Transformational Leadership and Employee Performance: The Mediating Roles of Employee Engagement and Organizational Commitment in the Indonesian Construction Industry

Abstract

This study aims to examine the influence of transformational leadership on employee performance through the mediating roles of employee engagement and organizational commitment in Indonesian State-Owned Enterprises (SOEs) construction companies. The study was conducted in a high-pressure construction environment characterized by project-based work, strong bureaucracy, and high job security. A quantitative approach was applied using a survey method with purposive sampling involving 104 employees. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that transformational leadership significantly affects employee engagement (β = 0.716, p < 0.001) and organizational commitment (β = 0.686, p < 0.001), but has no significant direct effect on employee performance (β = -0.070, p = 0.392). Employee engagement (β = 0.372, p < 0.001) and organizational commitment (β = 0.603, p < 0.001) both significantly influence employee performance, with organizational commitment showing the stronger effect. Indirect effect analysis shows that organizational commitment (β = 0.413) mediates the relationship between transformational leadership and employee performance more strongly than employee engagement (β = 0.266), together producing a significant total indirect effect (β = 0.679, p < 0.001) that indicates full mediation, since the direct effect of transformational leadership on employee performance is not significant. This study contributes to leadership literature by examining the mechanisms through which transformational leadership influences employee performance through employee engagement and organizational commitment within Indonesian construction SOEs. The findings indicate that organizational commitment serves as a stronger mediating mechanism than employee engagement in this specific organizational context.