Mediation Effect of Employee Motivation between Selected Leadership Styles and Employee Performance in Selected Financial Institutions in Mthatha, Eastern Cape

Abstract

This study aimed to mediate the effect of employee motivation on the relationship between selected leadership styles and employee performance in selected financial institutions in Mthatha, Eastern Cape.  Using a quantitative approach, data were collected via self-administered online questionnaires and manual copies. A total of 155 respondents were given the questionnaires. Inferential analysis was conducted with Smart PLS and Structural Equation Modelling to assess multivariate causal relationships. Findings indicated that the selected leadership styles significantly positively correlated with employee motivation and performance. Partial Least Squares Structural Equation Modelling (PLS-SEM) implemented through SmartPLS offers robustness, particularly in studies with complex mediating relationships and relatively small sample sizes (Hair, 2014). SEM allows simultaneous estimation of measurement and structural models, which is particularly valuable in industrial psychology studies like this one. The study recommends that financial institutions continue to design and implement leadership development programs tailored to foster motivational leadership styles and improve employee motivation and performance. These styles have demonstrated a strong positive effect on employee motivation, significantly improving employee performance.