The Effect of Transformational Leadership on Organizational Citizenship Behavior and Employee Performance in Pakistani SMEs: A Modern Analysis

Abstract

Employee performance is an important factor that determines the success of an organization, 
especially within a small and medium-sized enterprise (SME), where human capital can be the main source of competitive advantage. The article discusses the mediating variable of the association between transformational leadership and employee performance, which is Organizational Citizenship Behavior (OCB). The paper is based on the social exchange and social bond theories by postulating that transformational leaders motivate employees to commit discretionary and extra-role behaviors - epitomized by OCB - which consequently improves job performance. This mediating model is supported by empirical evidence from a sample of 405 workers in the Pakistani SMEs. Results indicate that the performance enhancement effect of transformational leadership cannot be directly stimulated; instead, it is more directed to the voluntary, citizenship-oriented behaviors of the employees. The research adds novelty to the body of research on leadership and organizational behavior by supporting OCB as a crucial psychological and behavioral process that can be applied by managers who want to maintain high performing and engaged workforces.