Positive impact on employees and customers - IKEA

Gillian Drakeford is the former CEO of IKEA UK, where she oversaw an organisation with over €2bn turnover, more than 10,000 employees and sales growth of 50%. Here she shares her experience of implementing the Real Living Wage. 

What does the Real Living Wage campaign mean to you?

I’m a strong believer that there’s nothing better than a good example. When you have employees talking about the impact it has on their everyday life it’s a powerful message. And then from an employer’s perspective, they see that the business improves, maybe it’s their relationship with clients or consumers, or the level of engagement. By providing a living wage combined with living hours people worry less and can be present at work in a different way. I think the campaign really helps bring it to the fore and elevate it during this period.

How did your journey towards being a RLW accredited employer begin?

Working for an organisation that is values and vision based, we were excited about ‘creating a better everyday life for the many people’. We talked and worked on all the things we could do for our consumers, but without people things don’t happen. In the retail industry one of your only variable costs is people, but when the conversation becomes just about profitability and working hours, then it can get to a point where the flexibility the business needs is at the expense of the people that work in it. At IKEA we said this is not okay, it isn’t demonstrating our values and it doesn’t make good business sense as people are less engaged.

From conversations with co-workers, we started to see we needed to look at the basic terms and conditions. For me, when I met with co-workers who expressed that they could not afford to buy IKEA from IKEA, it was clear we needed to act. It wasn’t just about the living wage, although we needed to pay a good rate, we also needed to secure we had good living contracts and living hours.

One of the biggest things you need to do is change the mindset of those running the businesses, that have been conditioned that your hours are your only flexibility. We had to build a business case where we could demonstrate that this was the right thing to do in order to connect people, engage people and do better business. This required a mind shift to looking at staff as a resource. We saw paying the Real Living Wage as a long-term investment, understanding that becoming accredited leaves a huge responsibility for whoever comes after to manage this well. How do you organise yourself in a way that you can continue to pay this, as the rate of increase is out of your hands.

It was a big step, and wasn’t a quick fix by any means. It required us to be clear on why we were doing it and how it would contribute to the business. It was about belief, this is the right thing to do for our co-workers, for the business and it contributes into society as well. It was the right thing to do, but it’s never easy to do the right thing.

What would you say have been the biggest benefits you’ve seen after becoming RLW accredited?

The initial outcomes we saw were very positive, a huge proportion of employees benefited as not only did it raise the base but it benefited others in the pay scales as well. It made a fundamental different to people’s lives, frontline workers said it allowed them to save for a mortgage, to pay for extra-curricular activities for their children, to be able to buy school uniform and a pair of shoes.

Paying the rate to employees regardless of age help us to attract and retain the younger generation and graduates, giving us a stronger talent pool for the future. In the initial stages, we saw improvements in retention and higher levels of engagement. The awareness continues as it has highlighted the need to look at the people you work with and your subcontractors. It becomes like when you drop a stone in a pool of water, it ripples.

It helped rebuild trust, building the brand and strengthening IKEA’s position in the UK as a retailer. It helped us to connect to a big part of IKEA’s agenda: the environment, sustainability and your responsibility in society.

What message do you have to other employers in your field who are not already RLW accredited?

The current environment for businesses and organisations is far more complex than when I led the question for IKEA. We are faced with unprecedented challenges, be it the war in Ukraine, the cost-of-living crisis and a shortage of skills and labour. I fundamentally believe that it is as important if not more important for employers to pay the living wage today and that the benefits are for both employers and employees.

It’s not a quick decision, and has to be part of a broader strategic plan. That often means you need to re-evaluate the way you measure your business, seeing people as a resource and not as a cost. You take on the responsibility to say this is what we pay, this will continue to grow, and then how do we relate it to engagement, productivity, efficiency and performance. I think businesses have a responsibility to contribute.

Previously there have been many naysayers stating they can’t afford it or that it will have a negative impact on profitability. The reality today is that without good compensation and working conditions employers will find it difficult to attract, recruit and retain people. This is a far bigger risk to long term growth and profitability over time.

The decision to become a living wage employer is about a long-term investment in your people, based on humanistic values and a belief that when a team gets good compensation and working conditions it will always have a positive impact on the final experience of your customers and long-term growth and profitability. If people are happy, they feel valued, they can afford to live and they are not worrying about what is happening at home then they can bring their best self to work.