store in Sweden as they are at a distribution center in China or a retail outlet in the U.S. With these values, IKEA strives to create a better life for its employees and customers.

 

5.3 Employees and Organizational Structure

 

IKEA’s relationship with its employees and organizational structure are quite admirable. First, the organization does not just seek out for individuals who can do the job — it also desires individuals with a personality that matches their values (IKEA, n.d.). The organization looks for individuals with the motivation to continuously become better, a robust yearning for learning, efficiency, simplicity, as well as the capacity to lead from the front. The organization considers these attributes as crucial to its way of doing things as it is less structured compared to most other organizations (Grol & Schoch, 2010). It is not unusual for organizations to consider culture fit when recruiting employees (Jones, 2013). Indeed, though culture can be learned, many organizations want individuals who are enthusiastic towards or ready to subscribe to their values.

 

Teamwork and collaboration are at the center of work at IKEA. In fact, one of the most important values at the organization is togetherness. The organization robustly believes in the power of collaboration (Grol & Schoch, 2010). IKEA is not the kind of organization for superstars or one-man shows. Instead, the organization espouses shared decision making. This is particularly apparent in the organization’s disfavor for too much structure. Most organizations of the caliber of IKEA tend to be characterized by tall, bureaucratic, or centralized structures. For IKEA, however, decision making is considerably decentralized, with the organization keen on fostering a participative management style. Managers trust the experience of their group members, and seek to coach, mentor, and empower them (Kowitt, 2016). The spirit of togetherness has been important for cultivating a sense of community within the organization.

 

IKEA’s participative management style is majorly influenced by the Swedish culture and its founder, who powerfully believes in cooperation (Grol & Schoch, 2010). Typically, hierarchy is not a Swedish thing. Bosses do not just do paperwork — they roll back their sleeves to participate in the task themselves. This hands-on approach permeates IKEA’s executive virtually in its entirety. As Kowitt (2016) describes it, most managers at IKEA do not even have business cards. Their office desks stand side by the side in an open floor plan, further exemplifying the organization’s preference for less hierarchy.

 

In an increasingly complex world, the importance of teamwork and collaboration cannot be overemphasized. Teamwork and collaboration involves encouraging diverse ideas, perspectives, and approaches (Mullins & Christy, 2010). This cultivates participative decision making as well as innovation and creativity. When an organization views employees as collaborators or partners as opposed to just workers, employees develop a sense of recognition — they feel valued and appreciated. This is often a valuable way of empowering, motivating, and inspiring employees, which may contribute to positive employee outcomes such as employee satisfaction and retention (Jones, 2013).

 

IKEA’s Scandinavian values have resulted in relatively generous compensation and benefits for employees. Compared to most retailers, IKEA has a more attractive wage policy (Kowitt, 2016). In 2015, the organization adopted the MIT Living Wage Calculator as a basis for determining employee pay. Presently, employees are paid $15 an hour on average, with the lowest starting wage being set at approximately $12 an hour (Kowitt, 2016). This is roughly $5 past the federal minimum wage. More interestingly, part-time employees enjoy health benefits for just 20 work hours weekly.

 

Inspired by the Swedish culture, IKEA usually discourages workaholics. The organization tends to be averted to long work hours, with unparalleled measures to ensure work-life balance. The organization believes that if work cannot be done within a sensible duration, then something is not right. Indeed, IKEA minds about work-life balance perhaps more than most organizations. Following a year one on the job, permanent employees are awarded 24 days of paid vacation as well as five days of sick leave (Kowitt, 2016). This is quite unheard of in the corporate world. Further, permanent employees who have been in the organization for ten years or more get 34 days of paid vacation in addition to five days of sick leave. Allowing employees a month long paid leave is portrayal of profound faith and trust in employees. It also demonstrates how the organization does not value conceit or self-importance. This is rooted in the organization’s belief in simplicity, as opposed to control, and the equality that characterizes the Swedish culture (Grol & Schoch, 2010).

 

The generous benefits IKEA offers its employees are not just determined by the management — employees also play a crucial role. The organization frequently surveys employees to gather their views about the benefits they would want (Kowitt, 2016). This is also quite unconventional — not many organizations will allow their employees to have a voice in benefits. For IKEA, however, the needs of employees are not taken for granted. As portrayed in its mission statement, the organization strives to make better everyday life for its people. Employee involvement is one of the ways through which the organization achieves this.

 

A major hallmark of participative or democratic leadership is inclusion. Inclusion basically means having everyone on board. IKEA values diversity. In fact, women make up over 50% of the organization’s senior management (Kowitt, 2016). This is also surprising given that most large organizations still have few or no women in top decision making positions. Gender diversity at IKEA is apparent at not only the management and executive levels, but also throughout the organization as a whole — women also comprise more than half of the organization’s workforce. Dissimilar to most organizations, IKEA does not just talk about diversity on paper — it is indeed a practical example of workplace diversity. The organization’s commitment to diversity is further exemplified by support for gay marriages as well as provision for domestic partner benefits and coverage for gender reassignment surgery (Kowitt, 2016). Some of these policies often do not sit well with more conservative countries, but the organization has always stood for its values.

 

5.4 Customer Focus

 

Right from its mission statement to the appearance of its products and stores, customer centeredness is an important priority for IKEA. The organization strives to empower every customer to create the home they want at an affordable cost (Grol & Schoch, 2010). Affordability is indeed core to IKEA, with the organization explicitly identifying cost-consciousness as one of its key values. The organization achieves this by ensuring low manufacturing costs. Cost-consciousness is a clear indication of how the organization considers the customer as an important stakeholder to its success. The organization seeks to reach as many customers as possible. The organization’s products also embody customer-centeredness. Its self-assembled furnishing products feature quality and creative designs with unmatched durability. Putting the customer first can have important benefits for an organization, especially in terms of customer satisfaction, customer retention, and revenue or financial performance (Mullins & Christy, 2010). IKEA’s impressive financial performance over the years attests to this.

 

6. Conclusion

 

Overall, IKEA provides valuable lessons as far as the importance of organizational culture in creating sustainable competitive advantage is concerned. The organization’s culture emphasizes teamwork, collaboration, diversity and inclusion, uniqueness, customer-centeredness, affordability, leadership by example, employee involvement and empowerment, as well as delegation of responsibility. Inspired by Swedish values and the founder’s philosophy, this culture has created immense competitive advantage for the organization in the increasingly complex and dynamic business world.

 

References

 

Browaeys, M., & Price, R. (2008). Understanding Cross-cultural Management. Harlow: Prentice Hall.

 

Clarke, L. (n.d.). Corporate culture of the heart. Retrieved from: https://inside.6q.io/ikea- corporate-culture-of-the-heart/

 

Geert-hofstede.com (n.d.). Country comparison. Retrieved from: https://geert- hofstede.com/sweden.html

 

Grol, P., & Schoch, C. (2010). IKEA: Culture as competitive advantage. CPA, Paris Chamber of Commerce. Retrieved from: http://www.efbl.org/upload/7730963-Strategijski- menadzment-Studija-slucaja-IKEA-2010-12-16.pdf

 

IKEA (n.d.). Do you share our values? Retrieved from: http://www.ikea.com/ms/en_US/the_ikea_story/working_at_ikea/our_values.html

 

Jain, N. (2005). Organizational behavior. Atlantic Publishers: New Delhi.

 

Jones, G. (2013). Organizational theory, design, and change. 7th ed. Harlow: Pearson.

 

Kowitt, B. (2016, March 10). At IKEA everybody is equal. Fortune. Retrieved from: http://fortune.com/2016/03/10/ikea-corporate-culture-best-companies/

 

Mullins, L., & Christy, G. (2010). Management & organizational behavior. London: Pearson Education.

 

Odagiu, C. (2013). Organizational culture, change management and performance. Managerial Challenges of the Contemporary Society, 1-6.

 

Schein, E. (2010). Organizational Culture and Leadership. 4th ed. Jossey-Bass: San Francisco.

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