Employee Engagement as a Mediator Between Transformational Leadership and Employee Performance

INTRODUCTION

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The emergence of transformational and fast-paced high thinking leadership has caused organizations to look for methods to strive effectively to sustain in the competitive environment¹. Obsolete business models, outdated leadership practices and old-fashioned thinking will not heighten growth in the ever changing highly demanding world. Thus, the adaptation of the most suitable leadership style and thoughtful approach is needed as to move the whole team to the right direction of the organization goals¹. To achieve the organization’s mission and vision, leaders play an important role in exhibiting appropriate leadership style and behaviors while dealing with subordinates or employees². Leadership style critically determines the actions of the employees moving toward the same direction together with the leaders in achieving the organization goals².

Every organization has its own mission and vision as well as their goal path towards success and sustainability in doing business. The reason why the shift of attention focus more on leadership style is that it is acknowledged as the root construct in helping leaders and organization to clarify issues and assisting the management in overcoming problems^1,2. According to Leavy¹, leaders with high performance characters are able to deliver better business performance and such leadership style is also associated with much higher level of employee engagement. Through adequate commitment to self-development, good leadership characters and behaviors can be reinforced and bad ones eliminated. An organization often emphasizes on the importance of its mission, technology, strategies, training and development in attaining sustainability in the industry. However, more often than not, the organization could miss out a very important factor which is the people in the organization itself as the key factor in achieving success. The term ‘people’ is referred to the significant roles of the leaders in influencing employee engagement where by eventually will lead to better employee performance.

The most important societal values according to Carter, and Greer² in Eastern and Western societies are justice, fairness, opportunity, engagement and freedom in the workplace. Leadership style focuses on these topics has become a huge concern in both academic and the real world. It is acknowledged as the basic variables that may help leaders to identify the suitable approach in formulating solution for the organizational problems. Employee engagement and employee performance are two of the core elements in an efficient organization. Since there has been very little attention paid to the public sector employee performance and its predictors are still unclear, the objective of this study intends to examine the relationship between transformational leadership and employee performance with employee engagement as a mediator in this context. Samples of this research would involve both employees and leaders for their perception of transformational leadership, employee engagement and employee performance in the public sector organization in Malaysia.

Employee performance is referred to the outcome achieved and accomplished at work and is being evaluated to ascertain levels of activities completed according to the aimed results. According to Cardy³, in the context of performance management, performance evaluation is not only the most important element but also depends on the policies, designs and features of an organization. Employee performance is proven to have substantial positive effects on organizational performance⁴. Employee performance can be defined as how well the employees perform in their job and tasks. Performance indices are instruments to evaluate goal achievement. Each organization has their own goals, employees were hired to ensure the organization’s goals are achieved with controllable activities and effective operation. Mostly, employee performance was affected by employees’ behavior instead of the actions taken to achieve the goal. This is due to the fact that most results of the employee performance were affected by environment factors which are uncontrollable and beyond the reach of human being. Organizations can be divided into two types, namely profit organization and non-profit organization. Chi et al.⁵ indicated that employee performance for profit organization can be measured by revenue, production and profit making of the organization, whereas for non-profit organization, mission accomplishment is the performance index. They did not evaluate performance by profits because they do not have guidelines whether the decision made is correct and the resource used is appropriate.

According to Borman and Motowidlo⁶, task performance can be defined as contribution to the organization directly or indirectly. Direct contribution is an activity which employees give support to the organization by implementing a part of its technological processes. While indirect contribution means it is contributed by providing necessary and needed materials or services. In addition, Borman and Motowidlo⁶ also argued that contextual performance is different from task performance. Contextual performance does not have direct job performance that can be measured by revenues, production output and profit making but in ways like employee’s support in shaping organizational, social and psychological context which serves as catalyst for task activities processes. This brings huge impact in achieving overall organizational performance. Contextual activities may include volunteering to support co-workers to complete the job and task activities that are out of the job scope. Contextual activities are important because employees contribute to the organizational effectiveness. Organizational citizenship behavior is one of the contextual performances. Therefore, employee performance is a combination of task and contextual performance. It is not only a personal achievement but it also contributes to the organizations achievement at large.

Transformational leadership was created first by Burns⁷ who developed his theory about transformational leadership based on political leaders in his research. The Burns⁷ emphasized that the vast difference between transformational leadership and transactional "occurs when one or more persons engage with others in such a way that leaders and followers raise one another to higher level of motivation and morality". The findings by Burns⁷ described that political leaders who successfully appealed to higher principles and moral values, able to influence the followers with the concept of transformational leadership. In transformational leadership, the Burns⁷ mentioned that there is an in depth connectivity in terms of performance, commitment and moral values of both followers and leaders. According to the study of a Keskes⁸, it was revealed that transformational leadership is a process of seeking aggregate objectives through mutual tapping of leaders’ and followers’ intention towards the accomplishment of change. On the other hand, Lian and Tui⁹ discussed that transformational leadership occurred when employees adopted the leader’s ultimate values by making changes in beliefs, perspectives and objectives. Leaders’ responsibilities are to transform the employees’ perceptions according to their needs and redirect them to a higher level. Employees believed that the organization was extraordinary and thus they were highly satisfied and motivated to perform additional roles¹⁰. Generally, employees were inspired and motived by their leaders.

Transformational leadership is not only focusing on tasks and jobs in the organization but also motivate followers to achieve higher level of performance⁷. Motivating employees to get into collective purpose of teamwork instead of individual personal gain is a critical element inspired by transformational leaders to accomplish goals and even surpass the mission of higher performance¹¹. A research conducted by Ling et al.¹² on 121 CEOs in 121 small and medium enterprises (SMEs) had examined the impact of CEO’s transformational leadership on employee performance in the company. Other variables of the study include firm’s size, status of founder of the company and CEO tenure as a moderator affecting the relationship between the transformational leadership and employee performance. The findings of the study found that there is a significant positive relationship between CEOs practicing transformational leadership and employee performance¹². Thus, based on the above discussion, the following hypothesis is proposed:

H1:  Transformational leadership has a positive relationship with employee performance.

Employee engagement is defined as the stages of commitment and willingness to sacrifice beyond expectation to bring the best of their capabilities towards their organization and values. An engaged employee is alert on the mission and goals of his organization and optimistically motivates colleagues around him to progress according to the objectives and goals. The optimistic value of the employee with his work place and its value system is called positive emotional connection towards his work. Kahn¹³ conceptualized engagement at work as "harnessing of organizational members’ selves to their work roles". The engagement refers to "people employ and express themselves physically, cognitively and emotionally during role performances". The concept has taken into consideration various factors in defining an engaged employee including behavioral factors displayed by the employee who is positively productive. The research identifies major variables through a detailed literature which explained employee engagement and the impact on employee performance in an organization. A study of Sarti¹⁴ examined the relationship between work engagement and leadership styles in human service organizations. There were two types of leadership being explored in the study namely participative and instrumental leadership. Employees who work in nine human service organizations in Italy were chosen to be the respondents of the study. The findings show that dimensions of employee engagement were related to leadership styles. It was found that participative leadership of the supervisors is particularly significant in predicting vigor and dedication among employees whereby instrumental leadership is positively related to vigor and absorption. Additionally, it was observed that actively involved employees in the organization represent high level of employee engagement which forms a key component in the achievement of the organizational objectives.

According to Macey et al.¹⁵, employee engagement can be a source of sustainable competitive advantage. Employee engagement is described as one of the key determinants in nurturing and escalating level of employee performance¹⁵. This study aims to examine the determinants of employee engagement and the strength of impact on employee performance. Highly engaged employees are found to have passion for their job and believe that they have deep connection to their organization. They yield positive energy, perception and attention into their job which lead to effective and efficient performance. Based on the study of 8,000 business units in 36 organization by Robbins and Judge¹⁶, it was found that highly engaged employees are able to produce optimum customer satisfaction, more productive, experienced lower turnover and lower accidents than business units of disengaged employees. Therefore, employee engagement is essential for an organization in order to obtain higher productivity and higher performance. In today’s competitive world of business, employee engagement can be acquired optimistically in conjunction with a strong leadership style to produce higher employee performance. Hence, on the basis of the above discussion, the following hypothesis is proposed:

H2:  Employee engagement mediates the relationship between transformational leadership and employee performance

Based on the literature review and empirical studies, a model was proposed and tested in which transformational leadership predicts employee performance and mediated by employee engagement (Fig. 1).