Teaching and learning processes should be subject to continuous change due to the constant evolution of social, educational and technological environments, which ultimately results in higher levels of student engagement. The current paper describes the technological changes faced by higher education institutions as a result of digital transformation challenges. Further, transformational and transactional leadership styles' effectiveness is regarded within the context of higher education institutions' digital enhancements. Over time, these factors have led to contextual shifts that have disengaged students from learning and thus self-development. The current research aimed to examine how higher education institutions should apply different leadership styles within digitally transformed contexts so as to increase students' learning engagement and reduce the risk of failure in their future developments within (inter)national labor markets. Data gathering and analysis involved a qualitative approach: an online survey was distributed, resulting in 856 responses. Through structural equation modeling, the data revealed a valid higher education digital transformation assessment tool; the results also emphasize the increased role of transactional leadership, as opposed to the traditional transformational style, within a highly digitized higher education institutional framework. Consequently, the linear relationship of students' work engagement with leadership proved to also be enhanced by quadratic effects. The current study stresses the importance of internal and external peers in higher education performance through high levels of student learning (work) engagement through leadership and a uniformly developed digitally transformed higher education environment.