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All Journal International Journal of Management Research and Economics
Friska Nanda Susanta
Universitas Narotama Surabaya
Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

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Analysis of the Effects of Leadership Style and Compensation on Employee Performance with Competence as a Mediating Variable at a State-Owned Railway Manufacturing Enterprise Friska Nanda Susanta; Sengguruh Nilowardono
International Journal of Management Research and Economics Vol. 4 No. 4 (2026): November : International Journal of Management Research and Economics
Publisher : Institut Teknologi dan Bisnis (ITB) Semarang

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.54066/ijmre-itb.v4i4.5068

Abstract

This study examines the effects of leadership style and compensation on employee performance, with competence as a mediating variable, at a State-Owned Railway Manufacturing Enterprise in Indonesia. The growing complexity of human resource challenges evidenced by declining employee discipline and inconsistent performance outcomes underscores the need for a comprehensive structural analysis of these relationships. Employing an explanatory quantitative design, data were collected from 300 organic employees across four major divisions via structured questionnaires and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 3.2.9. The measurement model confirmed satisfactory convergent and discriminant validity, as well as high construct reliability across all constructs. The structural model results reveal that leadership style and compensation both exert significant positive direct effects on employee competence and performance. Competence also significantly enhances performance directly. Furthermore, bootstrapping analysis confirms that competence successfully mediates the influence of both leadership style and compensation on employee performance. These findings indicate that transparent leadership and fair compensation packages not only directly improve performance outcomes but also operate indirectly by cultivating employee competencies that serve as a critical intermediary mechanism.
Co-Authors Sengguruh Nilowardono