The Effect of Transformational Leadership and Employee Engagement on Employee Performance in the Service Industry

This study examines the effect of transformational leadership and employee engagement on employee performance within the service industry. As organizations in this sector increasingly compete on service quality, customer satisfaction, and operational efficiency, understanding the human factors that drive employee performance has become a strategic priority for management. Transformational leadership, characterized by idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration, is theorized to enhance employees' motivation, commitment, and willingness to exceed expected job requirements. Similarly, employee engagement, reflecting the degree of vigor, dedication, and absorption employees exhibit toward their work, is considered a critical psychological state that translates leadership influence into tangible performance outcomes. This research employs a quantitative approach using a survey method distributed to employees working in service-based organizations. Data were collected through structured questionnaires measuring transformational leadership, employee engagement, and employee performance, and were analyzed using multiple regression analysis to test the proposed hypotheses. The findings reveal that both transformational leadership and employee engagement have a positive and significant effect on employee performance, whether tested partially or simultaneously. Transformational leadership was found to strengthen employees' sense of purpose and trust in their leaders, which in turn fosters higher engagement and, consequently, improved performance outcomes. Employee engagement was also identified as a key mediating mechanism linking leadership behavior to performance results. These findings contribute to the growing body of literature on leadership and human resource management by providing empirical evidence from the service industry context, where interpersonal interaction and employee behavior directly affect service delivery quality.