The IKEA effect?

What is that all about?

In some countries, or particularly in the west, IKEA is known as one of the cheapest options to buy furniture. This is not the case in the Middle East though.

And even though it’s known as one of the cheapest places to buy furniture, once you actually buy that piece of furniture, it’s very hard to let go of it.

It’s very hard to let go. You want to take it with you whenever and wherever you move. From one apartment to the next, you pack it and unpack it.

You do that because you have fallen for that IKEA piece of furniture. You have fallen for it even if it was so simple, even if it was so basic, even if all your friends have the same exact one, but perhaps in a different color.

You have fallen for it because IKEA made the best of what is called the “endowment effect”. 

The endowment effect basically says,

“We place greater value on items because we own them.”

Adam Ferrier, The Advertising Effect: How to Change Behaviour

How did IKEA make the best of the endowment effect?

IKEA lets you assemble the furniture yourself. You buy it, you take it home, and you put together the puzzle of that new piece of furniture. You buy supplies and get adventurous. When that happens, you fall for it. It’s part of you. You took part. You own it. Not only because you bought it with your own money, but because you created it. At least that’s what you think. You have put it together, all by yourself, following some instructions.

Besides the effects of loving it because you own it, the IKEA effect says, 

“People place a disproportionate value on something they build or help to create themselves.”

Adam Ferrier, The Advertising Effect: How to Change Behaviour

The endowment effect and IKEA effect can be applied to many products. It’s a cognitive bias that definitely can be embedded to influence consumers to believe they have created one thing, even if all they did was that final step. It can influence consumers to fall in love with the process, and your product.

It could be the premixed cake that you added eggs to and baked. It could be the predawn painting that you colored and hung on your wall. It could be the 3 in 1 coffee mix that you mix with boiling water to prepare the “perfect” cappuccino.

I can’t help but think on how this endowment effect can be best used to encourage employee engagement.

How can the endowment and IKEA effect help in employee engagement?

I know. I know. It’s not consumer behavior. It’s not influencing consumers to buy.

Employee engagement is about human resources and performance management.

That same principle of the endowment effect can be utilized to influence employees to be more dedicated and engaged within the organization. It can inspire them to become more creative and add more value.

How you might wonder?

Shares. Owning shares.

When you get the job offer, the first thing you look at is the salary, the second is the benefits and other packages. The moment you know you own shares, you feel you belong. You feel you are already part of the organization before joining, while you are still in your notice period in that old job.

In my career, I have worked in five large organizations. Out of the five, only one offered me shares. That’s only 20% and guess what?

The monetary value was not much at all. It was close to nothing, and even though that was true, I still every day looked at the stock market to see how well my shares are doing. I felt I was part of it. I owned some of it. It was my company. It was company even if I owned very little of it.

In this age, employees don’t stay in one company for 25 years like our parents’ generation did. They move from one company to the other. In fact, the median number of years for employees ranging from the age 25 to 34 is 3.2 years. 

I have seen friends and colleagues though staying in one company much more than that average. They stay longer because they feel they are part of that organization. They own it. They own a tiny part of it. They want to grow it. They are proud to be part of it.

Just like you are attached to that piece of IKEA furniture, you are also attached to that company if you feel you own it and help build it… and that’s only one way on how we can make the best out of the endowment and IKEA effect to increase and influence employee engagement.

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