10/27/06

Permanent Link - Economics of Self-Service and Employment 09:16:53 am by Alice Snell

Economics of Self-Service and Employment

Here’s an interesting problem to have. Self-service costs companies less in labor expenses and can be the cornerstone of a profitable business strategy. But in Sweden, due to the relatively high costs of hiring people, self-service has become an economic requirement. Newsweek International reports on the phenomenon:

“It's so expensive to hire people in Sweden that companies from IKEA on down would much rather you helped yourself, thank you…The constant battle by business to get around high labor costs is evident everywhere in Sweden. Here, the gap between high and low salaries is much narrower than in almost any other modern economy. The typical Swedish waiter, say, makes €23,000 a year, or about a quarter of what a Swedish CEO takes home. In Britain, the waiter would earn much less (€17,628), the CEO much more (€164,788). In the United States, the gap would be wider still. Thus, in IKEA-syndrome Sweden, the restaurant world looks very different. McDonald's thrives, according to a recent McKinsey & Co. study, but its fast-food competitor Pizza Hut, with bigger tables and larger serving staff, struggles.”

So it is neither a paucity of jobs nor a scarcity of available labor that is creating this conundrum, but the realities of compensation and cultural structures. Businesses in all industries have created new business models centered on self-service. Think about how the self-service IKEA Syndrome touches your life the next time you walk their aisles, write up your own order, load your own cart, deliver the boxes to your home, and assemble your piece of furniture.

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Taleo's Talent Management Solutions Blog is about developments in Talent Management - from its definition and practices - to the latest research in the field.

Alice Snell
Vice President, Taleo Research

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