Transformational Leadership and Employee Performance: The Mediating Roles of Work Engagement and Employee Well-Being and the Moderating Effect of Organizational Culture in Indonesia's Non-Bank Financial Services Industry
Abstract
Employee performance is essential for organizational sustainability, particularly in Indonesia's highly competitive non-bank financial services industry. Although transformational leadership has been widely examined as an antecedent of employee performance, few studies have simultaneously considered motivational, psychological, and organizational mechanisms within a single framework, particularly in emerging market contexts. This study investigates the relationships among transformational leadership, work engagement, employee well-being, organizational culture, and employee performance. A quantitative cross-sectional survey was conducted among 203 employees from two Indonesian non-bank financial institutions. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that transformational leadership is positively associated with employee performance both directly (β = 0.31, p < 0.001) and indirectly through work engagement (β = 0.207, p < 0.001) and employee well-being (β = 0.143, p = 0.006). Organizational culture positively moderates the relationship between transformational leadership and employee performance (β = 0.17, p = 0.012), indicating that a supportive organizational culture strengthens the positive effect of transformational leadership on employee performance. These findings provide empirical support for an integrated framework that combines transformational leadership, psychological mechanisms, and organizational context in explaining employee performance in Indonesia's non-bank financial services industry. The study contributes to the leadership and organizational behavior literature and offers practical implications for leadership development, employee engagement, well-being initiatives, and organizational culture management.
Keywords: Transformational leadership; Work engagement; Employee well-being; Organizational culture; Employee performance; Non-bank financial services; Indonesia.
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