Effiyanti EFFIYANTI, Abdul Rahman LUBIS, Sofyan SOFYAN, Syafruddin SYAFRUDDIN /

Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593 583

Print ISSN: 2288-4637 / Online ISSN 2288-4645

doi:10.13106/jafeb.2021.vol8.no2.0583

The Influence of Transformational Leadership on Organizational

Performance: A Case Study in Indonesia

Effiyanti EFFIYANTI1, Abdul Rahman LUBIS2, Sofyan SOFYAN3, Syafruddin SYAFRUDDIN4

Received: November 05, 2020 Revised: December 30, 2020 Accepted: January 08, 2021

Absract
The purpose of this study was to examine the relationship between transformational leadership and organizational performance with readiness
to change and empower knowledge sharing quality as mediating variables. The survey was conducted by collecting the respondents’
data by filling up forms which were designed using the google form application and collecting it using WhatsApp. This was performed
on 400 respondents, encompassing employees from the National Agency of Drug and Food Control in Indonesia. The research model
adopted was validated using Structural Equation Modeling technique with AMOS tool. The findings showed transformational leadership
as a significant predictor of readiness to change and it proved relevant in empowering knowledge sharing quality, which in turn affects
organizational performance. Furthermore, the effects of both two mediating variables was also examined, and only readiness to change
significantly influenced the relationship between predictors of transformational leadership and organizational performance. The findings
of this study showed the need for transformational leaders as the research focused on understanding the differences in employee character.
This is required to encourage better performance by empowering quality knowledge dissemination mechanisms, with continuous in-house
training activities. Therefore, the model adopted in this research and the hypotheses prove the direct effect of transformational leadership on
organizational performance, achievable through the mediating role of readiness to change.

Keywords: Transformational Leadership, Readiness to Change, Empowering Knowledge Sharing Quality, Organizational Performance

JEL Clasification Code: C12, M10, M12, M54

1. Introduction with dynamically occurring changes in an organization.

The expectation from a leader are always high, particularly
Leadership is a learning process characterized by towards achieving increased performance. Yukl (2006)
continuous practices with increased knowledge to deal defines leadership as a process which influences others to
understand their orders and agree on what to do and how
to do it, and it also facilitates individual and group efforts
First Author and Corresponding Author. Doctorate Program,
1 to achieve common goals. Many studies on leadership
Department of Management, Faculty of Economics and Business, styles have been going on for a long time since it was
University of Syiah Kuala, Banda Aceh, Indonesia [Postal Address: first conceptualized by a political scientist (Burns, 1978).
Jl. Teuku Nyak Arief No.441, Kopelma Darussalam, Kec. Syiah
Kuala, Kota Banda Aceh, Aceh 23111, Indonesia] Transformational leadership is a type of leadership which
Email: [email protected] focuses on achieving changes in values, beliefs, attitudes,
Professor, Departement Economics and Business Faculty, University
2
behaviors, emotional, and the needs of subordinates for
of Syiah Kuala, Banda Aceh, Indonesia. better change in future. Studies that are generally conducted
Email: [email protected]
Lecture, Departement Economics and Business Faculty, University
3 by researchers are to determine the relationship between
of Syiah Kuala, Banda Aceh, Indonesia. transformational leadership and organizational performance,
Email: [email protected] although the research generally conclude that there is
Lecture, Departement Economics and Business Faculty, University
4

of Syiah Kuala, Banda Aceh, Indonesia.

influence, research on the relationship of transformational
Email: [email protected] leadership and its effect on organizational performance
is still limited and mostly speculative (Bass, 1999). In
© Copyright: The Author(s)
This is an Open Access article distributed under the terms of the Creative Commons Attribution addition, there is still little research and knowledge about the
Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits
unrestricted non-commercial use, distribution, and reproduction in any medium, provided the
mediation process between transformational leadership and
original work is properly cited. organizational performance which is useful in improving
 Effiyanti EFFIYANTI, Abdul Rahman LUBIS, Sofyan SOFYAN, Syafruddin SYAFRUDDIN /
584 Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593

the performance of transformational leadership in building optimal effectiveness. The leaders today compete to
organizations (Boerner, 2007). create a vision for the future, and inspire members of the
The BPOM is tasked with protecting the public from organization. In addition, the leadership also has a role in
the circulation of substandard drugs and food, based on changing the atmosphere of the organization to be more
human health requirements. In addition, the incidence of optimal and professional (Paais, 2020). The original theory
globalization reported within the last few decades has forced was formulated from Burns (1978), where transformational
the BPOM to reform bureaucracy, and to subsequently leadership was described as a process characterized by
ensure better performance. However, numerous violations the interaction between leaders and followers to promote
have been exhibited by business actors due to the abundance one another into higher levels of morality and motivation.
of substandard medicinal and food products circulating in This concept features the observation of old problems with
the territory of Indonesia. Therefore, BPOM Republic of new perspectives, as the leaders stimulate higher attempts
Indonesia was instituted as a supervisory agency, where than usual. Also, the followers are inspired to think beyond
leadership is required to encourage hardwork amongst individual aims and interests, and encouraged to focus on
followers. The transformational style is suitable for greater team, organizational, national and global objectives.
reformation purposes, because the leaders serve as an initiator The clear future perspective provided ensures the leaders’
for restructuring, integrated with the organizations’ creativity, influence in a manner where the perspective is assumed to
innovation, flexibility, and responsiveness. Simultaneously, be personal, and further instigates the use of higher efforts.
there is a marked increase in the effectiveness and sensitivity Yammarino and Bass (1990) also reported on the need for
towards the collective needs required to ensure good transformational leaders to articulate a realistic future vision,
performance (Mora & Tidor, 2012). and stimulate subordinates
Based on the arguments discussed, the aim of this Furthermore, Bass (Yukl, 2006) formulated an empirical
study, therefore, is to develop a conceptual model, intended study after the emergence of Burns’ idea, which examined
to link transformational leadership with organizational the differences between transformational and transactional
performance. This paper broadly describes the relationship leadership. Moreover, both types were described in terms
through direct or indirect modeling, with the mediator of the behavioral components, stipulating the leaders
variables of readiness to change and empowering the quality influence on followers and vice versa. Particularly, the
of knowledge sharing, which was synthesized. The latter is transformational style demonstrates the need for followers
achieved by deriving new forms through theoretical analysis to express trust, admiration, loyalty, and respect for the
between the inspired interaction capability variable and leaders, as well as the motivation to accomplish more than
knowledge sharing. In addition, the theory of interaction expected. A research by (Abu-Tineh, et al., 2008; Sun &
and organizational learning & RBV were adopted with Henderson, 2017; Arif & Akram, 2018; Widodo et al., 2017)
leaders, and was intended to provide reinforcement in these recognized this leadership approach as an integrated activity
abilities by building the value of enthusiasm. This is further between practice and behavior, and is expected to serve as a
implemented as the organizations’ image, and new ideas guideline for leaders to achieve and perform extraordinarily.
are proposed with the aim of improving performance. Wu Furthermore, a study by Chen et al. (2012) stipulated the
et al. (2012) examined the significant effect of knowledge influence of strategic flexibility and environmental dynamics
sharing in interpersonal relationships on task performance. variable in transformational leadership style on company
The research by Husted and Michailova (2002) showed performance.
the inability to impact on organizations currently applying Garcı´a-Morales et al. (2008) identified the need for
incentives, resulting from the poor alignment with knowledge organizations to encourage this pattern of management, as the
sharing and incentives provision. Based on this modeling leaders involved are expected to be involved in the followers’
design, the current study is expected to prove the success of development within the company. Similarly, Bass and Riggio
transformational leadership in the significant reformation of (2006); Barling and Kelloway (2001); Shafi et al., (2020)
organizational performance through a quantitative empirical suggested emphasis on intrinsic motivation and development
approach using SEM. as the cause of popularity with transformational leadership.
This is particularly observed in organizations with followers
2. Literature Review performing activities according to their administrative
needs, inspired and empowered to achieve success in times
2.1. Transformational Leadership of uncertainty. The findings by Al Khajeh, (2018) identified
the negative relationship between charismatic, bureaucratic
Robbins and Judge (2015) defined leadership as the as well as transactional leadership styles and organizational
ability to influence a group towards achieving a vision performance. Conversely, the transformational, autocratic,
or goal. In addition, a strong level alongside adequate and democratic types had a positive association. The
management is required by every organization to attain transformational form has advantages which also mediated
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Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593 585

by Organizational Innovation and creativity (Nguyen et al., because of the ability to improve individual performance, and
2019; Samad, 2012; Arif & Akram, 2018; Minh-Duc & Huu- facilitate the creation of new knowledge (Cohen & Levinthal,
Lam, 2018; Doan et al., 2020). 1990, Noor & Salim 2012). This process is defined by Ling
In addition, numerous years of research on leadership et al. (2009) as the dissemination of information throughout
led to the formulation of typical behaviors by Bass in 1985, the organization. Cheng et al. (2009) reported on the loss
and was presented in the form of a Multifactor Leadership of meaning on instances where sharing with others is not
Quesionneire (MLQ). This design consisted of three practiced. Moreover, the knowledge stored in an employee
variables, including transformational, transactional and is more valuable when disclosed to other colleagues, because
passive, alongside nine factors, which were used during this practice serves as a resource for profit generation in
the assessment (Bass and Avolio, 2005). However, five business (Cheng et el., 2009).
dimensions were derived, including the idealized influence Van Den and Ridder (2004) defined Knowledge Sharing
of attributes, behaviors, inspirational motivation, intellectual as a process where individuals exchange knowledge
stimulation, and ind ividualized consideration. (both Tacit and Explicit). This activity is closely related
to an increase in innovative abilities. Zohoori, (2013)
2.2. Organizational Performance acknowledged the significant effect of sharing on the speed
and quality of innovation. This practice is known to improve
Organizational performance is regarded as the ultimate organizational performance in applying new ideas or
dependent variable of interest for researchers concerned methods to a work process (Ologbo et al., 2015). Meanwhile,
with any area of management. The measurement techniques continuous knowledge sharing is considered as the best way
introduced over the past two decades have been one of the through which managers improve company performance,
most widespread international trends in public (Pollitt, 2006). due to the positive effects (Rong Du et al, 2007), it also
Furthermore, performance is considered as a description of plays an important role in generating business opportunities
an organizations’ success or failure during the conduction of from the creation of new ideas (Xue et al., 2011). This
major duties and functions, in order to realize the stipulated activity is considered as one of the processes in knowledge
goals, objectives, vision and mission. This is also attributed management (Davenport & Prusak, 1998).
as achievements within a certain period
Cropanzano et al. (2002) defined organizational 2.4. Readiness to Change
performance as the transformation of inputs into outputs,
aimed at attaining certain results. Based on content, this An organizations’ readiness for change is a
provides information about the relationship between minimal comprehensive attitude is simultaneously influenced by
and effective (economic) costs, effective costs and realized the content, process, and context. The individuals involved
outputs (efficiency), as well as between outputs and results reflect the tendency to agree, accept, and adopt the specific
achieved (effectiveness). The performance of a company is plan aimed at modifying the current state (Holt et al. 2007),
possibly used as a benchmark while evaluating the collective with a characteristic readiness to perform a renewal at every
ability to achieve goals. Furthermore, the measurement used line of the organization.
is one of the most important factors, because the process The peoples’ understanding of this process is very
adopted evaluates the extent of goals achievement. This influential and important. Bridges (2009) reported on the
determines the possible existence of a deviation from the need to know why specific changes are necessary. Also, the
predetermined plan, or specified time schedule during the study evaluated the reasons why organizations eliminate
implementation. old routines and systems, and appraise the employees’
Wang et al. (2011) identified a positive link between the willingness to coexist during the transition. This period is
transformational leadership and individual-level follower laden with complexities as well as uncertainties, and also the
performance. The study also indicated an association with means to engage with a new system. Kurt (1951) described
team performance at the organizational level. This further organizational change as a three phases process, characterized
confirms the existence of a definitive association (Jyoti & by unfreezing, changing, refreezing. In addition, the thought
Bhau, 2015; Do et al., 2020). theory is assumed to be unfreezing in situations where
members are prepared. Furthermore, readiness is defined
2.3. Empowering Knowledge Sharing Quality as the employees’ perception on the need to organizational
restructure, as well as the possibility of expecting positive
Knowledge sharing is a basic management concept with outcomes (Shah & Shah, 2010).
specific focus on knowledge as the most valuable strategic In addition, it is impossible to avoid changes, as readiness
resource of an organization (Cumming, 2003), and also as is required from each employee to ensure continuation of the
the main resource for value creation (Nonaka & Takeuchi, designated work. This occurs due to the great influence of a
1995). The greatest value is experienced through sharing, change and the individuals’ readiness to accept. In addition,
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586 Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593

this concept is experienced in both positive and negative forms, four dimensions of these leaders, comprising inspirational
as employee attitude shows the behavior towards accepting, motivation (although weak), intellectual stimulation and
embracing, and obeying the new plan. The preparation for a individual judgment, were determined to be significantly
ready position involves reflection on the content, context and associated with employee engagement. Therefore, the
process, as well as the individual attributes to perceive and following hypothesis is derived.
believe in the modifications made (Holt et al., 2007).
There are two aspects to readiness, including (1) the H1: Transformational Leadership is positively related to
organizations willingness to change, comprising the attitude, organizational Performance Influence of Transformational
simultaneously influenced by the content, process, context Leadership on Readiness to change
and individuals involved. This shows the individuals
tendency to agree, accept, and adopt a specific plan aimed at Previous studies have evaluated and further recommended
modifying the current situation (Holt et al. 2007). Moreover, leaders to pay more attention towards increasing employee
the aim is renewal at every line of the organization, and willingness to change. This activity is expected to increase
Weiner (2009) attributed organizational readiness as a organizational performance, and (Alharbi, 2018) it further
shared determination of the members to implement the demonstrated the existence of a positive and significant
specific change. This also involves the creation of mutual relationship between the practice of transformational style
trust in the collective execution ability. Therefore, high and readiness to adopt the modifications. Therefore, Al-
level of readiness enhances the member’s interest towards Tahitah, et al, (2018) suggested the need for educational
initiating change, followed by the exertion of greater effort, leaders to focus and enhance this dimension, in order to
enhanced persistence, and cooperative behavior. These ensure a successful implementation. In addition, both
activities ultimately facilitates a successful implementation transformational and transactional forms of leadership
(Weiner, 2009). According to Ramnarayan & Rao (2011) had a positive correlation with the managers’ engagement.
organizational readiness to change refers to the collective Consequently, a direct, long-term effect was observed with
adaptations executed while identifying ways to realign the followers’ appraisal of change, which was positive for
establishment with a transforming environment. (2) The transformational and negative for transactional leadership
individual’s readiness to change, which is defined according (Holten and Brenner, 2015). Therefore, the following
to Armenakis et al. (1993) as a person’s beliefs, behavior hypothesis was derived.
and intentions towards the desired modifications, in relation
to personal perceptions of individual and organizational H2: Transformational Leadership is positively related
capacities to ultimately achieve success. Armenakis et al to readiness to change Influence of Readiness to change on
(1993) defined readiness as a cognitive behavior expressed organizational Performance
both in the form of resistance and support for change
efforts. Holt et al. (2007) considered this as an individual’s
Mathew et al. (2014) reported on the link between
willingness to adjust, considering the cognitive and
Readiness to Change and Company Performance, as the
emotional capacity to accept, as well as the personal efforts
research conducted on some of the employees at Kerala,
to execute the stipulated plans. Hanpachern (1997) devised
India showed resistance to change, and the possibility of
another definition, which implicates individual readiness as
low returns. Furthermore, Fagernaes (2015) showed the
the extent of mental, psychological, and physical keeness to
existence of positive and negative individual readiness level
participate in organizational development activities.
at the same time. However, significant differences were
observed at the organizational level. Therefore, the following
2.5. Hypotheses Development
hypothesis was derived.
2.5.1. Influence of Transformational Leadership on
organizational Performance H3: Readiness to change is positively related to
organizational performance Influence of Transformational
Overstreet, RE (2012) has identified the relationship Leadership on empowering knowledge sharing quality
between Transformational Leadership and Company
Performance, and the study results support both direct and Baytok et al. (2014) performed a research on the relationship
indirect influences in basic management organizations between Transformational Leadership and Knowledge
(bottom line). Furthermore, another research by Dathce Sharing, and the results acknowledged the significance
& Mukulu (2015) showed the significant effect of both in International Hotel Chains, and further emphasized the
transformational leadership and employee engagement at importance. In addition, Al-Syaidh et al. (2016) reported on
the Corporate State in Kenya. Moreover, three out of the the influence of theoretical transformational and transactional
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Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593 587

leadership style models on the Knowledge Sharing practices Questionnaire (MLQ-5X) formulated by Bass and
of employees. Furthermore, the latter is known to impact Avolio (2005), is considered as one of the most widely
on job and consequently on the Company Performance. used approaches today. This leadership style is known
Therefore, the following hypothesis was derived. to consist of five dimensions, including the idealized
influence of attributes, behavior, inspirational motivation,
H4: Transformational Leadership is positively related intellectual stimulation, and individualized considerations.
to empowering knowledge sharing quality Influence of Furthemore, each has an indicator, leading to a total item
empowering knowledge sharing quality on organizational of 20 questions. The Konkle dissertation questionnaire
Performance (2007) was used for measurement with the aid of a Likert
scale, due to the higher reliability as well as larger data
Garcia and Calantone (2002) evaluated the relationship volume provided, in contrast with other scales, and is
between Knowledge Sharing and Company Performance, also considered the most frequently used (Cooper and
and the results explained the sharing concept as one Schindle, 2006). This method is used with an interval of
component of learning orientation estimated to facilitate the 1 to 5, with the value of 1 indicating attitude has never
accomplishments. Hsu & Wang (2010); Wang et al. (2014) been done, 2 (almost never), 3 (sometimes), 4 (quite
reported on the mediation by Intellectual Capital. Meanwhile, often), and 5 (often done). The results are presented as
some studies highlighted the tendency for knowledge interval data (Cooper and Schindle, 2006; Sekaran, 2006).
sharing to reduce production costs, accelerate completion Moreover, the readiness to change variable was evaluated
in new development projects, improve decision making, using instruments from Lehman et al. (2002), through
coordination, innovation capability, as well as sales growth 4 dimensions. These comprise motivational readiness,
or revenue from the new products and services (Huang et al., Institutional resources, Staff attributes and Organizational
2010 ; Wang and Wang, 2012 : Taminiau, 2009). Therefore, climate, with an interval scored on a 5-point agree-disagree
the following hypothesis was derived. response scale. The variable of empowering knowledge
sharing quality was measured with an instrument adapted
H5: Empowering knowledge sharing quality is positively from Bock et al. (2005), and all assessments employed a
related to organizational performance five-point Likert scale, ranging from “very frequently” to
“very rarely” or “extremely likely” to “extremely unlikely.
3. Research Methods
3.2. Sample Design and Data Colletion
3.1. Research Instrument
The survey process was conducted by collecting the
The research data ought to be validated, prior to the respondents’ data from Food and Drug Authority offices all
collection of measurements from previous research. over Indonesia from 10-05-2020 to 29-05-2020. This was
Furthermore, organizational performance is evaluated using achieved by filling out forms designed using the google
instruments from Speklé and Verbeeten (2014), previously form application, and distributed using WhatsApp media.
developed by Price et al. (1981). These tools are specifically Therefore, each respondent directly fills in the desired
designed to measure the performance of organizations in information directly from a cellphone or computer. The
the public sector, and have been successfully applied in inputted data is then stored on the server, and is consequently
several previous studies, including a research by Williams used directly.
et al. (1990), and Verbeeten (2008). The performance
dimensions assessed include: (1) productivity, (2) quality or 3.3. Data Analysis
accuracy of work produced, (3) the number of innovations,
process improvements, or new ideas, (4) reputation for work Subsequently, SPSS version 18.0 was used for analysis.
excellence, (5) production or service goal achievements, (6) This study evaluated the nature of the measurement scale for
operational efficiency, and (7) the unit personnels’ spirit. convergent as well as discriminant validity, and the composite
Therefore, respondents in this case were asked to indicate the reliability was furthe3r assessed with confirmatory factor
score of their organizational unit on each of the performance analysis (CFA). Furthermore, structural equation modeling
dimensions by allotting points, in a Likert scale form of (SEM) was applied to verify the relationship between
1-5 (where 1 = far below average, 5 = well above average) transformational leadership pathways, organizational
(Speklé and Verbeeten 2014 ). performance, readiness to change and empowering
The transformational leadership variables were knowledge sharing quality. The software used for CFA and
measured based on the Multifactor Leadership SEM was AMOS.
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588 Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593

4. Results The education level was dominated by undergraduate

level S1 at 63.3%, Postgraduate level (17.8%), Diploma D3
A total of 792 respondents were collected, and the 467 (10.5%) and 34 respondents had a high school education
respondents were further verified and validated after the (8.5%). Moreover, a majority reported to work in the field
corrections. This comprised of 292 female (73%) and 198 / test section (41.5%), followed by the inspection field /
male (27%) respondents. Moreover, the dominant participant section (23.3%), the administration section / sub-section
age range was 31-40 years at 34.5%, while 29% were over (15.5%), infocom field / section (10.0%), the action field /
50 years old, followed by 41-50 (23.8%), 21-30 (12.5%) and
​​ section (9.3%) and leadership (0.5%).
1 respondent was under 21 years (0.3%). Furthermore, the positions of functional officials were
predominant (68.5%), followed by general staff (17.3%),
Table 1: Validity and Reliability for Constructs heads of fields / sections (7%), section heads (6.8%) and
heads of agencies (0.5%).
Variable AVE CR
Transformational Leadership (TL) 4.1. Validity and Reliability
0.583 0.954
Readiness to change (RC)
0.566 0.627 Table 1 shows the study data for convergent validity
Empowering Knowledge Sharing
0.534 0.843 test, and the AVE value of each variable > 0.5. Therefore,
Quality (EKSQ)
0.502 0.800 a positive validity was confirmed, indicating the ability of
Organizational Performance (EP)
each indicator to explain the latent variables.
Table 2 shows the Goodness-of-Fit Model Test results
Table 2: Goodness of Fix where the Chi-Sequare value (𝝵2) of 235.822 was significant,
with (p = 0.052). Moreover, the ratio of Chi value to degree
Research
Item Cut of Value
Value
Criteria of freedom was (𝝵2 / df = 1.175), which is much smaller than
the cutoff point 3, as suggested by Bagozzi and Yi (1988).
Chi-Square ≤ 215.663 for The goodness of fit index (GFI = 0.961) and comparative-
214.935 Good
value (𝝵2) DF 183 fit index (CFI = 0.996) were greater than the recommended
P-value >0.05 0.053 Good value of 0.9, while RMSEA was 0.019, and is significantly
RMSEA <0.08 0.019 Strong lesser than 0.08 (Hair et al., 2006), hence the model fit and
GFI >0.9 0.961 Very good
data are reasonable.
This discriminant validity of the construct in Table 3
AGFI >0.9 0.941 Very good was also evaluated, and the results showed greater AVE
CMIN/DF <3 1.175 Very good values compared to the squared correlation coefficients
Very between each pair. Therefore, every latent variable is
TLI >0.9 0.994 considered to be capable of self-discrimination against
Strong
Very
other latent variables, as each demonstrates a strong
CFI >0.9 0.996 relationship with the indicators (Amin et al., 2013; Hair
Strong
et al., 2006). Hence, the discriminant validity of each
DF minimal 183 Good variable concluded to be valid.

Tabel 3: Discriminant Validity Test

Empowering
Transformational Readiness to Organizational
Variable Knowledge Sharing
Leadership change Performance
Quality
Transformational
0.721 0.651 0.165 0.185
Leadership
Readiness to change 0,651 0,732 - 0.408
Empowering Knowledge
0.165 - 0,762 -0.091
Sharing Quality
Organizational
0.185 0.408 -0.091 0,679
Performance
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Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593 589

4.2. Structural Model The entire path has an estimated value of 0.197 or significant
p=0.032, indicating an influence. Furthermore, the relationship
Hypothesis testing for H1 to H5 was performed mediated by empowering knowledge sharing quality is possibly
statistically, using a structural model. The GFI goodness-of- explained through the existing trajectory with the leadership
fit obtained from the model includes the Chi-square value style at an estimated value of 0.264 or p=0.000 significance,
(χ2 = 214.935, df = 183, χ2 / df = 1.175, p = 0.053) and other suggestive of an effect. Furthermore, the association with
indices (RMSEA = 0.019; GFI = 0.961 ; CFI = 0.996). These organizational performance was 0.264 or p=0.843 significanec,
results indicate a proper fitting between the model and data indicating no influence (Figure 1). Furthermore, the mediating
obtained, which is then used in further analysis. capability of both variables is determined using the Sobel
Test calculator, and the significance value of paths using the
4.3. Empirical Testing of Hypothesized Model readiness to change was 3.114 or a significance of p=0.001,
which demonstrates an effect. Meanwhile, the latter has an
estimated value of 0.282 or a p=0.777 significance level,
meaning there is no effect.
Table 4 describes the relationship between transfor­
mational leadership and organizational performance medi­
ated by readiness to change and empowering knowledge
sharing quality. In addition, both play a role in improving
organizational performance by the leaders function through
statistical calculations, with a significance level of 1%.
Moreover, a 1 unit increase in leadership is estimated to
cause an elevation in performance by 0.185 unit. Hence, the
Figure 1: Results of the structural model; *** indicate first hypothesis was accepted, stipulating Transformational
significant at 1% level of significance based on t-statistic leadership is positively related to Organizational Performance.
The second hypothesis was accepted, as a 1 unit increase
The relationship between transformational leadership in transformational leadership instigated a 0.651 unit
variables an organizational performance mediated by readiness elevation in readiness to change at a significance level of 1%.
to change is possibly explained through the existing path Similarly, a 1 unit increase in readiness to change prompted a
between transformational leadership and readiness to change, 0.408 rise in units of organizational performance, hence the
characterized by an estimated value of 0.476 or a significance third hypothesis was accepted. In addition, an 1 unit increase
of p=0.000, which is indicative of an effect. Furthermore, in transformational leadership led to a 0.165 unit elevation
0.194 or p=0.017 significance was the subsequent correlation in empowering knowledge sharing quality. Therefore, the
to performance, suggesting the existence of an influence. fourth hypothesis was accepted.

Table 4: Results of the structural model

Standardized
Hypotheses Hypothesized path p-value Decision
coefficients
Transformational Organizational
H1 → 0.185 0.042 Supported
Leadership Performance
Transformational Readiness to
H2 → 0.651 *** Supported
Leadership Change
Organizational
H3 Readiness to change → 0.408 *** Supported
Performance
Empowering
Transformational
H4 → Knowledge Sharing 0.165 0.001 Supported
Leadership
Quality
Empowering
Organizational
H5 Knowledge Sharing → -0.091 0.155 Not Supported
Performance
Quality
Note: *** indicate significat at 1% level of significance based on t-statistic
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590 Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593

4.4. Mediation Analysis where transformational leadership improved the outcome

of organizational performance (Orabi, 2016; Overstreet,
The mediation path model shows the relationship of 2012; Dathce & Mukulu, 2015; Morales et al., 2012; Li
transformational leadership relationship with readiness et al., 2016). In addition, the association between both
to change variable, at an estimated value of 0.165, or variables was strong (Arif & Akram, 2018). Meanwhile,
0.001 significance (effect). Furthermore, the subsequent Samad, (2012) included the impact of innovation,
association with organizational performance was 0.408, or a while Dionne et al. (2004) stipulated the influence of
significance of 0.000 (effect). Hence, a cumulative value of transformational leadership, which reportedly exceeds
3.437 or 0.000 significance was derived after controlling this expectations.
mediator variable. However, the direct path was estimated at Furthermore, some studies highlighted the positive
0.185 or a significance of 0.042 (effect). and significant relationship between transformational
The mediation model on the path through empowering leadership and employee’s readiness to change (Alharbi,
knowledge sharing quality shows an estimated value of 2018). Therefore, further investigation is required
0.165 or a significance of 0.001 (effect) with translational to provide more insight (Al-Tahitah, 2018). The
leadership, and -0.091 or 0.155 significance (no effect) organizational function and readiness for change (ORC)
with performance. This indirect pathway by controlling the contributes to researches on modifications within the
mediator variable generates an estimated value of 1.301 institution as well as technology transfer, by identifying
or a significance of 0.193. The significance value after the functional barriers involved (Lehman, 2002).
controlling both mediators was obtained using the Sobel Test Furthermore, studies were also performed to highlight the
Calculator, and the results show the mediating effect of only possible changes experienced, including the employees
readiness to change between transformational leadership and perception of the organization’ ability to accommodate the
organizational performance. transforming situations by altering policies and procedures
(Eby, 2000). The results of another research on readiness
5. Discussion and Conclusion at the individual level show the tendency to be positive and
negative at the same time. However, tests performed at the
This empirical study has provided evidence on organizational level show a significant difference between
organizational performance development in Badan POM, both, hence the coexistence is estimated to exist only at the
Republic of Indonesia. In addition, a structural equation model individual level (Fagernaes, 2015).
was designed to prove the five hypotheses, H1, H2, H3, H4 Baytok et al. (2014) investigated the relationship
and H5, based on the role of transformational leadership, via between Transformational Leadership and Knowledge
the mediation of readiness to change and quality knowledge Sharing. The results acknowledged the significance of this
sharing empowement. The test results with 5% significance variable in International Hotel Chains, and emphasized
proved the support of only four hypotheses, where the first the importance of a transformational leader to achieve
stipulates the increase in organizational performance through success during information dissipitation. In addition, other
the input of transformational leaders. Similarly, the second researchers, including AL-Syaidh et al., 2016) reported on
estimates the substantial support of transformational leadership the effect of theoretical transformational and transactional
on readiness to change within the Badan POM organization, leadership style models on the Knowledge Sharing practices
Republic of Indonesia. The third hypothesis confirms the of employees, although the significantly impacts on job, as
pathway of readiness to change as a predictor of organizational well as Company Performance. This relationship has been
performance. In addition, the employees were very ready to widely studied, and the results explain that knowledge
implement every change demanded. The estimation of the sharing as an essential component of learning orientation
fourth hypothesis, characterized by the path of transformational (Garcia and Calantone, 2002).
leadership on empowering knowledge sharing quality. This The findings of this study showed the need for
indicates the potential to develop enthusiasm for sharing transformational leaders as the research locus to understand
knowledge with employees. However, the fifth path estimation the differences in employee character. This is required to
on quality knowledge sharing empowerment on organizational encourage better performance by empowering quality
performance was insignificant as a predictor. This finding also knowledge dissemination mechanisms, with continuous in-
indicates the lack of support, hence employees at Badan POM house training activities. Therefore, the model adopted in
Republic of Indonesia were unsuccessful in strengthening this research and the hypotheses prove the direct effect of
dissemination of quality information. transformational leadership on organizational performance,
The results from hypothesis testing are consistent achievable through the mediating role of readiness to
with previous studies conducted by several researchers, change.
 Effiyanti EFFIYANTI, Abdul Rahman LUBIS, Sofyan SOFYAN, Syafruddin SYAFRUDDIN /
Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0583–0593 591

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