The Impact of Transformational Leadership on Employee Retention: Mediation and Moderation Through Organizational Citizenship Behavior and Communication

TLDR

The study examines how transformational leadership affects employee retention in SMEs, with organizational citizenship behavior (OCB) as a mediator and communication as a moderator. Data from 505 SME employees were analyzed using Smart PLS structural equation modeling. Transformational leadership boosts OCB, which in turn increases employee retention; OCB mediates this effect, and communication strengthens both the leadership‑OCB and OCB‑retention links.

Abstract

This study investigates the impact of transformational leadership on employee retention in small- and medium-sized enterprises (SMEs) and probes the mediating role of organizational citizenship behavior (OCB) and the moderating role of communication. Data were collected using convenience sampling from 505 employees of SMEs. A Smart PLS structural equation modeling (PLS-SEM) was used to estimate the various relationships. The findings of the study reveal a positive and significant relationship between transformational leadership and OCB. Similarly, this study finds a positive and significant relationship in OCB and employee retention. In addition, OCB had a positive mediating effect on the relationship between transformational leadership and employee retention. Furthermore, communication positively moderates the transformational leadership- OCB and OCB-employee retention relationships. Leaders at SMEs should implement the traits of transformational leadership such as developing a compelling vision for employees, focusing on goal achievement, having problem-solving techniques, having a sense of purpose, and spending time on the training and development of the team to enhance OCB and employee retention.