International Journal Of HRM Business Essay

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This paper examines the challenges faced by the Human Resource Management in the Tourism Industry in the Maldives due to the recent global economic crisis. A case study approach was conducted on Sun Hotels & Resorts Private Limited using two data collection methods, a questionnaire and a semi-structured interview. The research findings show that downsizing and adjusting to the new Employment Act in the Maldives were two major challenges faced by the company. During the process of change management employees performance were negatively affected and the findings indicate that the company focused on reducing costs and making the company more lean efficient, however ignored some qualitative aspects. The results of the findings were discussed and recommendations for future research are given.


human resource management; economic crisis; Tourism Industry; Maldives; change management


During the past decade the phenomenon of globalisation has increased integration and co-ordination between countries around the world and today every country is highly dependent on one another. The increase in dependency may increase the adverse effect of an economic crisis on both developed and developing countries. In the recent past economic crisis has become an important issue, however much has not been written about it. ‘Economic crisis' is a term which is used by many authors on a more general basis. Okumus, Altinay, and Arasli (2005) identified several types of crises that has a huge adverse impact on the economy such as Asian financial crisis, September 11 terrorist attack on America, foot and mouth disease in the UK, war on Iraq, and bombing in Bali. An economic crisis could be defined as a diminution in the overall living standard of a country over a long period of time due to the detrimental effect on the country's macroeconomic indicators. According to revolutionary communist Karl Marx (1818-1883), an economic crisis is one of the major underlying problems of a capitalist regime which could decrease the employment rate, business sector developments, and investment spending. Therefore, in today's globalised world the most dangerous would be a ‘financial crisis' because it affects country's monetary and fiscal policies and decreases the overall living standard of a country to a great extent.

One of the most global economic crises of all time is the recent financial crisis which began in August 2007 in United States due to shortage in money supply in the US financial system. It is also famously known as the ‘housing bubble' in the United States. It is one of the most severe cases of economic crisis that the world has seen so far due to its negative impact on many economies. Many global financial institutions weakened and global stock market deteriorated because of the shortage in the money supply and investors become extremely unconfident. This financial turmoil has lead to a sharp fall in the world GDP (see Figure 1). According to International Monetary Fund, it is one of the highest downturns since World War II with a projected fall to ½ percent in world growth. In addition, international trade has also declined due to a reduction in the capital in both developed and developing countries and the credit crunch has also restrained consumption and production. Furthermore, one of the fastest developing countries, China, had the lowest GDP growth rate with 6.8% in January 2009. This indicates that developing economies has also suffered greatly. The Asian economic downturn in 1997 has substantially decreased the currencies, like Thai baht which fell by more than 20 percent in a month's time (Pine, Chan, Leung, 1998). This has resulted in high prices and reduction in tourist arrivals. This shows that the most severely affected are a country's main industries which supports the economy significantly. In addition, large international industries suffer a great deal during this period of time because they are controlled by the main macroeconomic indicators; Gross Domestic Product (GDP), unemployment and inflation. Tourism industry being one of the major international industries in the world has been affected extensively due to the current economic downturn. For example, according to the UNWTO World Tourism Barometer (2009), confirms that in 2008 there was a decline in the international tourist arrivals worldwide of 4% due to unstable global economy (Ministry of Tourism, Arts and culture, 2009). The highly affected are those developing countries which rely on supporting industries that produce higher profits. When looking at an internal perspective, highly affected would be the employees working in the Tourism Industry. According to International Labour Organisation (ILO) statement (2003), shows that the economic downturn due to the September 11 Attack had severely affected five million jobs in 2003 in the Travel & Tourism Industry (Costa, 2004). This is mainly because the industry is heavily relied on global Gross Domestic Product (GDP) representing over 4% and more than 3% of employment worldwide (Costa, 2004). This indicates the industry's employment rate is highly dependent on a country's GDP which may not provide favourable returns in an economic downturn.

The main aim of this article is to understand the main challenges faced by the Human Resource Management (HRM) in the tourism sector due to the crisis and how much the employees were affected by the crisis. The main focus would be on both quantitative and qualitative issues in order to identify whether the tourism company was more concerned with the issue which is costs or qualitative such as motivation and commitment. Some background information about the Maldives is obtained to gain some information on tourism sector and its importance to the country's economy. Afterwards, a literature review is conducted on HRM and change management in order to gain an insight to the previous studies. Followed by this a methodology about how the research findings was conducted would be given. Then, research findings of the data collected are obtained with quantitative data and these are examined. Finally, some important conclusions are presented and suggestions for further research are given.

Tourism Industry in the Maldives: Background

Maldives is situated in the Indian Ocean. It consists of approximately 1,190 islands, only 200 are inhabited. The islands spread over a distance of 900 kilometres, making this one of the most dissimilar countries in the world. The 26 geographic atolls which cover the land area are grouped into 20 administrative atolls. The population of Maldives is about 300,000. The tremendously low population density makes the Maldives distinctive. Tourism is the largest industry consisting of over 87 resorts with more than 16, 000 beds which generates 28% of the GDP and more than 90% of government tax revenue is produced from import duties and tourism-related taxes (CIA, 2009). It has become an important player and is one of the drivers of growth in the economy. In addition, the industry employs over one-fifth of the workforce which includes a fair amount of expatriates. According to Ministry of Human Resources, Youth and Sports (2009), expatriate employment in Tourism industry rise from 12,352 in 2008 to 13,057 in 2009. Many new markets has been introduced and contributed to the development of the tourism industry. One is China market which has the fifth highest market share with 7.9% (see Figure 2). Over the past decade, tourist arrivals has been increasing tremendously, however, in between there has been a decrease in the arrivals due to economic crises such Tsunami and the recent financial crisis. The recent financial crisis has reduced spending of individuals significantly due to the decrease in disposable income. The prediction of World Tourism Organisation (UNWTO) international tourist arrivals will drop to a minus between -4 to -9% in 2009 due to the financial crisis. Tourism industry in the Maldives, one of the biggest contributors to the country's GDP, is also expected to have significant negative implications with a decrease in the tourist arrivals leading to access capacity utilization. Due to a reduction in the tourist arrivals from the main markets, the actual growth rate was 1.1 per cent in 2008 and is estimated to descend in 2009 to a minus 11 per cent (see figure 3). This global downturn has resulted in big loss to tourism sector which reduces the country's GDP and standard of living.

Literature review

Globalisation is one of the drivers for organisations to become more efficient and effective as they are face with intense competition and increased customer choice. Many organisations stress on the significance of ‘employees' within the workplace. This raises the need for a useful Human Resource Management (HRM) in the management of key areas. The literature review focuses on challenges faced by HRM due to change management. The literature review is divided into mainly two sections. The first part deals with the historical background and some of the key theoretical underpinnings of HRM. The second part focuses on change management within HRM and its challenges in both quantitative and qualitative basis. Finally, some tactics to cope with these challenges will be highlighted.

Human Resource Management: A contextual background

Employees or workers play an important role in the overall performance of organisations. One of the influential practitioners during that time was Elton Mayo (1880-1949) who invented the ‘Human Relations Movement' which looks upon the social aspects of workers and stresses the importance of teamwork. His work pioneered human resource managers to adopt a different perspective regarding treatment of employees within an organisation. However some organisations take ‘employees' as an increased costs and devalues their importance which is a costly mistake. This is mainly in the manufacturing industries where management focuses on standardised activities and predominantly incorporates Adam Smith's (1723-1790) specialisation within the workplace. Over the past decade, dramatic changes have occurred within organisations as they are faced with pressures both internally and externally. More service-based organisations where employees play a major role starting from top to the consumer end have been emerging and rising to the top. It is the organisation's responsibility to utilise its employees most efficiently and effectively. Personnel Management is a term used by many writers to give emphasis to the day to day activities conducted by employees such as training, recruitment and selection, and employee relations to achieve a positive outcome. However, there has been some scepticism about the use of Personnel Management because it functions as an individual responsibility and it does not take into account some important aspects such as integration and commitment. Therefore, it has been replaced by Human Resource Management (HRM) which incorporates the vitality of employees as a part of the organisations overall objectives.

HRM was introduced in major parts of the world during the 1980s and 1990s including the US and UK. It is defined as ‘A philosophy of people management based on the belief that human resources are uniquely important to sustained business successes' (Price, 2004, p31). This definition identifies the importance of ‘people management' in an organisation to achieve a competitive advantage. Schuler also agrees that the ‘shift from Personnel Management to Human Resource Management is needed in today's era to attain good profits and effectiveness' (Price, 2004, p45). This would allow an organisation to recruit and select those employees who are strongly committed, flexible and competent for which the organisation is able to allocate in the most efficient and effective manner. This encourages employees to perform successfully and the organisation to achieve competitive advantage. Several authors have regarded HRM as a holistic approach which focuses on integrating all aspects of people management with the overall objectives of the organisation (Ahmad, S., Schroeder, G., R., 2003). This approach indicates that HRM is more significant to organisations rather than Personnel Management. It is also extremely useful in service-based organisations because employees are the primary function to achieve customer loyalty. This approach also gives significance to the needs of the people within the organisation and establishes a linkage with all hierarchies of human resource department. Storey (2001) considers HRM as a proactive approach which is more useful because service-based organisations are operating in an extremely volatile environment and the decisions taken by the management influences on the company's structure and strategy which in turn affects the human resource functioning and the policies and practices established by HRM. There has been much written about the HRM practices and its effect on organisational performance but there has been little focused on the challenges or difficulties faced by the HRM due to external obstacles and how this affect HRM practices and performance. Several models has been adopted by different authors, however there is only one model which is most influential in the context of HRM and its policies and practices. As this paper gives significance to the ‘human aspects' of employees within organisations it is important to look at Beer's Harvard Map model.

One of the most influential model developed by Beer (1984) which is known as the Harvard Map clearly shows the significance of ‘human aspects' and considers them as significant shareholders to the company. This model emphasises the values and beliefs of employees and appropriate human resource policies to adopt a committed culture where employees have the right for their opinions. The model represents the effect of the four strategic policy areas on an individual, management, and societal level which needs to be managed and maintained through Beer's 4 Cs which are commitment, competence, cost-effectiveness, and congruence. One important principle of this model is that employees should not be managed as factors of production but organisations should also take into account the psychological factors and effective communication into consideration.

This model clearly represents the significance of HRM policies and practices which has a considerable impact on an organisation's strategy and development. Those policies and practices adopted by an organisation affect the overall performance. However, the question to address is whether these policies and practices take into account the soft approach represented by Beer's Harvard Map. According to Gooderham, Parry, and Ringdal (2008), one key theory of HRM is universalistic theory which is concerned with the ‘human' aspects of management practices and this could be achieved through advocating the ‘best practice' model. This model illustrates the universalism of employees and establishes best practices identified by Boxall and Purcell such as employment security, selection and hiring, team working, high pay contingent on company performance, extensive training, reduction of status differences and sharing information (Alleyne, Doherty, Greenidge, 2006). These practices recognise the ‘human' aspects such commitment, motivation, and communication. In addition, Pfeffer's seven best practices also highlights the soft approach of HRM such as employment security, decentralised decision making, and reducing trade barriers of communication (Ahmad, Schroeder, 2003). Therefore, the ‘best practice' model is a major tool adopted by organisations which clearly represents the soft element of HRM policies and practices. However, to achieve a successful outcome organisations need to manage those practices in a consistent manner and should incorporate those features identified by Hiltrop (1996) which are flexibility, internal labour market arrangements, performance-based practices, high level of teamwork and internal communication. Different authors, however, have a different perspective when differentiating between soft and hard approach. For example Petrescu and Simmons (2008) explain two types of pay structure given to employees to increase the employee performance and ‘compressed pay structure' focuses on team work and commitment which takes into account the soft elements of HRM practices. On the other hand, Minbaeva (2008) argues that performance-based pay is not the only element to increase employee performance but also effective job design and flexible working practices are important to increase the intrinsic motivation level which takes in to account the soft side of HRM. Commitment approach is apparent in the Harvard Map because it takes into account the psychological aspects of employees rather than physical and establishes a collaborative model to achieve the individual goals of both the employee and the employer which is also connected to the overall objectives of an organisation (Gooderham, Parry, Ringdal, 2008). For an organisation to be successful it needs to design, establish, and manage those practices that integrate soft elements and are consistent with each other.

One criticism of the Harvard Map is that it is not very successfully used by majority of the bureaucratic organisations. This is due to the fact that there are many hierarchies in the management structure and therefore effective communication and commitment are not established which in turn undervalues the middle or lower level employees performance. There are also other models which should also be taken into account within the HRM framework. Beer's (1984) Harvard Map does not take into account quantitative aspects such as costs and productivity which is represented in Fombrun, Tichy and Devanna's (1984) Michigan Model which is also known as the hard approach. In contrast to beer's Harvard Model, Hiltop (1996) argues that Michigan Model is also extremely beneficial to organisations because it gives importance to improving quality and productivity level of employees. Furthermore, the Harvard Map model does not take into account the external forces when developing appropriate HRM policies. These policies need to address the issues of the external environment such as economic, political and social factors and need to be adaptable and responsive to external changes. Therefore, Warwick Model of Strategic Change and Human Resource Management (Hendry and Pettigrew, 1992) has become more prominent and represents an expansion to Beer's Harvard Map. The Warwick model address the issues of external business environment and its impact on HRM; the effect on the policies and practices adopted by the management and employees. Service-based organisations are highly affected by the changes that occur in the external business environment and go through long periods of change management to cope with the challenges such downsizing, motivation, and commitment faced by an organisation most efficiently and effectively.

Change management: HRM challenges

Change management is a highly complicated process that is related to the external forces of environment. It needs to be implemented with proper planning and supervision. Change management is a methodical approach to facing with problems within an organisation. It is crucial to manage those problems with good adaptation, efficient control and effective implementation. As it is related to the external forces of business environment, the highly affected by the change would be the employees working within organizations because of the physiological aspects and the major challenges faced by an organisation are mainly associated with the employees. Downsizing is one of the major challenges faced by HRM during the process of change management. In the business context, the term downsize is mainly associated with the hard approach because it deals with costs and efficiency. Papalexandris, 1996, p07 defines it as simple ‘the number of persons by the company must be reduced'. This meaning also indicates that it is a quantitative issue because it talks about reducing the ‘number' and this is considered to be a cost-cutting measure taken by organisations. The impact would be greater for service-based organisations than manufacturing organisations because it is highly labour intensive and would greatly impact the employees. Sahdev, Vinnicombe, Tyson (1999) agrees with the view that downsizing is merely a cost-cutting measure as it increases the responsibilities of the existing staff but not efficiency and effectiveness. Downsizing is usually an issue faced by human resource specialists mainly due to economic crises because it is linked to financial pressures. When an economy is affected by an economic crisis, the GDP is affected which means the country is not in a stable position to support major industries. This is because major financial institutions are adversely affected due to reduction in money flow and foreign direct investments. These pressure organisations to reduce costs of production and increase efficiency. The foremost attack is on employees which are also the most challenging because of the policies of Employment Act implemented by many major organisations. For example, Rigby (2001) argues that many major US industries have downsized their workforce at least 20% during the past decades due to external pressures. Another example from a survey by a Conference Board US in 1992 shows that 44 per cent of organisations that have downsized have achieved increased operating profits and 31 per cent have increased productivity (Emshoff, 1994). These examples indicate that downsizing is a major difficulty faced by many organisations and it does not increase the overall efficiency of the workforce but adds more workload to employees and makes the existing staff more insecure with their job. However, downsizing has its benefits. The underlying reason for organisations to downsize during the phase of change management is that it reduces the costs of production and increases efficiency which leads to competitive advantage. Tsai, Yen, and Huang, Huang (2007) argue that, as organisations are becoming more and more global, it is extremely vital to find new ways to reduce costs in order to increase its financial performance with increased productivity and therefore, downsizing would lead to added benefits, especially in a period of change management, such as reduction in overhead costs, faster decision-making, reduced bureaucracy. These would lead to increased productivity and improved quality. It is also important to note that the lesser the amount of people employed, the more flexible it would be and there is less risk of errors and mistakes during the operation process. However, the important question is whether this quantitative approach is worse than a qualitative approach which utilise employees in a more effective manner, rather than laying them off just to reduce the costs. For example, Sahdev, Vinnicombe, and Tyson (1999) point out those organisations that implement downsizing suffer much greater because of the continuation of the adverse effect on survivors or the existing employees who have survived from downsizing. This is an extremely important argument because organisations undermine the value of employees and make decisions merely based on costs which are not very wise and effective when taking into account the future implications. An environment that has gone through redundancies, the employees who are remaining would feel very insecure and physiologically affected. For example, Casio describes a ‘survivor syndrome' which is a term given to employees who have survived in the change management, because they feel extremely vulnerable and less involved in completing the task (Sahdev, Vinnicombe, and Tyson, 1999). It causes employees to become less energetic and angrier which may reduce the synergistic outcome. So downsizing does involve some negative implications to an organisation. For example, Tsai, Yen, Huang, Huang (2007) argue that three important characteristics of employees are affected which are ‘morale', ‘commitment', and ‘loyalty'. These are considered to be very important to manage in order to achieve customer satisfaction and competitive advantage. However, organisations focus on reducing costs and increasing price and do not take into account the qualitative aspects. On the other hand, Rigby (2001) agrees with this view but on a different perspective; organisations which downsize to reduce costs may have a detrimental effect not only on employees but also suppliers and business partners who may lose commitment and become less productive which may affect the relationship which was developed during many years.Human resource managers have to be mindful about the change in order to systematically manage costs however this does not mean that that the qualitative issues should be ignored. This paper looks upon the qualitative aspects involved in the business to a great extent. The model represented in Harvard Map explains the significance of employees in the workplace and identify them as significant ‘stakeholders' of the business. Therefore, analysing the qualitative challenges faced by employees due to change management is imperative.

Motivation is a major challenge faced by many organisations around the world. A successful organisation has to always maintain its employee motivation at stable levels in order to achieve consistent high performance. Key word here is ‘consistent' rather than ‘cost' because without overall consistency, managers are faced with de-motivated employees which are a huge obstacle that cannot be easily solved. It is justifiable to say that human resource managers are the people who are the most affected by an economic crisis because they have to deal with the employees who are the building blocks of an organisation. It is extremely an important challenge that needs to be tackled most effectively and efficiently. Motivation is an important aspect of any organisation and it has a huge impact on the overall performance of an organisation. Minbaeva (2008) identifies two types of motivation that have an impact on the knowledge gained by its employees who are both extrinsic and intrinsic which clearly outlines both the soft and hard element of employees. It could either affect externally where employees are controlled by a performance appraisal system while internally motivated through flexible working practices and job design. So his argument indicates that motivation could be increased using techniques that are both hard and soft. However it does not take into account the expectancy theory of motivation which was established by Vroom (1964) where behaviour of employees was analysed to make decisions regarding several motivational factors such as self-recognition, feelings of employees in the development process, and also self-esteem (Chang, Jang, 2008). Issues regarding job design and practices are not the only factors that increases motivation but also an individual's self-development. Change management is a difficult process to go through for the human resource managers, especially the employees, therefore managers need to put additional effort to increase or maintain the motivation level of employees working in different levels. Karatepe and Uludag (2007) give an example about ‘frontline' employees of hotel industry to play an important role in the delivery of goods and services to the customers and to obtain a positive attitude when performing. Hotel industry is highly service based and the performance of an employee is measured on how the service is delivered to the customer's expectations. Unlike a manufactured industry, employees need to be supervised constantly throughout the operational activities due its intangibility which makes them extremely sensitive and volatile to changes that occur within the business environment. For example, stress could be one of the problems which lead to de-motivation. Vakolo and Nikolaou states, ‘stress at work is a well-known factor for low motivation and morale, decrease in performance, high turnover and sick-leave, accidents, low job satisfaction, low quality products and services, poor internal communication and conflicts', (Vakolo, Nikolaou, 2005: pp 164). Mainly employees who are given less attention to during the process of change may become extremely stressed because of the uncertainty that involves in the change management and they are unable to cope with new situation which leads to a de-motivated workforce. This affects the overall performance of the organisation which may lead to customers becoming more dissatisfied and in turn loss of sales. One important point to note is that stress is developed from the employees attitudes towards change which could arise in three different manners analysed by Elizer and Guttman which are ‘persons cognitive about change', effective reactions to change', and ‘behavioural tendency towards change' (Vakola and Nikolaou, 2005). In addition, it is more justifiable to say that intrinsic motivated employees are less affected by the change because they establish a relationship based on commitment, empowerment and good communication where there is a mutual trust between the employee and the employer. Therefore, during a change management process they are more motivated to help the organisation to cope with the challenges. On the other hand, extrinsic motivated employees are highly affected because their performance are based on rewards and appraisal systems and when costs are reduced during the change management, they become less empowered and de-motivated to work because their wages are being reduced dramatically. According to Neuman, Pizam, and Reichel (1980), motivation is also related to job expectations and reward system because it increases employee's values. If organisations have clear expectations from their employees and offer an appropriate reward for the employees who work hard may increase the motivation level leading to increased performance. When the change management is going through it is important to communicate effectively with the employees by implementing clear visions in the minds of employees. Another major challenge faced by human resource managers is resistance to change from employees. Resistance to change is a natural occurrence by employees working within an organisation. It is one of the biggest qualitative difficulties faced by managers during the process of change management because it creates problems such as arguments between employee and employer, depression, disputes, and sometimes strikes. These problems have a negative impact on organisations brand image and loyalty. According to Vakola and Nikolaou (2005), resistance to change is described as a critical success or failure factor which means resistance to change could bring either positive or negative attitudes from employees. Employees who have low self-esteem and self confidence may become more vulnerable to change and may response negatively. Smith's (2005), argue resistance to change in two difference perspectives which are ‘holistic' and ‘managerialist' view. Holistic approach assumes that resistance is extremely useful to organisations during change management when managed effectively. A good relationship and effective communication is important in this approach as by listening to employees complains, difficulties, and comments may help the organisation to gather useful information. On the other hand, managerialist approach assumes resistance as a negative implication to organisation. It arises when employees are ignored during the process and this increases the potential for more problems such as absentees, uncertainties, and high turnover. These problems are extremely unhealthy and may pose dangerous threats to organisations objectives. Therefore, human resource managers need to be mindful about the problems to achieve effective organisational change. Thirdly, commitment is also one of the important challenges that human resource managers need to take into account. During the process of change management, senior managers become very distant from the employees mainly because they are more concerned with other issues such as increased costs and competition. This creation of barrier decreases employee's level of commitment towards organisation. In other words employees become more reluctant to change and fear to openly talk about their anxieties. To achieve an organisational commitment during the change management process, according to Morgan and Zeffane (2003) is by developing a ‘mutual trust' between the employee and the employer and this could be achieved through an organisational structure that allows for proper co-ordination and flexibility. During this process many organisations are more concerned with the quantitative issues and try to reduce to achieve competitive advantage; however, ignoring the qualitative issues is a costly mistake managers make. In addition, Skalik, Barabasz, and Belz (2002) argue ‘co-operation', ‘communication' and ‘culture' as three important conditions to achieving organisational commitment. Without the implementation of these three factors during the change management process, organisations lose its strategic direction which results in an ambiguous vision. There are some important tactics that can be used by organisations to cope with these challenged. According to Skalik, Barabasz, and Belz (2002), some of the important tactics to cope with the challenges are establishing a strategic goal that goes in line with the change management process and within that developing a structure that is more co-operative. This is extremely important because it helps the organisation to effectively communication with the employees. Smith (2005) looks upon some of the useful tactics that can also be used in the process of change management which are establishing a more democratic environment, conduction education activities, and appropriate preparation. The style of communication is again highlighted because employees need a management who understand their grievances. Having an autocratic style would further create problem between the employee and the employer, but a more democratic style of communication is helpful due to the sensitivity of the information obtained. Therefore, organisations need to tackle these challenges in order to be successful both in the short and long term


Change management is an extremely complicated process to research due to the sensitiveness of the information obtained from individuals because it deals with the challenges or difficulties faced by organisations due to changes in external forces (Fevzi, Mehmet, Huseyin, 2005). The research adopted a case study approach to understand the area of change management in depth by analysing the difficulties faced by Sun Hotels & Resorts Private Limited Company in the area of Human Resource Management and the effect of change management on employee's performance. Sun Hotels & Resorts Private Limited owns four resorts; Vilureef Beach & Spa Resort, Olhuveli Beach & Spa Resort, Beach House at Manafaru Maldives, and Irufushi Beach & Spa Resort, and is one of the leading companies in the Tourism Industry in the Maldives. This paper looks at issues of HRM so therefore the research specifically focuses on employees of the company and the HR Director. The company was chosen because it has the capability of providing useful data regarding the human resource issues. The case study approach also helped in gaining valuable information on tourism sector which can be compared to previous research and theoretical background in the area of HRM. The research implemented a deductive approach which helped in producing the interview questions and questionnaire. To acquire practical data, two data collection methods were undertaken; the semi-structured phone interview and the questionnaire. Fisher (2007) identifies the usefulness of phone interviews as a means of collecting data as it is easier to access people by phone rather than face-to-face as most of the people do not find time to have a formal meeting. The combination of both data collection techniques will allow a better understanding of the issues in hand and also more in depth information. Tashakkori and Teddlie (2003) agree that a research design is considered to be a multiple data collection method rather than single (Saunders, Lewis, and Thornhill 2007). The decision to collect data from Sun Hotels & Resorts Private Limited was wise because it was one of the tourism companies that were highly affected by the recent global economic crisis and also because it was highly advanced in the tourism sector. Other companies in the tourism sector were too small to get enough information. First, an interview was conducted by phone on 19 February 2010 with Human Resource Director of Sun Hotels & Resorts Private Limited which lasted for approximately 45 minutes and was tape-recorded. During the interview main focus was on strategic issues of management in order to:

* Understand the company's HRM policies and practices and their impact due to the recent economic crisis

* Main challenges faced by HRM in the process of change management resulted by the crisis

* The tactics used by HRM to cope with the challenges

Language was not a barrier in the communication process as English was spoken in the interview by both the interviewer and the interviewee. Second, based on the information from the interview and also previous studies used in the literature review, a series of questions was produced concerning the effect on employee's performance due to change management. Random sampling was used by the company due to ethical considerations and the questionnaire was sent on 26 February 2010 to 100 employees in either two resorts. However, 87 were received fully completed. The questionnaire was divided into 2 main segments. The first part focused on questions that were concerning with the recent economic crisis and change management. This was mainly to gather information on employee's awareness about the recent crisis and its effect on them both quantitatively and qualitatively. The questions concerning employees salary and the impact is quite sensitive, however, considerable amount have answered. The questions regarding the change management was more qualitative which focuses on the effect on employee's performance during the change management process. These were developed from the findings of previous studies and the interview regarding the challenges where emphasis was given to motivation, resistance, and commitment. The second section included questions regarding their personal information related to the company in order to gain a better understanding of information provided and to avoid ambiguity. The Excel was used to evaluate the findings from the questionnaire due to limitation of time.

Analysis of findings

As shown in Table 1, a larger proportion of participants were male (78.16%) compared to females (21.84%) indicating women as not actively working in resorts due to several reasons which will be discussed. The respondents who have participated in the research were generally staffs who are mainly at the age of 20-39 years (75.86%). The majority of the respondents who have participated in the questionnaire were mainly categorized into restaurant waiters (17.24%), followed by laundry service (10.34%), and room boy (9.2%). This indicates that majority of the respondents are lower-level workers who are entitled for minimum wages. When asked whether they were aware of the recent economic crisis, majority of the respondents were aware of it (58.62%), however, a considerable amount of respondents were not (40.23%). Table 3 shows the number of years the participants have worked for. This is an important finding because it helps to understand the level of experience the participants have in the company and this relates to the level of income they earn and other activities. The data point out that majority of participants have worked in the company for less than 5 years (82.77%), from that only 27 people (31.03%) have worked for one year to less than three years while minority of them have worked for less than a year (12.64%). Very less participants have worked for more than five years with only 15 respondents (16.84%). This may be because the majority of respondents who are actively working in the resorts are of younger age group who are between 20 and 29 years (42.53%). The participants consist of a very young age segment which is generally similar to many other resorts working age group. The findings from table 5 show the participants monthly income and monthly reduction due to economic crisis which is shown in US Dollars. The first half of the section shows the participants income where majority of respondents monthly income were less than $499.99 (31.03%) and between $500 and $999.99 (34.48%). There were only 7 respondents who earned more than $1500 (8.05%) which maybe because majority of respondents have worked for less than five years and therefore the level of experience contributes a lot to the amount they earn. There is also a high correlation between age and income where high income earners are those who have worked for more than five years (17.24%) earning more than $1500 (8.05%). The second half shows the amount that was reduced when economic crisis came into effect. Majority of the respondents has a reduction between $200 and $399.99 (59.77%) and less than $199.99 (33.33%). This reduction was carried out mainly to decrease the costs of production. It may have a negative impact on the performance of the workers. None of the respondent's income was reduced more than $1000. The section concerning with HRM of the company and change management are showed in table 6, 7, 8, and 9. Table 6 shows participants level of satisfaction with 5 important Human Resource Policies; Salary, Overtime Payments, Amount of Vacation, Working conditions, and number of working hours. The table shown has a symmetrical pattern where majority of the respondents are neither satisfied nor dissatisfied for each of the HR policies indicated. Majority of the respondents were on neither side with HR policies, salary (55.17%), working condition (57.47%), and number of working hours (56.32%). With overtime payments majority of the respondents were dissatisfied (42.53%) while only 13 respondents (14.94%) were satisfied with the amount of vacation. None of the respondents were very satisfied with either one of the HR policies. The interview also looked at the issue of HR policies and the interviewer stressed on increasing the level of control and management of the HR policies due to the new Employment Act which came into effect on 2008. Due to this labour act, the company has to make some changes to the HR policies and has become extremely strict in maintaining them. Table 7 shows the respondents level of participation with the senior management. The findings indicate how much the senior management contributes to the performance of the staff. Four very important factors of HRM, relationship, communication, commitment, and motivation are used, to understand the performance of the employees. The table indicates majority of the respondents are doubtful about the level of participation or encouragement by their senior managers which is shown in red. Over 66 respondents (75.86%) are not happy about the contribution to their motivation level by the senior managers. In addition about 64 respondents (73.56%) feel that they do not have a good communication with their senior managers while 61 respondents (70.11%) feel they do not have a good commitment with their senior managers. These figures may likely to increase in a case of change management process. A range of 5-15 is respondents who are extremely happy with the participation of senior managers. Change management analysis was used in the questionnaire because it is a process which companies go through during any type of economic crisis. Change management is an adjustment of companies to the new working environment. Table 8 shows employees understanding of the term ‘Change management' which indicates majority of the respondents (54.02%) of the employees were not familiar with the term while a considerable number of people (45.98%) do have an understanding. It is important for companies to educate employees about important terms to avoid complications. Table 8 shows the effect of change management on the participants on a qualitative basis. Several factors such as ‘informed about the crisis', ‘communication', involvement', ‘performance', ‘training', ‘motivation', and ‘commitment' are looked at to understand the effect of change management in depth. The table is strongly highlighted in green which indicates that majority of the respondents who neither agreed nor disagreed with the effect of change management. Majority were not involved in the process of change management (62.07%). The red highlights respondents who were negatively affected from the change management process which is in a descending order starting from left end. There were a large number of respondents who were not informed about the crisis at an early stage (35.63%). On the other hand, purple highlights respondents who were positively affect from the change management which is in an ascending order starting from left end. Some of the respondents agreed that their training was not affected during the change management process (26.44%). None of the respondents were highly benefited during the change management. Interview findings indicate that there was a reduction of 23% of employees from 2,200 to 1,700 which is extremely large, however from the interview, it come into view that there were not very large disputes but just very minor ones which was resolved through discussion and adaptation.

Table 1

Types of participants in gender and job title

Gender n %

Male 68 78.16

Female 19 21.84

Total 87 100

Job title n %

Guest relation officer 5 5.75

Bell boy 5 5.75

Room boy 8 9.2

Excursion guide 2 2.3

Main restaurant waiter 15 17.24

Diving instructor 3 3.45

Bar men 6 6.9

Souvenir sales assistant 2 2.3

Airport representative 2 2.3

Store keeper 1 1.15

Maintenance assistant 1 1.15

Spa manager 1 1.15

HR officer 1 1.15

Front office receptionist 7 8.05

Launch section staff 6 6.9

Laundry service 9 10.34

Water sports instructor 4 4.6

Spa therapist 6 6.9

Chef 1 1.15

Accountant 1 1.15

Office administrator 1 1.15

Total 87 100

Table 2

Participant's awareness of the recent global economic crisis

Are you aware of the recent global economic crisis? n %

Yes 51 58.62

No 36 40.23

Total 87 100

Table 3

Participant's number of years worked

Number of years worked n %

Less than one year 11 12.64

One year to less than three years 27 31.03

Three years to less than five years 34 39.10

Five years to less than ten years 9 10.34

Ten years or more 6 6.90

Total 87 100

Table 4

Participant's age range

Table 5

Participant's Monthly income and reduction in USD $

Monthly Income (USD $) n %

Less than 499.99 27 31.03

500 - 999.99 30 34.48

1000 - 1499.99 23 26.43

1500 - 1999.99 5 5.75

More than 2000 2 2.3

Total 87 100

Monthly Income reduction (USD $) n %

Less than 199.99 29 33.33

200 - 399.99 52 59.77

400 - 699.99 5 5.75

700 - 999.99 1 1.15

More than 1000 0 0

Total 87 100

Table 6

Participants level of satisfaction with the HR policies

Table 7

Participants level of participation with the senior management

Table 8

Participant's familiarity with the term ‘Change Management'

n %

Yes 40 45.98

No 47 54.02

Total 87 100

Table 9

Effect of change management on the participants


The research findings show that Human Resource department plays a major role in the management of employees working in the resorts. The department is structured in a manner that requires easy handling of several responsibilities which are quota management, medical services, leave management, staff records, staff appraisal, and also most importantly staff training. These responsibilities are managed by the head office of HR department. Two of their main resorts, Beach House at Manafaru Maldives and Irufushi Beach & Spa resort are given management contract to Hilton International Management which gives them the sole responsibility in recruiting and managing staff. The other two resorts, Vilureef Beach & Spa Resort and Olhuveli Beach & Spa Resort are managed solely by the company. The research findings also indicate that training and education are the most important HRM practices conducted by the company to increase their performance. Employees are given on the job training and industrial placements to develop their skills because they do not obtain the necessary skills required. In addition, the company is also conducting seminars to educate employees about the essential expertise they require. In addition, the introduction of the new labour regulations under the Employment Act on August 2008, allowed the company to oblige and manage employee relations according to the Employment Act. This encouraged the company to give a fair remuneration and establish good working conditions including better accommodation and sufficient food. It is evident from the research findings that the company was largely affected by the recent economic crisis because it plays a major role in the overall economic performance. The most affected were the Hilton managed properties because the economic crisis got into effect when it had just finished the establishments of the two resorts which resulted in significant reductions in the room rate and occupancy. However, the other two resorts did not face much detrimental affect due its long history of establishment. To face the economic crisis, the company is going through the process of change management and has given a high severity to three very important HR policies which Recruitment policy, Attendance policy, and Quota management. It is important to note that there are a high percentage of expatriates working in tourism sector in the Maldives so therefore the handling of quota is extremely important for the company in a period of crisis. If it is not handled well, the company will face major loses. Due to the increased number of expatriates working in the country, government has imposed a quota on the expatriates which the company has to monitor. If it is not management up to the requirements of the government the company may face high costs. In addition, the company is also more stringent in attendance of employees where they are faced with fines anytime they attend late. Also the company is more focus on recruiting competent staff by establishing a data bank for recruitment and working among recruitment agencies which would enable them to work with qualified and capable employees. From the research findings it is clear that the main difficulty faced by the company during the process of change management was over staffing. The difficult of overstaffing enable the company to downsize a considerable number of employees in order to reduce costs. Downsizing was one of the major challenges faced by the company in the process of change management. This is mainly to reduce the increased costs faced by the company and to make the organisation more lean and efficient. There was a reduction of 23 per cent from 2,200 to 1,700 employees which is a significant reduction. This reduction would facilitate the company to become more efficient and effective both quantitatively and qualitatively. Another major challenge faced by the company during the process of change management was adjusting to the new Employment Act because it was revised and became effective in 2008 and it was a huge challenge for the company because it was in the middle of economic crisis. By giving more strictness to the HR policies, it would help the company to face these challenges as there was reduction in the level of absenteeism. However, it is an extremely time consuming process and therefore the company needs to be patient. The research analysis suggests a higher proportion of male employees were actively working in the resorts. This may be because women are not encouraged to work in resorts by their families or spouses however, in the recent past younger generation have become more educated and has started working in the field of tourism. The employees who are working for lower level position usually do not require a higher qualification but O' Level English is compulsory. From the findings it is evident that there is a range of lower-level positions from ‘waiters' to ‘room boys'. Many younger workers from islands or expatriates are usually working in these positions. From the findings it is apparent that the employees were negatively affected from the economic crisis due to the change that the company has to go through to cope with the challenges faced by the company. Employees were adversely affected both quantitatively and qualitatively. Burnett (1998) agrees that a crisis could have an adverse effect on the employees so therefore companies need to build a strategic plan. It is evident from the research findings that the company has reduced the income of employees drastically in order to reduce costs. The reduction may have a negative impact on the employees and it could be a major obstacle for them. This is related to previous studies by Minbaeva (2008) who identifies two types of motivators, extrinsic and intrinsic, and employees who are extrinsic motivated are negatively affected if their income is reduced because they are motivated by reward systems and performance appraisals. Those employees who are affected from the reduction may be extrinsic motivated employees. One important issue that needs to be outlined is employee's satisfactory level with the HR policies. It is evident that most of the workers feel they are controlled by these HR policies and not encouraged by it. Main reason is that the company is much more focuses on making the organisation more lean and efficient and therefore has adopted more strict policies while ignoring the qualitative issues which could be a costly mistake they make. However, the new Employment Act may encourage the company to provide good working conditions and accommodation. Another important issue that was found in the research findings was that employees working in the resorts do not have a good relationship and good communication with the senior management. Tsai et. al (2007) argues communication as an important factor and could solve many problems that is related to employees such as complaints, arguments, and disputes. It is important that the company understands employee's grievances and communicate with them effectively as it might help them to gain useful information. The negative effect of change management was quite evident from the research findings. The main concern was that employees were not informed about the crisis at an early stage and majority of the employees were not involved in the process of change management. Most of the employees were not even familiar with the term change management. Due to not obtaining knowledge about the crisis the employees feel isolated and insecure. These may result in de-motivated and uncommitted workforce.

Conclusion and further research

This study examined the challenges faced by HRM in the tourism sector in the Maldives due to the recent global economic crisis. Several important conclusions are found from the research conduction on one of the leading companies in the tourism sector in the Maldives, Sun Hotels & Resorts Private Limited. Firstly, two major challenges were faced by the company which are downsizing of employees to reduce excessive costs and to increase efficiency. Another major challenge is adjusting to the new Employment Act by making important changes to HR policies of the company and establishing strict regulations. These two challenges confirm that the company is more focused on quantitative issues such as costs and ignores the qualitative issues which is unhealthy in the long term because employee performance is monitored usually on a qualitative basis. Today, employees of organisations are the critical success factor. Secondly, it is concluded that employees and the senior managers do not communicate effectively. Communication is continuously talked about because it is an extremely important factor when the organisation is going through difficult times. The level of communication is very low. This may be because of the organizational structure or the style of communication used by senior managers that employees may feel reluctant to raise their voice. Establishing a more democratic style of communication and an open friendly environment may encourage employees to become more motivated. Finally, it is concluded that employees are adversely affected by the change management. The process was mostly focused on reducing costs; therefore, the company did not give much attention to the employees which may adversely affect their performance. Two major problems were that employees were not informed about the crisis at an early stage and that they were not involved in the process of change management. Therefore it is extremely important for the company to take employees as important assets to the company.

It is important to note that this article only provide information on financial crisis that occurred recently, but not on any other type of crises. There is still limited research on HRM and its implications which increases the need for further research in order to analyse the area in more depth. Therefore, future research needs to be conducted on tourism industry and its employees in order to understand the main problems associated with it. Future research could be conducted on a different country to get a comparative analysis and also focusing on different issue of crisis rather than financial, which may be interesting. Therefore, research on a different type of crisis and on a different country may help gain a better analysis of HRM