Detailed Discussion on IKEA’s organisational culture
Question
The purpose of this assignment is to undertake a research report in relation to the chosen topics (see the assessment task) from the list below. It is mandatory that you develop a critical and analytical report to meet the assessment criteria. You should demonstrate the depth of your research, and highlight your ability to question, compare and contrast and analyse a range of theories and texts in relation to your topics.
Task
A. Identify from your research and academic theory, two of the paired topic areas from the module.
You should select either 1 or 2 and either a or b only
1. Work groups and teams
2. Management and Leadership
a) Power and Politics
b) Conflict and Negotiation
B. Using your organisation or one that you are familiar with as a case study, analyse and critically discuss the impact that your topic areas may have on the culture of the organisation. Your analysis must be based upon relevant academic literature. It must also make specific reference to conceptual models and theories.
Answer
Introduction
This research report is developed on IKEA’s organisational culture, which is a popular multinational furniture retail chain. The major aim of this report is to analyse the relevant academic concepts and key issues associated with management and leadership. Moreover, relevant academic concepts and key issues associated with power and politics are also discussed in this research report. Most importantly, the impacts of these important concepts on the IKEA’s organisational culture have been discussed. Relevant academic theories are applied in this research report to understand the concepts of leadership and organisational power. In order to determine the impact of the selected aspects on the IKEA’s organisational culture, relevant organisational culture theory is also applied.
Part A- Management and Leadership
Management approaches are nothing but the co-ordinating efforts of the employees in an organisation to develop strategies for accomplishing the commonly developed goals. Development of the management strategies in a workplace requires the availability of sufficient financial resources, skilled human resources, advanced technological resources, and sustainable natural resources (Carlsson, 2019).
Leadership can be defined as a vital social-influence problem, which improves the skills and maximised the efforts of individuals in a group. Leaders are responsible for motivating and guiding the team members of group members in an organisation to achieve a commonly developed goal (Gong et al., 2019). Leaders need to be charismatic and influential to motivate the team members.
In terms of differences, it can be shared that the managers in an organisation follow the leadership style, guidance, and pathways directed by the leaders to achieve a goal (van Linden et al., 2019). On the other hand, leaders in an organisation engage the managers and other sub-ordinates to create an agenda, develop a strategy, and follow the guidelines to achieve the business objectives. The leadership theoretical framework proposed by Kurt Lewin has been discussed here to determine the academic concepts and key issues in leadership and management.
The Leadership Style Framework of Kurt Lewin
Kurt Lewin is a popular psychologist in the field of management studies. Kurt Lewin has proposed that leadership or managerial style of a leader or a manager highly depends on the personality traits, attitudes, behaviours, and interpersonal skills of that particular leader of manager. As per the principles of this leadership framework considered in the IKEA’s organisational culture, leadership styles can be divided into three types. These are delegative or laissez-faire leadership style, participative or democratic leadership style, and autocratic leadership style (Wu, 2020).
Figure 1: Kurt Lewin's Leadership Framework
In autocratic leadership approaches, leaders play active roles in strategy development activities. Most importantly, the autocratic leaders do not allow the employees, managers, and other sub-ordinates to participate in the strategy development activities. The managers under the autocratic leaders apply authoritative approaches in which the employees have to follow the guidelines and strategies as per the decisions of organisational leaders. Too much centralisation in autocratic leadership approaches can create serious employee motivation issues as employees cannot share their dissatisfaction and demotivation in autocratic approaches with the leaders and managers (Mishra et al., 2019). In several organisations, autocratic approaches create low motivation and low job satisfaction issues. Too much centralisation or inadequate application of autocratic leadership approaches can affect the IKEA’s organisational culture, workplace environment, and employees’ performance level.
In democratic or participative leadership approaches, leaders play active role in strategy development process. In this leadership approach, leaders engage managers and other sub-ordinates in strategy formation activities. The democratic leaders and managers take suggestions from my team members, but the leaders take their own decisions by taking help of the suggestions given by team members (Baraldi and Ratajczak-Mrozek, 2019). In this democratic leadership approach, the managers communicate with the leaders and sub-ordinates in a transparent way so that the problems or perceptions of employees are shared with the leaders. Democratic leaders generally follow decentralised approach and too much decentralisation can create disciplinary issues. In some situations, some sort of authority is required to maintain adequacy of workplace environment. Uncontrolled decentralisation in democratic leadership can affect the efficiency of team output and it can hamper the business growth.
The important goal of laissez-faire or delegative leadership approach is to empower the followers and make the followers competent enough to develop innovative strategies. The delegative and laissez-faire leaders generally transform followers into highly competent, empowered, motivated, and creative employees in an organisation (Frank, 2020). Organisations like Google, Microsoft, and Amazon adopt this delegative or laissez-faire leadership style in order to develop an innovative workforce. Similar to autocratic and democratic approaches, the laissez-faire leadership approaches also have some key issues. In case of negative outcomes, the leaders can hide from their responsibilities and it can cost business losses. Unconsciousness about the cohesiveness also can be considered as an important possible challenge of this leadership approach.
Part 2- Power and Politics
In order to become successful, every organisation needs to have a balance in terms of utilisation of power and politics in achieving the business objectives. In several centralised organisation, it is identified that the power is not equally distributed among the individuals in the workplace. In the decentralised organisation, it is identified that power is equally distributed among the individuals in the workplace (Husz and Carlsson, 2019). In centralised organisation, the top-level management only have the decision making rights. In the decentralised organisations, every internal stakeholder has the right to accompany the top-level management in developing strategies.
Internal politics in workplace can be termed as a common workplace issue. Equal distribution of power in the organisation can reduce the possibilities of internal politics. In several centralised organisations, it is identified that some decision makers misuse their power in strategy development activities, which leads to biasness and ethical challenges (Fragouli and Nicolaidou, 2020). Hence, proper supervision and monitoring is necessary in centralised organisations in which the decision making rights and power is centralised to the higher authority as unethical activities and poor internal politics can hamper the moral as well as fundamental rights of the employees in the workplace. The power game and the players theory is applied below as a Power-Politics organisational theory in the workplace. The academic concept and key issues associated with the Organisational Power and Politics can be determined below within this analysis on IKEA’s organisational culture.
The Power Game and the Players Theory
As per the principles of this theoretical approach, organisational behaviour can be identified as a power game. The players within the organisations are highly influencers with differentiated personal needs, who tend to control the organisational actions and decisions. Hence, it is necessary for an individual researcher to understand the characteristics of the influencers in order to realise the understanding of the behaviour (Franken and Wattenberg, 2019). The investigation on the characteristics of the needs and decision making activities of the influencers can help a researcher to identify the degree of internal politics and equality of the distributed power. This investigation actually helps the individuals to understand the typical organisational behaviour of an organisation.
As per the principles of this theory, there are four important bases of organisational power and organisational politics. Non-substitutable, dependency, formal, and concentrated power are considered to be four important power bases. In terms of non-substitutability, power cannot replace performing employees as it can promote negative internal politics. In terms of dependency, the decision makers or power holds need to think about dependent variables in the workplace and give them respects (Thomas, 2020). For examples, performing employees need to be valued as it promotes fair organisational politics. In terms of formal power, the moral and fundamental rights of every individual need to be respected by giving them power to share their problems in workplace. It can significantly help in promoting fair organisational politics. In terms of concentrated power, the managers or the leaders in the organisations are responsible for the improvement of skill level, knowledge level, and competency level in the workplace for the fair power distribution in workplaces (Stathakopoulos et al., 2019). Effective skill development and knowledge development skills can empower the employees in workplace to make their impressions and marks. Hence, providing opportunities for skill and knowledge development also can be promote fair organisational internal politics.
Part 3
The theoretical concepts of management, leadership, and organisational power and politics are discussed. Now, the impacts of these approaches on the IKEA’s organisational culture are discussed below.
Brief Description about IKEA
IKEA is a Netherland-based Swedish multinational retailer, which is headquartered in Delft. IKEA was established in the year 1943. This multinational retail chain offers ready-to-assemble and customised furniture products. Furniture products are the major product lines of IKEA. Apart from the furniture goods, IKEA sells differentiated kitchen appliances and home accessories. As of 2019, the company is operating with more than 400 retail stores across the globe. As of 2019, IKEA has employed almost 2, 11,000 employees around the world. As of 2019, IKEA was considered to be most valued and prestigious furniture retail brand. The business value of IKEA around the world is almost 19 Billion US Dollars (Statistica, 2020).
Major roles of the employees of IKEA in the workplace is to be attentive towards the customers, offer them best possible services, and ensure customer satisfaction in the stores. In terms of current business situation, the profitability of IKEA has gone down by 10 percent in the year 2019 due to the poor employee retention in last few years. In addition, the online operation activities with 50 e-commerce stores are not helping the company to improve the growth of the business. The business goal of IKEA is to become climate positive and circular. The company’s main goal is to become planet and people positive by 2030 (Bederoff and Moynihan, 2018). The company has adopted recycled and renewable strategies in operation management activities to achieve the goals.
What is the impact of Management-Leadership and Power-Politics on IKEA’s organisational culture?
IKEA is operating across the globe with 433 stores across the globe. The management of the company has adopted a centralised IKEA’s organisational culture in which the decision making power of the company is centralised towards the top-management of the company. It is important here to identify the influence of the management approach, leadership style, and power and politics orientation on the IKEA’s organisational culture. Before identifying the influence, this will be vital enough to determine the management approach, leadership style, organisational culture, and power and politics orientation of IKEA.
Management and Leadership, and Impact on Organisational Culture of IKEA
IKEA follows functional corporate structure. The IKEA’s organisational culture is developed of several functions, such as marketing, HRM, finance, operations, R&D, and technology etc. Now, these organisational functions are developed of different kinds of sub-functions. Almost 2, 11,000 employees work for the company. Despite multiple functions, the lower-level employees are not entitled to share their views with the management. All the employees and their managers have to report about job performance and task targets to the higher authorities. On the other hand, higher authorities do not bother about the inclusion of the lower-level staffs in conference or meetings.
In decision making and strategy development process, the decision makers of IKEA do not take the views and suggestions from the professionals of different functions. This ensures that the company follows autocratic leadership approach in which the thoughts and views of the lower level staffs of the company are not shared with the management. Similarly, the managers are bound to follow the guidelines of leaders and top-management. The managers adopt authoritative approaches in which the top-down communication network is applied. The feedbacks of the employees regarding job roles, responsibilities, suggestions, motivation, and satisfaction are not taken by managers. Hence, it is identified that the top-management of IKEA follows autocratic leadership approach and the managers consider authoritative approach in the business operation activities. These management and leadership approaches are creating a customer-centric culture in the business in which the employees are pressurised to follow the guidelines of the business. This particular organisational culture is not becoming employee-friendly as they are not entitled to share their views (Cain, 2018). Poor employee retention in last few years it indicates that the organisations are not satisfied and the company is not successful in satisfying the needs of employees. Hence, the management needs to think about some transformation in the leadership and management approaches for better employee motivation and improved employee retention.
Power and Politics, and Impact on Organisational Culture of IKEA
Before analysing the characteristics of the power and politics in the workplace of IKEA, it would be vital to understand the IKEA’s organisational culture. In order to understand the organisational culture, the organisational structure of IKEA needs to be investigated. The company follows hierarchical organisational structure. Most importantly, long hierarchies of the company do not maintain a transparent communication between the top-management and lower-level employees in a time-effective manner. Therefore, the top-management decision makers keep entire authority and power to make decisions and develop strategies. Due to this hierarchical structure, the management feels comfortable in promoting centralised culture. In this centralised culture, the top-management professionals of IKEA make important decisions without any involvement of the employees and professionals of different organisational functions.
Centralised culture is followed by IKEA’s organisational culture basis on the hierarchical structure. The management also believes that inclusion of employees and decentralisation can increase business operation cost and business operation time. Due to these organisational aspects, it can be stated that the strategy development authority and power is not equally distributed among the hierarchies. These are entirely centralised to the top-management. Hence, possibility of unethical internal politics in the workplaces does exist due to the centralised culture and hierarchical structure of the corporate functions of IKEA’s organisational culture. Due to the hierarchical structure, centralised culture, and unequal distribution of power in the workplace, majority of the employees are failing to share their level of workplace dissatisfaction. In last five-six years, the company has adopted an aggressive customer-centric approach in business in which the company has made the staffs responsible for customer satisfaction, customer retention, and customer acquisition. Due to strong customer-centric approaches, the management is failing to supervise the stress and poor workplace motivation of employees. Majority of the employees in the workplace are get scolded by the authorities to improve workplace performance (Cain, 2018). These are resulting in poor workplace motivation and poor job satisfaction. Due to inadequate distribution of power among employees, huge internal politics, and centralised culture, the profitability of the business has reduced by 10 percent in the year 2018. Hence, the company should think about transformation in organisational culture, organisational structure, and power distribution approaches to retain employees and maintain sustainability in business.
Conclusion
IKEA is the leading furniture retailer in this world. The company is popular because the firm offers customised and ready-to-assemble furniture products to the customers as per their needs. In order make customer satisfied, the company aggressively imposes customer centric strategies and business goals. The employees are entitled to follow these goals and strategies. However, the autocratic leadership, authoritative management, unequal power distribution, hierarchical structure, and centralised culture of IKEA are affecting the motivation as well as performance level of employees. Several employees have left IKEA’s organisational culture in last few years due to inappropriate centralisation. Looking into these poor retention approaches, the management needs to bring decentralised culture, less-hierarchical structure, democratic leadership, and equal power-distribution approaches in workplace.
References
Baraldi, E. and Ratajczak-Mrozek, M., 2019. From supplier to center of excellence and beyond: The network position development of a business unit within “IKEA Industry”. IKEA’s organisational culture Journal of Business Research, 100, pp.1-15.
Bederoff, J., and Moynihan, R., 2018. IKEA aim to use only renewable and recycled materials by 2030. [Online]. Available at:
Cain, A., 2018. 'I get yelled at least once a day': IKEA restructured its stores to become more 'customer-centric,' but employees say the plan backfired. [Online]. Available at:
Carlsson, M., 2019. Strategic sourcing and category management: Lessons learned at IKEA. Kogan Page Publishers.
Fragouli, E. and Nicolaidou, Z., 2020. Risk Management of Multinational Companies (MNCs) in Rising Economies. International Journal of Information, Business and Management, 12(4), pp.237-267.
Frank, L., 2020. The impact of organisational culture on the involvement of indirect procurement by their internal stakeholders: A case study from the FMCG industry IKEA’s organisational culture (Master's thesis, University of Twente).
Franken, S. and Wattenberg, M., 2019, October. The Impact of AI on Employment and Organisation in the Industrial Working Environment of the Future. In ECIAIR 2019 European Conference on the Impact of Artificial Intelligence and Robotics (p. 141). Academic Conferences and publishing limited.
Gong, Z., Jiang, X. and Liu, L., 2019, March. The influence of brand culture on Enterprises: a case study of IKEA. In International Academic Conference on Frontiers in Social Sciences and Management Innovation (IAFSM 2018). Atlantis Press.
Husz, O. and Carlsson, K., 2019. Marketing a New Society or Engineering Kitchens? IKEA and the Swedish Consumer Agency. In Consumer Engineering, 1920s–1970s (pp. 215-243). Palgrave Macmillan, Cham.
Mishra, R.K., Raj, A.S. and Karuna, M., 2019. IKEA, Furnishing the Indian Homes: The Challenges of Culture, Competition and Channel. IPE Journal of, p.95.
Stathakopoulos, V., Kottikas, K.G., Theodorakis, I.G. and Kottika, E., 2019. Market-driving strategy and personnel attributes: Top management versus middle management. Journal of Business Research, 104, pp.529-540.
Statistica., 2020. IKEA- Statistics and Facts. [Online]. Available at:
Thomas, D.S., 2020. Vineyard as an Organizational Metaphor. In Organizational Metaphors (pp. 107-121). Palgrave Macmillan, Cham.
Van Linden, C., Young, M. and Birkey, R., 2019. IKEA’s Organizational Structures: Evaluating the Ethics of Tax Avoidance. Journal of Business Ethics Education, 16, pp.275-282.
Wu, Y., 2020, February. The Marketing Strategies of IKEA in China Using Tools of PESTEL, Five Forces Model and SWOT Analysis. IKEA’s organisational culture In International Academic Conference on Frontiers in Social Sciences and Management Innovation (IAFSM 2019) (pp. 348-355). Atlantis Press.
