ANALYSIS OF LEADERSHIP STYLE, ORGANIZATIONAL CULTURE, AND

ORGANIZATIONAL COMMITMENT ON EMPLOYEE PERFORMANCE

MODERATED BY REWARD SYSTEM

 

Jones Pahotan1, Chandra Wibowo Widhianto2

Universitas Bunda Mulia, Jakarta Utara, Indonesia

 

[email protected]1, [email protected]2

 


ABSTRACT

Employee performance has a very important role in the success of a company. Employees who have good performance will help the company achieve its goals and vision, but not all have good performance; some employees only meet sufficient criteria, as happened with the employees of RM SME Regional Office Jakarta 1 PT. Plat Merah Berwarna Biru Bank. This research aims to analyze the role of reward system variables in moderating the influence of leadership style, organizational Culture, and organizational commitment on employee performance. This research is categorized as causality research with a quantitative approach. The sample was determined using a simple random sampling technique. Research data was collected by distributing questionnaires to 145 samples. Data analysis was carried out using the partial least squares method through the SmartPLS version 3 program. The research results show that each variable of leadership style, organizational culture, organizational commitment, and reward system directly has a significant effect on employee performance. The reward system can only moderate the influence of organizational culture on employee performance, but the reward system has yet to moderate the influence of leadership style and organizational commitment on employee performance.

 

Keywords: leadership style, culture, commitment, performance, reward system.

 



Corresponding Author: Jones Pahotan

E-mail: [email protected]

https://jurnal.syntax-idea.co.id/public/site/images/idea/88x31.png

 

INTRODUCTION

Employee success can be seen from the level of employee performance in the company. Performance results from work successfully achieved by employees by focusing on company goals. Performance can be detected and measured if individuals or groups of employees have standards or measures of success set by the organization (Asmalah & Noviyanti, 2021). High employee performance will make it easier for employees to get the opportunity to be promoted to a higher position (Niati et al., 2021). Employee performance has a very important role in the success of a company (Listiana, 2023). Employees who have good performance will help the company achieve its goals and vision. On the other hand, employees who have poor performance can become a burden and hinder the company's progress.

Previous research studies found various factors that caused a decline in company performance. The first factor is leadership, which significantly influences employee performance (Y. Setiawan & Yuniarsih, 2018); (Hadian Nasab & Afshari, 2019); (Qalati et al., 2022). Leaders must choose a leadership style that best suits the situation at hand and the characteristics of existing employees. Leadership is used to achieve business goals by influencing interactions between leaders and subordinates (Qalati et al., 2022). A leader needs to be able to adapt their leadership to meet the organization's needs and motivate employees. Effective leadership is the most important pillar of an organization, through which employees can be motivated towards high levels of performance that lead to the success of an organization (Hadian Nasab & Afshari, 2019). Many types of leadership are applied, such as strategic leadership, namely a new leadership theory with three dimensions: charismatic, transformational, and visionary leadership (Y. Setiawan & Yuniarsih, 2018). Strategic leadership addresses issues typically handled by a company's top management team (Zia-ud-Din et al., 2017). Leadership directly influences employee creativity (Syafitri et al., 2021).

H1������ : Leadership style influences employee performance

Organizational Culture also positively and significantly influences employee performance (Cherian et al., 2021); (Strengers et al., 2022). Organizational Culture is a set of values, beliefs, norms, and behaviors that organizational members implement and share. Organizational Culture covers all aspects related to the organization, including the way the organization communicates, how it makes decisions, how it motivates employees, and how it manages conflict (Hendri, 2019). As a state-owned company, PT Bank Plat Merah Berwarna Biru implements a culture that includes Trustworthy, Competent, Harmonious, Loyal, Adaptive, and Collaborative (AKHLAK). Organizational Culture can influence overall employee performance because organizational Culture can influence how employees behave and work together. A positive organizational culture can encourage employees to be more productive, but a negative organizational culture can reduce employee performance. Organizational Culture greatly impacts performance (Cherian et al., 2021).

H2������ : Organizational Culture influences employee performance

Apart from that, organizational commitment significantly influences employee performance (Hendri, 2019); (Korda & Rachmawati, 2022). Organizational commitment describes employee loyalty and attachment to the organization where they work (Hendri, 2019). Organizational commitment includes the employee's desire to continue working in the organization, contribute actively and productively, and defend and promote the organization's interests. Organizational commitment consists of three aspects, namely affective commitment, normative commitment, and sustainable commitment. Employees who feel they have a high commitment to their organization tend to work harder and are more dedicated to achieving organizational goals, which can improve organizational performance (Korda & Rachmawati, 2022). In addition, employees who feel they are highly committed to the organization tend to be more loyal, enthusiastic, and satisfied with their work. This can positively impact overall organizational performance because happy and motivated employees tend to work more effectively and efficiently (Eliyana & Ma�arif, 2019).

H3������ : Organizational commitment influences employee performance

PT. Plat Merah Berwarna Biru Bank provides two types of compensation to its employees. First, there is fixed compensation consisting of basic salary and allowances. Second, there is variable compensation given based on performance achievements. This variable compensation includes short-term incentives and bonuses given to employees as recognition for their achievements. Reward systems can be applied in various environments, such as the workplace, school, and personal life. The basic principle of the reward system is that when individuals or groups do good things or are successful, they are given awards that motivate them to continue doing good things. Rewards can be financial incentives, recognition, promotions, greater responsibility, or verbal praise. A well-designed reward system can have several benefits, including increased motivation, productivity, and job satisfaction. Reward systems can also help retain employees and attract new talent. A reward system that includes salary, bonuses, appreciation, and health care benefits significantly affects employee performance (Noorazem et al., 2021). Furthermore, rewards positively and significantly affect performance (M. A. Setiawan & Mardiana, 2022).

H4������ : The reward system influences employee performance

Based on the results of studies from previous research, a research gap was found where leadership style did not affect employee performance (Eliyana & Ma�arif, 2019), organizational Culture did not affect employee performance (Firtria, 2019), and organizational commitment did not affect employee performance (Eliyana & Ma�arif, 2019). The occurrence of this research gap is suspected to have other factors that could strengthen or weaken the influence between these variables. The reward system is a solution to the research gap. A reward system is a method used to incentivize individuals or groups to encourage certain behaviors or achievements (M. A. Setiawan & Mardiana, 2022).

H5����� : The reward system moderates the influence of leadership style on employee performance

H6����� : Reward systems moderate the influence of organizational culture on employee performance

H7����� : The reward system moderates the influence of organizational commitment on employee performance

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Figure 1. Model framework

 

METHOD

This research is categorized as quantitative with a causality design. The research places the variables leadership style, organizational Culture, and organizational commitment as independent variables, the reward system as a moderating variable, and employee performance as the dependent variable. The measurement of each variable is operationalized as follows.


 

Table 1. Variable Operationalization

Variable

Dimensions

Indicator

Leadership Style (X1) (Yulk, 2020)

 

Transformational leadership

1.      The influence of idealization

2.      Inspirational motivation

Transactional Leadership

3.      Contingent reciprocity

4.      Active exception management

Organizational Culture (X2)

 

 

(Hendri, 2019)

 

 

 

Trustworthy

5.      Responsible for tasks

Competent

6.      Increase self-competence to respond to changing challenges.

Harmonious

7.      Respect everyone regardless of background

Loyal

8.      Obey the leadership as long as it does not conflict with the law.

Adaptive

9.      Quickly adapt to get better.

Collaborative

10.   Open to working together to produce added value

Organizational Commitment (X3)

 

 

(Hadian Nasab & Afshari, 2019)

Affective

11.   Identify with the company values

12.   Willingness to put in extra time on the job

Normative

13.   Demonstrate loyalty to company rules.

14.   Feel a moral responsibility not to leave the company in difficult situations.

Continuous

15.   Find it difficult to get the same job in another company

Reward System (Z)

 

(Noorazem et al., 2021)

Wages

16.   Salary according to position/job

17.   Salaries are paid on time

Bonus

18.   Providing bonuses commensurate with work

19.   Giving bonuses can trigger work

Health benefits

20.   The company provides health benefits

Employee Performance (Y)

 

(Pawirosumarto et al., 2017)

Work Quality

21.   Have quality work

22.   Have good performance

Quality of workforce

23.   Have standards in work

24.   Have the ability

Time efficiency

25.   Tasks completed on time

The research population is employees of RM SME Regional Office Jakarta 1 PT. The Plat Merah Berwarna Biru Bank has 228 employees, and a sample of 145 respondents was taken using the Slovin formula calculation and determined using a simple random sampling technique. Research data was collected using a questionnaire instrument, and carried out statistical analysis using the partial least squares method using the SmartPLS version 3 program.

 

RESULTS AND DISCUSSION

Research respondents were dominated by male respondents, with a percentage reaching 56.6%, while female respondents were 43.4%. The age of respondents between 36 � 45 years was the largest with a percentage of 26.9%, followed by those aged 25 years and under and 45 years and over with respective percentages of 26.2%, while respondents aged between 26 � 35 years as much as 20.7%. Most of the respondents had taken a bachelor's degree, with a percentage reaching 85.5%, while 15.5% had taken a master's degree. Through outer model analysis, it is known that the instrument used meets the provisions of the convergent validity test with a loading factor value of > 0.7 and AVE > 0.5 (Hair & Hult, n.d.).

 

Table 2. Outer Model Evaluation

Variable

Code

Loading Factor

AVE

Cronbach Alpha

Composite Reliability

Leadership Style

GP1

0.920

0.830

0.932

0.951

GP2

0.900

GP3

0.904

GP4

0.920

Organizational Culture

BO1

0.831

0.718

0.921

0.939

BO2

0.860

BO3

0.869

BO4

0.794

BO5

0.847

BO6

0.881

Organizational Commitment

KO1

0.912

0.816

0.943

0.957

KO2

0.902

KO3

0.904

KO4

0.914

KO5

0.883

Rewards System

SR1

0.916

0.846

0.954

0.965

SR2

0.913

SR3

0.932

SR4

0.937

SR5

0.900

Employee performance

KK1

0.938

0.843

0.953

0.964

KK2

0.893

KK3

0.910

KK4

0.925

KK5

0.923

Source: Processed Data, 2023

The analysis results also show that Cronbach's alpha and composite reliability values are greater than 0.70 so that the indicators for the variables are declared reliable. Furthermore, the Fornell-Larcker test shows that the coefficient value of the same variable is higher than the correlation value with different variables. This indicates a discriminantly valid indicator.

Table 3. Discriminant Validity Test with Fornell Larcker

Organizational Culture

Leadership Style

Employee performance

Organizational Commitment

Rewards System

Organizational Culture

0.848

Leadership Style

0.665

0.911

Employee performance

0.749

0.816

0.918

Organizational Commitment

0.687

0.771

0.833

0.903

Rewards System

0.660

0.682

0.791

0.731

0.920

Source: Processed Data, 2023

The indicators in each variable have been declared convergently and discriminantly valid and have a high level of consistency (reliability). The next stage is to evaluate the inner model with the following tests.

 

Table 4. Inner Model Evaluation

R Square

R Square Adjusted

Q Square

Employee performance

0.842

0.830

0.696

Source: Processed Data, 2023

The R Square value of 0.842 means that the variance of the variables of leadership style, organizational culture, organizational commitment, and reward system, as well as the interaction of reward system variables as moderation, have been able to explain the variance of employee performance variables of 84.2% while the remainder is explained by the variance of other variables outside the model. These findings indicate that this research model still provides room for development.

Q value 2 The higher of 0 (small), 0.25 (medium), and 0.50 (large) describes the relevance of the PLS path model (Yahaya et al., 2019). The R Square value of 0.696 can be categorized as large so that the model that connects the variables of leadership style, organizational culture, organizational commitment, and reward system, as well as the interaction of reward system variables as a moderator of employee performance, has relevant predictions to a large degree.

Figure 2. Model Construction Results

Based on the PLS Bootstrapping analysis results, statistical t values were obtained, as presented in the following table.

Table 4. Research Hypothesis Testing

 

Coefficient

T Statistics

P value

Note.

H1

Leadership Style -> Employee Performance

0.295

3,183

0.002

Accepted

H2

Organizational Culture -> Employee Performance

0.218

2,500

0.014

Accepted

H3

Organizational commitment -> Employee Performance

0.264

2,346

0.021

Accepted

H4

Reward System -> Employee Performance

0.268

2,739

0.007

Accepted

H5

Leadership Style * Reward System -> Employee Performance

-0.155

1,696

0.093

Rejected

H6

Organizational Culture * Reward System -> Employee Performance

0.196

2,496

0.014

Accepted

H7

Organizational Commitment * Reward System -> Employee Performance

-0.064

0.716

0.476

Rejected

Source: Processed Data, 2023

The basis for making decisions about hypothesis testing with t statistics is that when the t statistic value is > 1.96, and the significance probability (p-value) is < 0.05, the hypothesis is declared accepted. Thus, H1, H2, H3, H4 and H6 are declared accepted while H5 and H7 are declared rejected.

The Influence of Leadership Style on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 3.183 with a significance probability of 0.002. It can be seen that the t statistic is > 1.96, and the p-value is < 0.05, so H1 is declared accepted, meaning that leadership style affects employee performance. This significant influence is supported by a positive coefficient value of 0.295. When there is an increase in the leadership style variable, it will significantly improve the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. Plat Merah Berwarna Biru Bank. This hypothesis is accepted because leadership style has an important role in determining employee performance. Effective leadership is the most important pillar of an organization, through which employees can be motivated towards high levels of performance that lead to the success of an organization (Hadian Nasab & Afshari, 2019). An effective leader can provide clear direction, motivate employees to achieve common goals, and provide the support necessary to help employees achieve better performance. Good leadership can influence employee performance positively. Conversely, poor leadership can damage employee morale and reduce organizational performance. Leaders who pay attention to employee development can help improve employees' skills and abilities, ultimately improving their organizational performance. Additionally, a leader who provides effective feedback can help employees understand areas where they need to improve their performance. Thus, employees can take corrective action and improve their performance. Leaders who motivate employees will increase their enthusiasm and dedication to their work. This can help increase employee productivity and performance.

Leadership influences a group to achieve a vision or set goals (Robbins & Judge, 2018). This finding is in line with various studies which have found that leadership style variables have a significant influence on employee performance (Hadian Nasab & Afshari, 2019); (Eliyana & Ma�arif, 2019); (Y. Setiawan & Yuniarsih, 2018).

The Influence of Organizational Culture on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 2.500 with a significance probability of 0.014. It can be seen that the t statistic is > 1.96, and the p-value is < 0.05, so H2 is declared accepted, meaning that organizational Culture influences employee performance. This significant influence is supported by a positive coefficient value of 0.218. An increase in organizational culture variables will significantly improve the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. The Plat Merah Berwarna Biru Bank. Acceptance of this hypothesis is because a positive organizational culture can improve employee performance, but if the organizational Culture is filled with distrust, dependence on hierarchy, and authoritarianism, employees tend to feel unmotivated and unmotivated to do their work well. In this case, a negative organizational culture can reduce employee performance. Organizational Culture covers all aspects related to the organization, including the way the organization communicates, how it makes decisions, how it motivates employees, and how it manages conflict (Hendri, 2019). PT Bank Plat Merah Berwarna Biru implements a culture that includes Trustworthy, Competent, Harmonious, Loyal, Adaptive, and Collaborative (AKHLAK).

Organizational Culture can also influence company performance, productivity, and long-term success (Robbins & Judge, 2018). This finding is in line with various studies which have found that organizational culture variables have a significant influence on employee performance (Cherian et al., 2021); (Firtria, 2019); (Djalil & Lubis, 2020).

The Effect of Organizational Commitment on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 2.346 with a significance probability of 0.021. It can be seen that the t statistic is > 1.96, and the p-value is < 0.05, so H3 is declared accepted, meaning that organizational commitment affects employee performance. This significant influence is supported by a positive coefficient value of 0.264. An increase in the organizational commitment variable will significantly improve the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. The Red Plate Bank is Blue. This hypothesis is accepted because organizational commitment is the level of an employee's desire to continue working in an organization and contribute optimally to achieving organizational goals. The relationship between organizational commitment and employee performance is very close because organizational commitment can influence employee motivation, loyalty, and performance. Employees with a high level of commitment to the organization tend to be more motivated, loyal, and dedicated to achieving organizational goals. They are also more likely to take initiative and responsibility for their work. In this case, positive organizational commitment can improve employee performance.

Organizational commitment describes employee loyalty and attachment to the organization where they work (Hendri, 2019). Employees who feel they have a high commitment to their organization tend to work harder and are more dedicated to achieving organizational goals, which can improve organizational performance (Korda & Rachmawati, 2022). This finding aligns with various studies that have found that the organizational commitment variable significantly influences employee performance (Eliyana & Ma�arif, 2019); (Hendri, 2019); (Korda & Rachmawati, 2022).� �

The Effect of Reward Systems on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 2.739 with a significance probability of 0.007. It can be seen that the t statistic is > 1.96, and the p-value is < 0.05, so H4 is declared accepted, meaning that the reward system affects employee performance. This significant influence is supported by a positive coefficient value of 0.295. An increase in the reward system variables will significantly improve the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. The Red Plate Bank is Blue. Acceptance of this hypothesis is because the reward system is a way for organizations to provide recognition and appreciation to employees for their performance. The relationship between the reward system and employee performance is very close because an effective reward system can better motivate employees to achieve organizational goals. An effective reward system includes recognition for good performance achievements, financial rewards, and career promotions. Employees who receive recognition and rewards for their performance tend to be more motivated to do their jobs better. In this case, an effective reward system can improve employee performance. Conversely, a bad or unfair reward system can reduce employee motivation and performance. Suppose employees feel the reward system is unfair or does not reward their performance enough. In that case, they may be less motivated to do their jobs well and less dedicated to achieving organizational goals.

A reward system is a method used to incentivize individuals or groups to encourage certain behaviors or achievements (M. A. Setiawan & Mardiana, 2022). Providing incentives or rewards to employees by companies can increase their motivation and performance and help maintain and increase employee satisfaction in working at the company. The reward system is very important for organizations because it has become important in managing employee performance (Noorazem et al., 2021). This finding aligns with various studies that have found that reward system variables significantly influence employee performance (Noorazem et al., 2021); (M. A. Setiawan & Mardiana, 2022); (Hadian Nasab & Afshari, 2019).

The Influence of Reward Systems in Moderating Leadership Style on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 1.696 with a significance probability of 0.093. It can be seen that the t statistic < 1.96 and the p-value> 0.05 means that H5 is rejected, meaning that the reward system cannot moderate the influence of leadership style on employee performance. Although the reward system is a powerful tool in motivating employees, it has limitations in moderating the influence of leadership style on employee performance. This happens because there are differences in perceptions regarding leadership styles. Employees in different organizations or levels may have different perceptions of the leadership style used by their superiors. Some employees may feel inspired and motivated by a particular leadership style, while others may feel overwhelmed or less motivated. These differences can influence how reward systems are interpreted and accepted by employees. This result differs from previous research, which stated that the reward system moderates the influence of leadership style on managerial performance (Febrianti et al., 2021).

The Influence of Reward Systems in Moderating Organizational Culture on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 2.496 with a significance probability of 0.014. It can be seen that the t statistic is > 1.96, and the p-value is < 0.05, so H6 is declared accepted, meaning that the reward system moderates the influence of organizational culture on employee performance. This significant influence is supported by a positive coefficient value of 0.196. When there is an increase in the leadership style variable, supported by a good reward system, it will significantly improve the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. The Plat Merah Berwarna Biru Bank. Acceptance of this hypothesis is because when the reward system is implemented appropriately, it can help strengthen the desired organizational Culture and encourage employees to follow these values in carrying out their duties. Suppose an organization implements an individualistic work culture that does not align with a reward system. In that case, employees can feel marginalized or unmotivated to work better because no rewards are given to those working with the team and contributing to achieving goals. Organizations must have a reward system that aligns with the desired organizational values and Culture to strengthen organizational Culture and encourage employees to achieve better performance. In this case, the reward system can act as a tool to shape and strengthen the organizational culture desired by the organization. The results of this research align with studies that state that the influence of organizational culture on employee performance can be moderated by reward variables (Rivai, 2020).

The Effect of Reward Systems in Moderating Organizational Commitment on Employee Performance

The results of the PLS analysis obtained a statistical t-value of 0.716 with a significance probability of 0.476. It can be seen that the t statistic < 1.96 and the p-value> 0.05 means that H7 is rejected, meaning that the reward system cannot moderate the influence of organizational commitment on employee performance. Reward systems are important in motivating employees to improve their organizational performance. Although reward systems can provide incentives and encourage employees to achieve company goals, they can only sometimes moderate the influence of organizational commitment to employee performance. This happens because not all incentives match employee commitment. Reward systems can provide various incentives, such as bonuses, promotions, or recognition. However, not all of these incentives are directly related to organizational commitment. Some incentives may be more related to individual achievement than to support the organization's goals and values. Therefore, reward systems that need to consider the strong relationship between incentives and organizational commitment may not be able to moderate the influence of this commitment on employee performance. This result is not in line with the results of previous research, which stated that the reward system could moderate the influence of organizational commitment on employee performance (Dewi & Hasniaty, 2017).

 

CONCLUSION

The variables of leadership style, organizational culture, organizational commitment, and reward system partially significantly affect employee performance, where leadership style has the most dominant influence. The reward system can moderate the influence of organizational culture on employee performance but cannot moderate the influence of leadership style and organizational commitment on the performance of permanent employees at RM SME Regional Office Jakarta 1 PT. The Plat Merah Berwarna Biru Bank. For further research, you can consider assistance options in the process of filling out the questionnaire so that you can obtain more accurate data. Future research that will conduct similar research but needs to examine employee commitment to the organization can use contract employees as research samples.

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