Impact of transformational leadership and psychological contract on employee performance with job satisfaction as a mediating variable

Abstract

The impact of globalization quickly and dynamically requires development and change in the environment. This is inseparable from public organizations that face various challenges and obstacles to be more responsive to the needs of citizens. However, the performance of human resources from public organizations is now also always in the public spotlight where in practice in Indonesia it is still not good enough. Empirical studies or research have been conducted to analyze the effect of transformational leadership and psychological contract on employee performance. This study attempts to remedy the existing knowledge gap and limited literature by including job satisfaction as a mediating variable on employee performance levels in Indonesia. This study aims to determine the effect of transformational leadership and psychological contract on employee performance with job satisfaction as a mediating variable. A structured questionnaire with closed-ended questions was used to collect raw data from 241 employees. Descriptive tests and SEM PLS tests were conducted to determine the statistically significant relationship between transformational leadership and psychological contract on employee performance with job satisfaction as a mediating variable. The results reflect a statistically significant relationship between transformational leadership and psychological contract to employee performance with job satisfaction as a mediating variable. This study has practical implications for practitioners in the field of human resources, organizational leaders, academics, and government policy makers because they can strategically plan transformational leadership and psychological contract practices and link these practices to employee performance in an organization. Further research can be conducted in other government organizations to conduct comparative studies obtained across organizations on the effect of transformational leadership and psychological contracts on employee performance with job satisfaction as a mediating variable.