Success factors for hesitance kandalama’s internal environment

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Executive Summary:

Economic recession in 2007 till date has left irremovable scars in some economies. In 2007-2008 developing nations even though not directly hit were affected severely by this crisis. The Hospitality and Tourism industry was negatively affected as well. Many developing nations generate a lot of income via the hospitality and Tourism industry, Sri Lanka is one of them. The civil situation in Sri Lanka was never normal owing to communism, riots, and poverty that cause unrest. Interestingly Aitken Spence Hotels Holdings PLC (ASHH PLC) has learnt to make the best even during times such as these. There are not more than twenty five 5-star hotels in Sri Lanka nine of which are owned by ASHH PLC. The organisation incepted its roots in Sri Lanka since 1968. It has lead by example on understanding the environment and sustaining a risky business even in tough times. The latest creation of ASHH PLC in Sri Lanka is the Heritance Kandalama. As evident from the case study, the main factor for the success of this unit under ASHH PLC is the fact that it was created and designed as something to be looked from rather that something to be looked at; very unconventional and opposite concept from the stereo type design structure for leisure 5 star eco hotels. Major competitors for the ASHH PLC in Sri Lanka are the Hilton Hotels Corp, Eden Hotel, Taj Lanka Hotel and the Palm Garden Hotels Nanayakkara. G (No Date). In 1991 the organisation decided to complete their presence in the all the three points of the famous cultural triangle destinations viz. Anuradhapura, Polonnaruwa and Sigiriya. Geographically Sri Lanka has wet most lands and dry land up north. The lower portion of Sri Lanka is populated with Sinhalese speaking people and the upper portion has most Buddhists. The environment based on which the assessment is conducted is the country itself. 

Challenges with this report are that it is not able to clearly comment on the exact hierarchical structure of the organisation and it has been assumed in good faith that an effective and efficient Human resource department did exist in the organisation. It has also been assumed that the employees in the brown sites are very different in every aspect than the green site despite the conditions in Sri Lanka being similar all over. This case study aims to explain the environmental factors, the cultural/structural and decision making parameters and finally the people, team dynamics and inter organisational functional relationships that need to be considered in the industry and how ASHH Plc should proceed on implementing an Environment Management system (EMS). Also it would discuss common factors that are mistaken to be considered as an initiative for EMS. This report would confine its findings and conclusions only from the perspective of managing people and organisations

External analysis (MPO) to industry- Hotels having Environment management systems (EMS)

Following the 1992 Summit, the World Travel and Tourism Council (WWTC), together with the World Tourism Organization (WTO) and the Earth Council published “Agenda 21 for the

Travel and Tourism Industry - Towards Environmentally Sustainable Development”, D. Sitarz (2000). Even today there are only a handful hotels and resorts that abide by this requirement. A possible theory could be that the cumulative effect of globalisation, culture amalgamation, need to specialise externally and standardise internally had had evidential effect on political, social, economic and legal factors and vice versa. These factors have made this niche industry grab several opportunities and protect itself from many threats. Some of the key macro factors that affect the process of managing people and organisations are discussed below.

Hotels across the world with proper functioning EMS systems are quite few in number hence opportunities in the global market are galore. Innovative methods of managing an EMS are still being explored. Trade and taxation policies in the initial stages (post liberalisation) had an impact on organisations and hence on people. Some effects were immensely healthy and rich in terms of profit, growth, job opportunities but others affected the complete economic condition, socio cultural diversity of Sri Lanka. In recent times however owing to immense global interdependence economically and financially governments are forced to think on their respective economies' security and development; hence it can be only the early players who have reaped strong position and growth. It is debatable that entry into this industry today is relatively more difficult than it was during 1990's. Although the government in Sri Lanka have a ‘no intervention' policy on tourism and have realised that it significantly contributes towards the rising GDP, other geographic and social factors make it risky to start a venture. Established companies or new players who wish to diversify in this industry are realising the competitive pressures and getting required political accreditations thereby raising the standards of the brand and consequently the pay scales, Social life, standard of living of people within. Scarcer resources are increasing the supplier power. Buyers are low on bargain power, this opportunity is lucrative for eco-resorts to grow and expand before the rivalry increases. There is tremendous pressures from substitutes in the niche 5 star eco-resort industry; but based on the Resource based view the Kandalama concept strategies are still fairly valuable, inimitable, rare and un substituted. 

Key Implications of the macro factors for ASHH Plc operations

Political - Threat: P. Jones (1999) quoted that significant structural difference between the hospitality industries in different countries will continue to exist. A country's laws affect the ownership, size and operation of hospitality businesses. Political scenario for ASHH Plc was an opportunity initially as the government thought the hotel would help gain foreign exchange earnings, but gradually became a threat when the opposition government along with various communities who had the valid point that construction of the hotel would invite crime. The impact on the organisation was to deal with various stakeholders e.g. environmentalists and the political power war between ruling and opposition government. When Heritance Kandalama was in the initial stages the employees in the organisation were all leaders with a vision who wanted to make this project a success despite the odds; hence every threat was looked at from the perspective of an achievable opportunity. The impact of these challenges on decisions of people and the organisation was as follows:

Business growth: Affected negatively owing to the unrest, civil war and government instability on the whole. People do not have jobs and organisations cannot create jobs.

Taxation Policies:Sri Lanka's tax administration was and still is weak owing to the coexistence of parallel regimes and the existence of legal provisions enabling the Board of Investment (BOI) to override Inland Revenue and Customs laws in granting tax concessions and limited experience with modern taxes, Worldbank (2011). This means that despite liberalisation Sri Lanka's internal tax collection procedures were not regulated to add value towards growing the economy. The Sri Lankan legal system also got the Kandalama project to standstill. However critiques were taken as constructive feedback and the complete operation was designed around the concerns of every critic and the environment.

Economic(Threat): Sri Lanka has risen considerably on the ‘Tourism podium', and is arguably much greener environmentally for the very reason that it is still developing. For better understanding of the economic factors with respect to 1990-2010, it may be observed that the crisis, both in 1997-98 and 2007- 2009, affected tourism industry negatively and hence sustainability for the hotel industry also was affected. Mithapala, S, (2009) quoted in the global travel and industry news that this is in line with the grassroots behavioural theory of Maslow's hierarchy of needs, where a person would postpone discretionary and recreational expenditure in a situation like this, where basic security needs are in jeopardy. Buying power of people in developed countries has drastically reduced and hence tourists now prefer to go to countries which have a lower currency denomination than their own, which gives them the same or better experience. The recent myriads of events in Sri Lanka and a weak judicial system and public administration Sri Lanka's national interest rates rose drastically thereby creating a static in circulation of money and hence GDP overall. Also poverty in Sri Lanka is at the peak. ASHH Plc has contributed to Sri Lanka's economic growth by providing employment to many local communities and attracting tourists in all its hotels in Sri Lanka. It won the confidence of the government and of the people by providing livelihood and simultaneously protecting the farmers' interests and the environment.  If not by a major proportion ASHH Plc has improved poverty and averted crime to a considerable extent by making local communities self dependant and financially equipped for survival. A threat however could be the uncontrollable natural calamities that wreck Sri Lanka's economic position periodically. Seeking resources and distribution is another threat to Sri Lanka owing to bad road conditions.

Socio Cultural (Opportunity):These are indeed opportunity. Many researchers have classified this into either threat or an opportunity. This report suggests that socio- cultural factors are always an opportunity, especially for this industry as it is extremely important for an organisation to conduct thorough studies on a particular economy where they wish to develop, expand or diversify. It becomes a threat only if the organisation has not done their homework efficiently. Adler.N (2008) states that focusing on strategies and management from the perspective of people and culture allows one to understand the influence of national and ethnic cultures on the functioning of an organisation. Firms must reflect their responsibility towards society rather than just profits.  ASHH Plc has catered to almost every cultural and societal requirement. Kandalama was built in the northern part of Sri Lanka, a dry area highly populated with Buddhists.  It built a hotel around the environment and not vice versa, the organisation understood the source and reasoning of the comments that were provided from the Buddhist monks and farmers and protected a heritage site. It also realised the need for employing local people for their benefit.

Technology (Threat):Technology has across all the four dimensions of measuring complexity achieved maximum match to the concepts of global Multiplicity, Interdependence, most of all ambiguity and ultimately flux. Too much and the value is lost, too little and value is never found. Using too much technology definitely is a threat especially in an industry that aims to work on environment retention. There are varied viewpoints on the usage of technology and each viewpoint strives to make its own mark independently thereby creating ambiguity and flux for businesses and people to make a decision on whether adopting certain technology would be good for environment management or not. ASHH Plc has in a novel way, proved that to be environmentally friendly, usage of technology has to be kept at the minimum. This is displayed by the process that the company chose to cut and build around the rocks by using traditional techniques, they also moved trees using technology instead of cutting them. Also the principles of 7R's are being conducted almost without hi-tech gadgets. There is no evidence however of how much technology is being used within the lobby and internally for everyday operational purposes. For their brown sites however technology is a threat as the construction has been completed and now the organisation may have to decide on lower emission to sync their reputation with their company objectives. 

Success factors for Heritance Kandalama's Internal Environment (MESO Level)

Sullivan (2004) and Rusnak (2006) state that, the characteristics of hospitality organizations make implementing strategic plans particularly problematic. Increasing staff diversity, globalization, customer demographics and demands, workforce composition, environmental considerations, economic shifts, new technologies, natural disasters, and numerous other factors have the potential to affect hospitality organizations in unanticipated ways. With regards to the Structure, Culture, decision making and leadership traits of ASHH Plc in Heritance Kandalama, the organisation made best efforts to make this whole project a success using people and processes. Given below is a critical evaluation f what ASHH Plc can transfer from Heritance Kandalama in the new hotels:

Strategic Design and organisational structure (Strength):

Miles and Snow (1978 & 2003), suggested that in addition to corporate and business strategies, other strategies may be developed to cover particular functional areas, such as Human resource Management, Information Technology and Marketing that suggest the significance of organisational factors underlying strategy. In case of Kandalama, ASHH Plc was a ‘prospector' (as defined by Miles and Snow) as they were continuously in search of new ideas and resources to achieve their objectives in a unique way. As per theories of the strategist J Barney, ASHH Plc has generated a valuable, inimitable, rare and un substituted creation - Heritance Kandalama. They innovated a novel approach towards EMS deployment; however the challenge now would be to replicate the same in all the brown site hotels. In case of transitioning the same objectives to other hotels it may utilise the ‘defender' approach as a strategy(as defined by Miles and Snow). The strategic design of Kandalama was ‘tall' since the management made decisions and conveyed the same to the employees; however the design for other hotels must be ‘flat' to maintain employee faith in organisational decisions. The organisational matrix structure would yield better results with the old hotels as it superimposes a horizontal set of divisional reporting relationships in a hierarchical functional structure.

Human resource strategy (Weakness):

ASHH Plc adopted a vertically integrated matrix structure but had a Personnel management approach at the lower levels of employment and Human resource management approach (HRM) at the higher levels of employment. The HR decision strategy applied in both cases however was the contingency approach. The organisation hired the local communities as resources in Kandalama for smaller roles but these were led by leaders who experienced a human resource approach on a much bigger role. Moreover the objectives of building the hotel around the environment would not have taken shape had it not gained the trust of the locals. These locals were not treated individually as in human resource practices. Applying this strategy will certainly dig out challenges in the other hotels of the organisation since people, processes and cultures have already been created and other hotels work in a specific way which would be very different from Heritance Kandalama employees. The organisation must utilise a Universalist human resource management (HRM) strategy as the audience in these old hotels are completely different. Kandalama employees are local farmers and villagers but the employees in the other hotels are from urban areas having decent academic qualifications.  As against personnel an HRM strategy would work in the transition process - a combination of Universal and Contingency approaches. Universal mostly because operations in Kandalama have already proven successful, it is now a matter of replicating possibilities; this in turn means that there is already a proven solution and a defined objective. Contingency approach can be used in the phase where specific ideas need to be collected to deploy EMS in certain architecture in the brown site as the methods in which objectives for these hotels can be achieved may be different.    

Leadership and Management style (Strength):

It is important to understand the cycle of change before implementing a specific leadership and management style. According to Kurt Lewin (1947) organisations must go through three steps before accepting a change - Unfreeze (Status quo), move and refreeze. Unfreezing is like undoing something to level it to a neutral state. Moving then to another changed state becomes easier to fix the change as a new culture or methodology. Failure to understand this may result in major conflicts of interests and opinion. People within the organisation must be ready to trust and accept the change in the management decision and the leadership styles that would follow to make those decisions. The ASHH Plc management in the brown site hotels have to fathom this cycle and imbibe the importance of deploying an EMS and highlight its underlying value to the employees. The measure through which the changes can be managed with minimal resistance are Education, communicating, participation and involvement, facilitation and support, Negotiation and Agreement, Manipulation and co-optation Based on the continuum of leader behaviours, by Tannenbaum. R and Schmidt. H (1973), Kandalama management had more assertive authority and they often sold ideas to employees. In the brown sites the focus should move towards a more collaborative effort where suggestions are welcomed and the productive ideas end up being executed. (Tannenbaum. R and Schmidt. H model attached in Appendices I)  

Knowledge management (Weakness):

By far the most important factor in business growth and survival today is the knowledge that people possess. Kandalama achieved commendable rewards and honours worldwide for its operations in Sri Lanka. If the processes and the knowledge by which such a success was captured at all, ASHH Plc must use them as a great resource for further development in brown sites. Existing staff from the Heritance must be utilised and be credited for their tacit and recorded knowledge training and transfer to other employees in the brown site. Effective resource management trainings, forums and brainstorming session would bring out the best in all employees. According to Davenport.T et al (1999) the main objectives that any knowledge management or retention program must undergo are: Create knowledge repositories accessible to everyone, Manage knowledge as an asset/enhance learning environment. Once The primary objective of ASHH Plc is to deploy a successful EMS in their brown sites. If the organisation managed to record knowledge for multiple projects during Kandalama replicating most of those would save time and effort for all employees.

Corporate Social responsibility (Strength):

ASHHH Plc should maintain the same efforts that it took to build Kandalama to re-engineering the new sites. Getting support and agreements from local communities even in the brown sites would help the firm all the more since the sites have already been established and so have the surroundings around the hotels. Any changes as a part of the projects re structuring efforts can again invoke negative perceptions towards the functioning of these hotels.

Success factors of Kandalama's people (micro environment):

Motivation and rewards system:

Maslow. A (1943) stated that there are different needs that motivate various individuals at various stages of life. Most employees in Kandalama emerged from “Physiological needs” as per Maslow's needs hierarchy theory. During the time line in discussion Sri Lanka was stricken and still is recovering because of the wars and the unrest. People wanted to equip themselves with basic resources that can feed them, clothe them and shelter them. By employing local communities Kandalama resourced those needs by providing them a livelihood and resourcing their intrinsic rewards. In case of brown sites the needs would be different and hence a different motivation instruments needs to be used. As per McClelland.D's needs theory (1975), the brown site hotels may display needs for achievement, Affiliation and the need for power hence extrinsic rewards would play a pivotal role. Perks, promotion, recognition, status etc can be provided to the most contributing, performing and deserving employees. It can also be assumed to be a small compensation y or greed factor based on which the employees will support and work towards the project.


Utilising existing expertise to replicate in the brown sites would immensely help the company by preventing other teams to reinvent the wheel. Every piece of knowledge gathered on making the 7 R principles must be applied to find the feasibility of what can and cannot be afforded in the brown sites. Employees must be encouraged to brainstorm and form Delphi groups to seek advice and ideas on project implementation.

Management by objectives and control processes:

It is extremely crucial at this stage that the leaders and managers in the organisation allocate resources and plan activities efficiently and effectively with a clarity on which areas of the brown site need attention to achieve those objectives. There is a possibility that employees may lose track of what the objectives are halfway through the project if they are consistently facing problems to complete tasks; hence the organisation must encourage personal commitment up to optimum satisfaction since the employees in the brown site are at different need stages of life than the green site. Simultaneously the leaders must create an organisational atmosphere or culture that is ready to embrace dynamic changes. Effective control systems must be put in place for the project. These control systems can be achieved if standards are established, performance is consistently measured and corrective actions are taken post comparison of where they wanted to go and where they are. Since the organisation already has deployed EMS earlier it can adapt to preventive control measures and gain from the learning of direct control measures that they experienced during Kandalama. Control mechanisms must be cost effective, understandable, should consider major exceptions on what can and cannot be replicated in the brown sites. They must also be flexible and finally role.

How to deploy the EMS system

Analyse Strengths & Weakness against Opportunities and threat

Establish Objectives - Deploying a realistic and successful EMS in brown sites. Deploy EMS in brown sites only where efficiency gains can be achieved, costs would reduce, activities that comply with the legal regulations in Sri Lanka and which would also aid as a marketing or social benefit.

Assess and research on relevant EMS certification. Involve mid or senior level managers in becoming a subject matter expert in any certifications if required

Determine the premises or the areas within the brown sites where the projects can be carried out using a 6 R's off the 7 R's implemented earlier e.g. Recycling, Reuse, Replace, Reject, Reclaim and Reduce. (Using the Repair option in urban hotels on customer facing items may bring down the reputation initially as compared to

Competitors and Reclaim can be done for all items except sludge, sewage and fruit peels in brown sites )

Staff development and training

Develop alternatives solutions to deploying each objective.

Establish specific goals function and team wise and Implement plan

Maintain transparency on the progress of the project, conduct periodic reviews and appraisals.

Clearly the opportunities for Kandalama are Economic and Socio- cultural factors and the threats are Political/Legal and Technical. The company's strengths are