The Influence of Transformational Leadership on Job Satisfaction, Organizational Commitment, and Employee Performance

This research analyzes the influence of transformational leadership towards employee job satisfaction, organizational commitment, and employee performance. The study involved 146 members of middle management as research samples. Research findings show that transformational leadership significantly influences job satisfaction and organizational commitment.

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International Research Journal of Business Studies vol. V no. 02 (2012)
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This research has four main objectives; first, to prove and analyze the
influence of transformational leadership towards employee job satis-
faction; Second, to prove and analyze the influence of transformational
leadership towards organizational commitment; Third, to prove and
analyze the influence of transformational leadership towards employee
performance; Fourth, to prove and analyze the influence of organiza-
tion commitment towards the employee performance. This research
involved 146 members of middle management as our research sample
namely Head of Department, Plantation Manager, Plant Manager,
Head of Bureau/Division, Head Assistant, Head of Strategic Business
Unit (SBU), Chief Engineer and Head of Hospital Service. Structural
Equation Modeling (SEM) was used to test and analyze relationship
among the research variables. Research findings are transformational
leadership significantly influences job satisfaction, transformational
leadership significantly influences the organization commitment. The
job satisfaction is shown to have significant influence on employee
performance, and organization commitment significantly influences
the employee performance..
© 2012 IRJBS, All rights reserved.
Received: January 25, 2012
Final revision: June 12, 2012
Keywords:
Transformational Leadership,
Job Satisfaction,
Organizational Commitment,
Employee Performance
Corresponding author:
[e-mail]
Marnis Atmojo
Universitas Riau, Riau
A R T I C L E I N F O A B S T R A C T
State-owned enterprise (BUMN), is one
of the important business players that
largely contributes to national development,
aimed at developing people prosperity. Highly
valuable state-owned enterprise (BUMN) requires
professionalism in its management for a well
run enterprise, without creating burden to the
government.
PT Perkebunan Nusantara V Riau (PTPN V) is one of
the state-owned plantation enterprises in Indonesia.
It is a consolidation of ex- PT Perkebunan II, PT Per-
Vol. 5| No. 2
ISSN: 2089-6271
The Influence of Transformational Leadership
on Job Satisfaction, Organizational
Commitment, and Employee Performance

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Marnis Atmojo / The Influence of Transformational Leadership on Job Satisfaction, Organizational Commitment, and Employee Performance / 113 - 128International Research Journal of Business Studies vol. V no. 02 (2012)
kebunan IV and PT Perkebunan V in Riau Province.
PTPN V manages palm, rubber and cocoa cultiva-
tion. However, since 2001, the company has been
focusing only on the palm and rubber cultivation.
The total number of employees, total production
and employee productivity of PTPN V, Riau are
shown in Table 1.
It is evident from Table 1 that employee produc-
tivity in 2006 was 16.78% lower than that of 2005.
This is related to declining employee performance
which later decreases the production output. One
of the possible causes is the change in organiza-
tional structure due to a merger of three PTPN
companies to become a single PTPN V entity,
which then results in alteration of organizational
leadership. Leadership strongly influences com-
pany’s overall performance. In 2007, productivity
showed a positive trend with the increase of 7.67
% compared to that of previous year. A minute
increase in productivity of 1.31% occured in 2008.
While in 2009, employee productivity plummeted
by 11.30%, affecting the company’s profit achie-
vement. This situation clearly indicates declining
PTPN V employee’s performance. The downtrend
is possibly related to the merger adaptation pro-
cess to several different leadership characteristics
as a result of government consolidation program.
State-owned plantation enterprise follows a
beurocratic management style which possibly be
adopted from the government beurocracy. To date,
several state-owned plantation enterprises have
transformed to real corporations shedding their
beurocratic patterns. The transformation from
“bureaucracy” to “corporation” remains the main
agenda of state-owned plantation enterprises.
Furthermore, inspite of the state-owned planta-
tion’s organizational structure that support decen-
tralized authority, the bureaucracy issue exists due
on the ineffectiveness of authority delegation as a
result of paternalistic culture.
Paternalism is different from leadership. While
leadershipis the process of influencing others to
achieve organizationalbenefits, paternalismis
identical to superiority. Paternalism is a value sys-
tem with absolute dependence to the leader. In
paternalistic organization, the member of organi-
zation assumes that the authority and accountabi-
lity relies on the leader. Therefore, the responsi-
bility of organizational development relies prima-
rily on the leader. In paternalistic organization, the
applicationof modern managementprinciples
which is based on Good Corporate Governance
where professionalism becomes the attributes of
all members of organization can be difficult.
Leadership plays a key role in company restruc-
turization especially in plantation business. The
majority of state-owned plantation company
requires corporate restructuring for profitization
and/or privatization.According to theories and
prior experiences, in a declining organization per-
Year Total employees
(person)
Total Production
(Tons)
Productivity
per Person
Employed
Increase/Decrease
in Productivity (%)
2005 16,204 2,092,097 129.11
2006 16,073 1,726,920 107.44 -16.78
2007 16,130 1,865,936 115.68 7.67
2008 16,614 1,896,745 114.17 1.31
2009 15,581 1,567,266 100.59 -11.30
Table 1. Total Employees, Total Production dan Employee Productivity of PTPN V Riau
in 2005-2009
Reference: PTPN V Riau (2010)
formance, restructurization process is more likely
to succeed when originated from the leader. This
is also relevant to the state-owned plantation com-
pany. Considering theneed of restructurization, it
is necessary for the state-owned plantation com-
panies to have leaders with advanced leadership
quality (Nugroho, 2005). Without leader’s sincerity
to execute policies for the common good, it will
be difficult to revitalize the state-owned plantation
performance (BUMN Track, 2008).
In the effort to achieve its best performance, the
Board of Directors of PTPN V Riau has made a
great effort to achieve a significant breakthrough,
as an example, through building corporate vision
to be a “World Class Company”(BUMN Track,
2008).
The implementationof this corporate vision
supported with strong leadership enabling changes
in every aspect of the organization, which is known
as transformational leadership. Transformational
leadership articulates a vision of the future of the
organization realistically, stimulates subordinates
intellectually,and gives personal attention to
diversity in the subordinate level.
According to Bass danAvolio (2003), transforma-
tional leadership is a change-orinted-leadership,
where organization vision is not only formulated
but also implementedthrough; first, idealized
influence, where leader through his/her personal
autonomy extraordinarily influences his/her subor-
dinate. Second, inspirational motivation, the ability
of leader to emotionally inspire, motivate, cheer,
festive dan even praise his/her subordinates.
Third, individualized consideration, the ability and
responsibility of leaders to provide satisfaction and
encourage subordinate’s productivity. The leader
tends to be friendly, informal, close to the subordi-
nates, treat the suborndinates equally, provide ad-
vice, help and support for individual development.
Fourth, intellectual stimulation reflectsthe ability
of leaders to stimulate the subordinates intellec-
tually through motivation.
Several influences of transformational leadership
towards research variables are analyzed in
this study. The first influence investigatedis
transformational leadership and job satisfaction.
Transformationalleadership is leadership that
nurtures the need of personal development of
followers, stimulates and inspires them to offer
their best effort in reaching organizational goals.
A relationshipbetween employee satisfaction
and work aspect is noted, Robbins (2006),
demonstrates that job satisfaction is a pleasurable
or positive emotional state resultingfrom the
appraisal of one’s job and perception of one’s work
quality with regard to its valuable contributions.
Factors that contribute to employee satisfaction
include: activities, compensation, independence,
reward, social status, and social services.
Job satisfactionis subjectivein nature, where
each individual experiencesdifferent level of
job satisfaction.The more job aspects match
individual’s desire, the higher job satisfaction, and
vice versa.
Accroding to Luthans (2005), there are three job
satisfaction dimensions; first, job satisfaction is an
emotional response towards job situation. Hence,
job sastisfaction can be visualized and predicted.
Second, job satisfactionis often determined
by how well outcomes meet and exceed the
expectations.Third, job satisfactionrepresents
several related attitudes.
Dorman dan Zapf (2001), explains that there
are two factors that influence job satisfaction,
personnel and organizational factors. Personnel
factor involves personality aspects, status, seniority,
job match dan life satisfaction. On the other hand,
organizationalfactor involves reward system,
centralized authority, acceptance of supervisor,
social and job reward as well as work environment.
Job satisfactionis subjectivein nature, where
each individual experiences different level of job
satisfaction. The more job aspects match one’s

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desire, the higher job satisfaction, and vice versa.
Tondok dan Andarika (2004) stated that
transformational leadership gives a positive and
significant influence towards job satisfaction. This
is contraryto research finding by Sudarmasto
(2005), which suggestedthat transformational
leadershipdoes not significantlyinfluence job
satisfaction.
Secondly, in order to understand the influence
of transformational leadership towards organiza-
tional commitment, one should note that trans-
formational leader should possess the ability to
articulate and align his/her vision to the subordi-
nates, elevate those around them from a lower to
a higher level of need. A vision should be trans-
mitted through persuasion and inspiration, not by
decision and directive statement. Effective leaders
use a combination of captivating rethoric, meta-
phors, slogan, symbols and rituals. Commitment
to the vision is strongly related to followers trust in
their leader.
Oganizationalcommitmentis defined as “The
degree to which on employee identifies with a
particular organization and its goals, and wishes
to maintain membership in the organization”, in
which elementsof organizationalcommitment
are: affective, normative and and rational (Rob-
bins, 2006).
Affective commitmentis originatedfrom em-
ployee’s emotional attachment to the organiza-
tion. Employees with strong affective commitment
will identify themselves through active participa-
tion and enjoying his/her involvement within the
organization.Employees with high normative
commitment will stay in the organization because
they ought to do so. Rational commitment is rela-
ted to commitment based on perception on the
cost the employee associated with leaving the or-
ganization. In other words, employee with strong
rational commitment will stay in the organization
because they need to.
Commitment can be formed at the very beginning
when individual initially joins as a member of
organization, through well-developed socialization
and orientation program. Employee understanding
on company details, vision and mission through
socialization and orientation program will hasten
the unification of employee as an individual within
the organization. Commitment directs individual
to work according to the company expectation
and individual expectation,which encourages
better work performance (Luthans, 2005).
Tobing (2009) demonstrates that transformational
leadership significantly influences organizational
commitment.This research finding is further
confirmed by Fortmann et al. (2003) who states
that transformational leadership has a significant
influence towards organizational commitment.
Basically, a leader should create organizational
commitment to the follower by creating follower’s
trust. Trust not only depends on the leader’s
expertise,but also the leader’s consistencyin
statements and attitudes.
Third, the next relationship analyzed is the influence
of job satisfaction towards employee performance.
One will tend to work passionatelywhen job
satisfaction is attained. This job satisfaction is the
key for morality, discipline, employee performance
in supporting company objectives. High employee
satisfaction creates company/organization loyalty
which later improves employee performance.
Employee performanceis defined as results
obtained fromjob functions or activities performed
as behaviour and results (Amstrongdan Baron,
2005). Evaluation towards employee performance
can be assessed by several parties involved and by
a representative evaluator. Robbins (2001) states
that usually the best work evaluation is to be done
by employee’s direct supervisor. This is related
to the fact that direct supervisor is the person
responsible for his/her subordinate’s performance
for comprehensive evaluation.
Robbins (2001) also suggests that recently not
all direct supervisor can directly observe subor-
dinate’s performance because of newly imple-
mented performance system, such as independent
team creation, distant work method which creates
gap between the supervisor and the subordinates.
Study conducted by Sudarmasto (2005) demons-
trates that besides evaluator’s factor, method used
in performance evaluation should be well suited,
to give respresentativeresults. There are five
methods of individual performance evaluation.
Mathis dan Jackson (2002), states that, employee
performance in the context of productivity de-
pends on three major factors; First, innate ability
to accomplish task which consist of talent, inte-
rest, personality factor, and psychological factor.
Second, employee effort level which includes mo-
tivation, work ethics, work attendance and work
planning.Third, support provided to the work
force such as training, tools, known expectation
and productive work colleagues.
The above statements are in line with Lussierda-
nAnchua (2001), which suggests that performance
is a function of ability, job satisfaction, motivation
and resources. Therefore, in order to increase per-
formance, appropriate actions are required accor-
ding to the causative factor.
Andrew (2004) finds that job satisfaction signifi-
cantly influences tennis player’s performance. This
finding is supported with study done by Tobing
(2009) which argues that job satisfaction signifi-
cantly influences employee performance. In short,
the higher the job satisfaction results in higher the
employee performance.
Lastly, influence of organizational commitment
on employee’s performance is analyzed in this
study. Commitment can initially be built at the
initial point of contact of member within the
organization, through well-developed socialization
and orientation program. Employee understanding
on company details, vision and mission, through
socialization and orientation program accelerate
the unification of employee as an individual within
the organization. Commitment directs individual
to work according to the company expectation
and individual expectation, which provokes better
work performance (Luthans, 2005).
Prior research argues that organizationalcom-
mitment is related to performance (Carmeli and
Freund, 2004). Research done by Andrew (2004)
involvingthe collection of samples from em-
ployees working in manufacturingand service
companies, hypothesizes that organizational com-
mitment is related to performance.
Based on above explanations in the context of the
transformational leadership model, employee job
satisfaction, organizational commitment and em-
ployee’s performance, there are several reasons
this research conducts which are; First, transfor-
mational leadership variable, employee job satis-
faction, organizationalcommitment,employee
performance are crucial elements for the success
of organizations and its employee, hence requiring
in depth research. Second, results inconsistency in
previous study with regard to relationship of trans-
formational leadership and performance was no-
ted. Hence, different research model need to be
proposed for further investigation. Third, accor-
ding to several theoreticalreviews and researches,
transformational approach in leadership model is
highly relevant to organization facing global com-
petition with major uncertainties and challenges.
The purposes of this research are; First, to prove
and analyze the influence of transformational
leadership towards employee job satisfaction;
Second, to prove and analyze the influence of
transformational leadership towards organizational
commitment; Third, to prove and analyze influence
of transformational leadership towards employee
performance; Fourth, to prove and analyze the
influence of organization commitment towards
employee performance.

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Research Hypotheses
H1.Transformational leadership significantly in-
fluences PTPN V Riau employee job satisfaction
H2.Transformationalleadership significantly
influences PTPN V Riau organizational commit-
ment
H3. Job satisfactionsignificantlyinfluences
PTPN V Riau employee performance.
H4. Organizational commitment significantly in-
fluences PTPN V Riau employee performance.
Interpersonal Variables Research
Initial hypothesis of this study is based on the
importance of a leadership role in influencing job
satisfaction of employees. In the job satisfaction
of subordinates understand there is a correlation
with aspects of the work, because basically
it’s own job satisfaction is an individual, where
each individual will have the satisfaction level is
different. More and more aspects of the work in
accordance with the wishes of the individual, the
higher the perceived level of satisfaction and vice
versa.
In order to encourage the achievement of job
satisfaction of subordinates, the leadership of the
organization through transformational leadership
should consider the relationship of these factors.
If subordinates feel the needs and expectations
are met will certainly try to devote myself entirely
to sasran and organizationalgoals. The next
subordinate will work better when knowing that
the organization provides opportunities for growth
(H1).
Transformationalleadership must have the
ability to match the vision of the future with
his subordinates.A vision must be moved by
persuasionand inspiration,not by a decision
or force. Commitment to this vision is closely
related to the belief that subordinates of leaders.
It is impossible that a leader is not trusted can
successfully achieve its commitment to a new
vision for the organization. Trust depends on the
perceivedexpertiseof these leaders, but also
depends on the consistency of the leaders in the
statements and actions of leaders (H2).
Job satisfaction affects employee performance,
meaning that an individual’sperformancewill
increase when the job satisfaction of individuals
are at a high. A person tends to work with passion
if satisfaction can be obtained from the work. Job
satisfaction is a key driver of employee morale, dis-
cipline and work performance of employees in the
company’s goals in support tewujudnya. Job satis-
faction is high, or both will make employees more
loyal to companies or organizations. The higher
the job satisfaction of employees will provide op-
portunities to achieve optimal performance (H3).
In principle, a commitment to grow the organiza-
tion can be done in various ways. Commitment
can be stimulated before someone becomes part
of an organization such as carrying out a good se-
lection to get the employees who actually have the
perception, expectation, or the value correspon-
ding to the organization. Or someone who will join
the organization to understand where they work.
Commitment can be formed when someone has
just become part of the organization, through a
program of socialization and a good orientation.
Socialization and orientation program is essential
to accelerate the organization’s employees. Com-
mitment can be formed even after someone for so
long been part of the organization through a career
path or provide enough job challenging. Commit-
ment will be of great benefit to the development
organization in the future, especially to improve
employee performance (H4).
Relationship between research variables and
research hypotheses can be seen in Figure 1.
In Figure 1 are shown the positive influence of a
variable to another variable, which is preceded by
a variable that transformational leadership has a
H1 H3
H4
H@ H2
ServiceRewardIndepende
nce
Compensati
on
PrestigeActivities
Motivation
Inspiration
Job satisfaction
(Y1) Behavior
Idealized
Influence
Intellectual
Stimulation Employee
Performance
(Y3)
Transformational
Leadership (X)
Individual
Considerati
on
Results
Organizational
Commitment
(Y2)
RationalAffective Normative
Figure 1. Relationship of research variables and research hypotheses.
positive effect on job satisfaction of employees.
Further transformational leadership has a posi-
tive effect on organizational commitment of em-
ployees.Linking other variablesthat positively
influence employee performance is the variable
of job satisfaction. And finally a positive influence
on organizational commitment to employee per-
formance
METHODS
Research Approach
In order to answer research problems, this
research employs quatitativeand qualitative
approaches.Quantitativeapproach was done
to attain four research objectives which are: to
analyze the influence of tranformational leadership
on job satisfaction, organizational commitment
and employee performance at PT. Perkebunan
Nusantara (PTPN) V Riau. On the other hand,
qualitativeapproach is used to obtain a big
picture of the real transformational leadership,
job satisfaction, organizational commitment
and employee performance at PT. Perkebunan
Nusantara V, as one of the agribusiness enterprises
in Riau Province.
Place of Research
This research was conducted at PT. Perkebunan
Nusantara V (PTPN V) Riau Provice, a plantation
company which spreads across 5 Districts
including Rokan Hilir District, Rokan Hulu District,
Kampar District, Siak District and Indragiri Hulu
District.
Research Populaton and Sample
Population is a group individual or research objects
which at least have one similar characteristics
(Umar, 2003). Research population in this study
is all permanent employees of PT.Perkebunan
Nusantara V Riau in 2010. Employees included in
this research are middle management employees
consists of Head of Deparment, Plantation
manager, Plant Manager, Head of Bureau/Division,
Head Assistant, Head of Strategic Business Unit
(SBU), Chief Engineer and Head of hospital, with
the total of 146 respondents.
According to Ferdinand (2006), samples are the
subset of population, consisting of several part of
population. Sample size has important role in the
estimation and interpretation of SEM results. Hair
and Ferdinand (2006) suggests that appropriate
sample size for SEM analysis is between 100-200.
If the sample size is too large > 400, the analysis
becomes so sensitive that it is difficult to obtain a
good measure of Goodness-of-fit.

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Sampling technique used in this study is Census
Method, a techique of sample selection where
all population are considered as samples(Umar,
2003) which is 146. In other words, the total
research samples has fulfilled the data analysis
criteria using Structural Equation Modeling (SEM).
The distribution of research respondents can be
clearly seen in Table 2.
Research Variables and Measurement
of Variable Indicators
Research variables can be classified into: First,
exogenous variable, variable that are not predicted
by other variables in the model (Ferdinand, 2006). It
is also known as source variable atau independent
varible. In this research, exogenousvariable
is transformationalleaderhip (X1). Second,
endogenous variable, a variable that is predicted
by one or more variables in the model (Ferdinand,
2006). There are two endogenous variables in
this research; First, variable affected when the
exogenous variable influences the endogenous
variable (Sekaran,2003).In this research the
intervening variable is job satisfaction (Y1) and
organizational commitment (Y2). Secondly,
dependentendogenousvariable or dependent
variable. The endogenous variable is employee
performance (Y3).
Field/ Division (Position) Total (person)
Head of Department 14
Plantation Manager 27
Plant Manager 10
Head of Bureau/Division 40
Head Assistant 34
Head of SBU 15
Head of Engineer 3
Head of Hospital 3
Total 146
Table 2. Distribution of Total Middle Management Employees at PTPN V Riau in 2010
Reference: PTPN V Riau
The indicators of transformationalleadership,
job satisfaction, organizational commitment and
employeeperformancevariableswere measu-
red through PTPN V Riau middle manager’s per-
ception, using questionnaires. The questionnaire
consists of several questions based on relevant
theory related to each analyzed variable. The 5
point Likert scale was used to measure attitude,
opinion and perception of an individual or a group
of people about social phenomena(Sugiyono,
2006). The transformational leadership indicators,
which include idealized influence, inspirational
motivation, individualized consideration and intel-
lectual stimulation (Bass dan Avolio,2003) were
measured through middle manager’s perception
on the scale of: strongly disagree = 1, disagree = 2,
quite agree = 3, agree = 4, strongly agree =5. Em-
ployee work satisfaction variable was measured
with following indicators: activity, compensation,
independence, reward, social status, and social
services (Robbins, 2006), having the attribute of
very dissatisfied= 1, dissatisfied = 2, quite satisfied
=3, satisfied = 4 and very satisfied = 5. Further-
more, organizational commitment’s indicators are
affective, normative and rational (Robbins, 2006)
measured in the scale of: strongly disagree = 1,
disagree = 2, quite agree = 3, agree = 4, stron-
gly agree =5. Lastly, the employee performance
variable indicators includes: behavior and results
(Amstrongdan Baron, 2005) with the attribute of:
strongly disagree = 1, disagree = 2, quite agree =
3, agree = 4, strongly agree =5.
Type and Source of Data
There are two kinds of data collected in this
research, primary and secondary data. Primary
data were collected through direct interview with
respondents with the use of questionnaire. On
the other hand, secondary data were collected
from several sources mainly from PT. Perkebunan
Nusantara V Riau.
Data Collection Technique
The data collection technique employed
questionnairedistribution,where the data are
collected based on the list of questions designed to
meet the intended objectives. The questionnaire
was distributedto each respondentand each
questionnaire item was organized according to
the research variables.The questionnairewas
directly distributed to respondents with the help of
related department handling the human resource
matters.Respondentswere explained on the
instruction of use, focusing on the objective and
the aim of study for easier understanding and
questionnaire completion. Secondly, in addition
to questionnaire, interview technique was also
used. The interview was conducted directly to
respondents/employeesduring their work to
obtain technical information and data to further
add, support, complete any data that have not
been covered in the questionnaire.
Data Analysis
Validity and Reliability Testing
Data hold important role in a research because
they reflects the variable in question and functio-
ned as a tool for hypothesis test.Data validity repre-
sents the data quality. This relies on the instrument
used which fulfills the validity and realibility prin-
ciples.
The Confirmatory Factor Analysis (CFA) was ap-
plied to test instrument’s validity and realibility.
The detailed results were presented in Appendix
1. The instrument is considered validunidimensio-
nalfor GFI score> 0.90 and considered reliable for-
Construct reliability score> 0.70 (Ferdinan, 2006).
Index Testing Criterion Remarks
X2 (Chi – Square Statistics) Small value
expected
Testing whether population covariace
estimated to be the same as sample
covariance (research model proposed
according to field data)
Probability ≥ 0.05 Significance test towards covariance
matrixand estimate of covariance matrix
RMSEA ≤ 0.08 Compensate the weakness of Chi – Square
in large sample size
GFI ≥ 0.90
Calculateaweighted proportionofvariance
in sample matrix accounted for by the
estimated population covariance matrix
(analog R2 in double linear regression)
AGFI ≥ 0.90 GFI adjusted to DF
CMIN/DF ≤ 2.00 Coherence between research data and
model
TLI
GFI ≥ 0.95
Comparison between investigated model
and baseline model.
Model applicability testing insensitive to
sample size and complexity of model.
Table 3. Goodness of Fit Indexes for Model Evaluation
Reference: Ferdinand (2006) danSolimun (2004)

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Descriptive Analysis
Descriptiveanalysisdata is used to figure out
variable’s characteristics that are measured by
several indicators.Descriptivestatisticsprovides
frequency, mean, the maximum and the minimum
value of each indicator.
HypothesisTesting
The influential pattern observed in investigated
variable is a causal relationship between one or
more independent variables and one or more
dependent variables. The causal relationship
presented, utilizes an unsimplified research
model: the presence of variable with dual role,
as an independent variable in one case and as
a dependentvariableon the other case. This
relationship requires analytical tool that is able
to simultaneouslyexplain the relationships.
Structural Equation Modeling (SEM) was used to
test and analyze relationship between research
variables using AMOS software (.Ferdinand, 2006),
suggested the Goodness of Fit Indexto evaluate
research model. It is shown in Table 3.
RESULTS AND DISCUSSION
Test of Instrument Validity and Reliability
Results oftest instrument validity andreliability of
each variable are shown in Table 4.
The result of instrument validity and reliability test
presented in Table 4 indicates that all researchva-
riabls are valid and reliable (GFI score >0.9 and
construct reliability > 0.7).
Variable GFI Construct Reliability
Transformational Leadership(X1) 0.953 0.919
Job Satisfaction (Y1) 0.958 0.853
Organizational Commitment (Y2) 1.000 0.967
Employee Performance (Y3) 0.986 0.809
Reference : Data analysis (2010)
Table 4. Results of Validity and Reliabililty Instrument Testing
Decriptive Variable
The result of decriptive analysis includes frequen-
cy, which is attained from tabulation of 146 res-
ponses scores, shown below:
• Responseson TransformationalLeadership
Indicators
Respondent’s perceptions towards transfor-
mational leadership are: idealized influence
(4.29), insipiring motivation (4.19), intellec-
tual stimulation (4.25) and individual consi-
deration (4.13). This result indicates that the
influence/responsefor each leadershipdi-
mension is relatively uniform with Standard
deviation of less than 1.
• Responses on Job Satisfaction Indicators
Respondent’s perceptions towards job satis-
faction are: activities(4.14), compensation
(4.22), independence (4.11), reward (4.22),
service (4.24) and prestige (4.40). The res-
ponse to each job satisfaction dimension is
quite uniform with the S.D of less than 1.
• Responseson OrganizationalCommitment
Indicators
Respondent’s perceptions on organizational
commitment are: affective (4.23), normative
(4.12),and rational (4.34). Similarly, uniformity
of reponses is observed with a lower than 1
standard deviation.
• Responses on Organizational Employee Per-
formance
Employee performance ispercepted as: beha-
vior (4.24) and results(4.35). The response
of each work motivation dimention shows
uniformity,with a standard deviation of less
than 1.
Results of the Analysis of SEM and Hypothesis Test
Model Testing
Results of Goodness of fit overall modeltest,
done to understand whether hypothesized model
supported with empirical data, are presented in
Table 5.
According to the result of the Goodness of fit
overall model test presented in Table 5, it can
be concluded that the seven criteria used model
feasibility testing have fulfilled the requirement,
without requiringany further adjustment.This
indicates good fit of the measurementmodel
and hence proposed model considering data and
research model coherence.
Hypothesis Test
Results of hypothesistest between research
Table 5. Results of Goodness of Fit Overall Model Test
Criteria Cut-of value Results Remarks
Chi- Square Small 157.410 Good Model
p-value ≥ 0.05 0.634
CMIN/DF ≤ 2.00 1.227 Good Model
GFI ≥ 0.90 0.986 Good Model
AGFI ≥ 0.90 0.952 Good Model
TLI ≥ 0.95 0.973 Good Model
CFI ≥ 0.95 0.977 Good Model
RMSEA ≤ 0.08 0.045 Good Model
Reference : Data analysis (2010)
Table 6. Results of Hypothesis Test of Variables Influence
No Independent VariableDependent VariablePath Coefficient p – value Remarks
1 Transformational
leadership (X)
Job satisfaction(Y1) 0.984 0.035 Significant
2 Transformational
leadership (X)
Organizational
Commitment(Y2)
0.635 0.004 Significant
3 Job satisfaction (Y1) Employee Performance
(Y3)
0.642 0.003 Significant
4 Organizational
Commitment ( (Y2)
Employee Performance
(Y3)
0,968 0.034 Significant
Note: *** = p < 0,001
Reference : Data analysis (2010)
variables in each pathaccording to SEManalysis,are
concisely presented in Table 6.
According to Table 6,the hypothesis test suggested
that; First, transformationalleadership signifi-
cantly influences job satisfaction. This is shown
by the path coefficient of 0.984, with significance
probability of 0.035. Therefore, transformational
leadershipsignificantlyinfluences job satisfac-
tion by 0.984, which means that each increment
of transformational leadership, will result in the
increase of job satisfaction by 0.984. The finding
supportsthe hypothesisstatingthattransforma-
tional leadership significantly influences PTPN V
Riau employee job satisfaction. Secondly, trans-
formational leadership significantlyinfluences
organizational commitment. Based on the path
coefficient result of 0.635 and significance proba-

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Marnis Atmojo / The Influence of Transformational Leadership on Job Satisfaction, Organizational Commitment, and Employee Performance / 113 - 128International Research Journal of Business Studies vol. V no. 02 (2012)
bility of 0.004 transformational leadership is signi-
ficantly shown to influence employee organiza-
tional commitment. Transformational leadership
significantly influences employee organizational
commitment by 0.635, which means that every
increase in transformational leadershippromotes
the employee’sorganizationalcommitmentby
0.635. This research finding further confirms the
hypothesiswhich states that transformational
leadership significantly influences PTPN V Riau
employee organizational commitment. Third, job
satisfaction significantly influences employee per-
formance. This is evident from path coefficient
of 0.642, with significance probability of 0.003.
Therefore, employee job satisfaction significantly
influences employee performance by 0.642, im-
plying that the increase in job satisfaction by one
scale, rises employee performanceby 0.642. The
positive correlation supports the initial hypothesis
stating that job satisfaction significantly influences
PTPN V employee performance. Fourth, organi-
zational commitment shows a statistically signi-
ficant influence on employee performance.This
is shown by path coefficient that scored 0.968
and significanceprobabilityof 0.034.In other
words, organizationalcommitment influences
employee’s performance by 0.968, indicating that
every improvement in organizational commitment
will increase employee’s performance by 0.968.
Similarly, the research finding further confirms
the hypothesis which mentioned that organizatio-
nal commitment significantly affects PTPN V Riau
employee performance.
Transformational Leadership Significantly
Influences PTPN V Riau Employee
Job Satisfaction
Research finding shows that transformational lea-
dership significantly influences employee job sa-
tisfaction. This indicates the higher transformatio-
nal leadership quality of middle management, the
higher employee job satisfaction. In short, there
is enough empirical evidence to accept hypothe-
sis (H1) which states transformational leadership
significantly influences employee job satisfaction
This findings are aligned with results of other study
by TondokdanAndarika (2004), which mentioned
that transformational leadership have a positive
and significant impact on job satisfaction. Howe-
ver, this finding is contrary to the research by
Sudarmasto (2005), which suggested that transfor-
mational leadership did not significantly influence
job satisfaction.
Furthermore, research resultsare in line with Rob-
bin’sfinding (2001). There are several influential
process found as a result of transformational lea-
dership. The firstis the influence of transformatio-
nal leadership towards job satisfaction. Transfor-
mational leadership is a leadership that considers
the need of individual self-development as well as
stimulating and inspiring the followers to accom-
plish more in reaching theirwork goals.
Robbins (2001) concept was supported withSu-
darmasto(2005), which suggested that transforma-
tional leadership is change-oriented leadership, in
which organization vision is not only formulated
but also implemented.
According to Bass andAvolio (2003), transforma-
tional leadership is change-oriented leadership,
in which organization vision is not only formula-
ted but also implemented through; First,idealized
influence. Leader, through personal authority can
extraordinarilyinfluence his/her subordinates.
In the context of PTPN V, the idealized influence
arises in a consistent leader. The subordinates not
only admire and respect but also trust the leader.
As an example, before enforcing discipline to the
subordinates, leaderfirst nurturesa self-disciplined
attitude.The second is inspirational motivation.
This refers to leader’s ability to emotionally inspire,
motivate, cheer, festive dan even praise his/her su-
bordinates. In this research, the manager provides
support and encouragement to the subordinates
to achieve organization goals, employee promo-
tion is provided as a reward. Third, individualized
consideration, the ability and responsibility of a
leader in providingsatisfactionand encourage
subordinate’s productivity. The leader tend to be
friendly,informal, close to his/her subordinate
and treat them equally, providing advice, help and
support for personal development.For instance,
the plant manager of PTPN V Riau encourages the
subordinates to continuously enhance their career
prospects through improvement in productivity. In
this way, an employee can be recommeneded for
advancement in rank or position in the company.
The lastly is intellectual stimulation. It is the abi-
lity of a leader to intellectually stimulate his/her
subordinates through motivation. For an example,
leaders at the plant managerlevel at PTPN V Riau,
allows the subordinates to communicate any pro-
blems and issues as well as the potential proposed
solutions.
To further understand job satisfaction, it should be
noted that job satisfaction is subjective in nature,
where each individual experiences different level
of job satisfaction. The more job aspects match
individual’s desire, the higher job satisfaction, and
vice versa.
Transformational Leadership Significantly In-
fluences the PTPN V Riau Employee Organizatio-
nal Commitment
This study found that transformational leadership
insignificantly influences employee organization
commitment.Hence, the transformationallea-
dership at PTPN V Riau has significant influence on
employee organization commitment. In conclu-
sion, there is not enough empirical evidence to
accept the hypothesis (H2) which states that trans-
formational leadership significantlyinfluences
employee organizational commitment.
Research by Tobing (2009) finds that transforma-
tional leadership has significant influence on orga-
nizational commitment. This finding is further sup-
ported with study done by Fortmann et al. (2003)
which proposes significant influence of transfor-
mational leadership towards organizational com-
mitment.
Transformationalleadership improves organi-
zational commitment, for instance, through the
ability of middle management to assist their su-
bordinate’s career advancement or involve them
in training programs. This creates reluctancy for
employees to leave the company because of the
potential of career advancement.
Direct transformationalleadership canincrease
organizationalcommitment. A leader should
emphasize the subordinates to do their utmost
work as they are part of the organization.
Furthermore, transformational leadership also en-
hances organizational commitment of the subor-
dinatesthrough vision transmission. Commitment
to company vision is strongly related to follower’s
trust in the leader. The transformational leadership
applied in PTPN V Riau is shown to strengthen or-
ganizational commitment by emphasizing subor-
dinates to do their utmost work, considering that
they are part of the organization.
Job Satisfaction Significantly Influences the PTPN
V Riau’s Employee Performance
The study results demonstrate that job satisfaction
significantly affects employee’s performance.
As previouslymentioned,the higher PTPN V
Riau’s employee job satisfaction the higher
their performance are. In short, there is enough
empirical evidence to accept Hypothesis 3 (H3)
which states employee job satisfaction significantly
influences employee’s performance.
This is in line with study done by Andrew (2004)
which argues that job satisfactionsignificantly
influencestennis player’sperformance.Similar
finding is suggestedbyTobing (2009) which
demonstratesthat job satisfactionsignificantly
influencesemployeeperformance.Shortly,the
higher the job satisfaction results in higher the
employee performance.
Employee satisfaction impacts on improvement in
PTPN V Riau’s employee performance. In order to

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Marnis Atmojo / The Influence of Transformational Leadership on Job Satisfaction, Organizational Commitment, and Employee Performance / 113 - 128International Research Journal of Business Studies vol. V no. 02 (2012)
achieve optimal performance, a plantation mana-
ger must be responsible to any issues related to
region/sector allocated as his/herareaofresponsi-
bility. For instance, plantation unit A requires a
plantation assistant. If positive work performance
was observed, the person would be promoted
to handle wider section, as an example, planta-
tion sector type B. This reward system stimulates
job satisfactionto the employee because the
workload/responsibilityis delegated according
to one’s ability. The job satisfaction therefore, in-
creases work performance.
Organizational Commitment Significantly
Influences PTPN V Riau Employee Performance
Results of this study show organizational commit-
ment has positive and significant influence towards
employee performance. As mentioned previously,
the higher employee organization commitment,
the higher the performance. In conclusion, there is
enough empirical evidence to accept Hypothesis
4 (H4) which states organizational commitment
significantly influences employee performance.
This empirical finding is in line with previous re-
search which illustrates the relationship of orga-
nizational commitment to performance (Carmeli
and Freund, 2004). Similar findings were noted
in research done by Andrew (2004) involving the
collection of samples from employees working in
manufacturing and service companies. The study
demonstrates that organizational commitment is
also related to performance.
The employees of PTPN VRiau are committed to
improve their performance which further impacts
on company profit and bonus/reward distribution.
The pride and gratefulness of working in a state-
owned company motivatesemployees to be
responsible and better in performance.Highly
commited employeestend to believe that the
job is the main source of income for the family.
In PTPN V Riau, employee achievement is always
appreciated both financially and non-financially.
Employees are valued as company’s asset.
MANAGERIAL IMPLICATIONS
From the analysis and findings of research
conducted, resulting implications in the field of
human resource management, especially those
associated with transformationalleadership,
job satisfaction, organizational commitment
and employee performance. Of the relationship
between variables indicate if the study confirm
previous research work, therefore the results
of this study can be an empirical reference for
the practitioner to implement important policies
related to these variables along with examining
the indicators used in this study.
Obtained in addition to the positive implications,
this study also has limitations of the study. Although
already qualified the use of SEM, but research is
still using relatively few respondents compared
to the possibility of many employees who engage
in transformational leadership. Another limitation
is the subject of this study involved only middle
manager, the PT. NusantaraV,. Developeda
possible future studies that use subjects who
engaged in similar businesses and industries, such
as PT. Plantation and PT Nusantara II. Nusantara III
plantation in North Sumatra and PT. VII Nusantara
Plantation in Lampung province.
Further assume that this research model to build
on this research is only determined by a series
of transformationalleadership variables, job
satisfaction, organizational commitment and
employee performance. Yet the reality may not
be as simple as that. Fore expected to add other
important variables such as, competencies,
education and training, organizationalculture,
innovation, compensation and work environment.
CONCLUSION
1. Tranformationalleadership significantlyin-
fluences employee job sastifaction at PTPN
V Riau. In other words, tranformational lea-
dership should be able to understandthe
diverse need of individuals. The more work
aspects match with the individual desires,the
higher employee job satisfaction at PTPN V
Riau.
2. Tranformational leadership significantly
influences employee organizationcommit-
ment at PTPN V Riau. This implies that trans-
formational leadership should encourage
employee’strust. Trust building relies on
leader’s expertise and leader’s consistency
in articulating statements and attitudes. As a
result, transformational leadership improves
employee’sorganizationalcommitment at
PTPN V Riau.
3. Job satisfaction significantly influences PTPN
V Riau employee performance,suggesting
that job satisifaction improves PTPN V Riau
employee performance. Satisfied employee
has better performance than those unsatis-
fied. The satisfactionresults in happiness
which means that the company meets em-
ployee’s work expectation.
4. Organizationalcommitmenthas significant
influence on PTPN V Riau’s employee
performance. The finding implies that
job satisfactionenhances PTPN V Riau’s
employee performance. A high level of
organizational commitment promotes loyalty
to the company.
Recommendations
1. The theoriesthathave been developed in
this research can be further developed and
continued in the future research conduct, to
create more comprehensive problem solving
model for transformationalleadership,job
satisfaction, organizational commitment and
employee performance.
2. PTPN V Riau leaders should predominant-
ly implement transformationalleadership
in every leadership layer, especially in the
middle management level.
3. The leader and the management of PTPN V
Riaushould increase the employee’swork
satisfactionlevel. Furthermore,the middle
management should optimize their capabili-
ties in reaching the set target to improve em-
ployee performance. Efforts in developing job
satisfaction should focus on the main contri-
buting factors such as: activities, compensa-
tion, independence, reward, social status and
social services.
4. The leader and the management of PTPN V
Riaushould enhance organizational commit-
ment. This can be done through embedment
of company vision through the three aspects
of commitment, namely affective, normative
and rational commitment.
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This paper examines the value creation on the acquisition of Volvo
Car Corp by Zhejiang Geely Holding Group. The acquisition of Volvo
by Geely became an interesting topic to discuss since it was the first
time in automotive industry that a Chinese company acquired an
international company with a considerably high transaction amount.
The paper examines the short term value creation using event study
to calculate abnormal returns of each company’sstock during
the announcement period and measuring the significance of the
cumulative abnormal return. The findings are consistent with previous
studies over the years which have shown that most acquisitions fail
to add value for shareholders in the acquiring company. The paper
discusses the broad managerial implications of the findings this paper
discussion on marketing aspect after the acquisition by integrating two
different brand perceptions.
© 2012 IRJBS, All rights reserved.
Received: December 16, 2011
Final revision: May 3, 2012
Keywords:
value creation,
acquisition,
Geely,
Volvo,
automotive,
China,
event study,
abnormal return,
cumulative abnormal return,
management,
brand perception,
cross border transaction
Corresponding author:
*[e-mail]
**[e-mail]
Yane Chandera*, Handyanto Widjojo**
Prasetiya Mulya Business School, Jakarta - Indonesia
A R T I C L E I N F O A B S T R A C T
Automotive industry in China has been
growing tremendously for the last some
years (China Association of Automobile
Manufacturer, 2009; Ma, Pagán, & Chu, 2009), since
it became the member of World Trade Organization
and was more exposed to open market mechanism
(World Trade Organization, 2001). Considering
the increase of fierce global competition and
the slowdown of the global economy, Chinese
government decided to revitalize the automotive
industry. Acquisition strategy was one of the
Chinese government strategy to speed up China
auto industry to become the big 10 internationally
auto manufacturer as well as to attract more
international capital (Harlem & Scramm, 2009).
The prerequisite of the successful merger and
acquisition (M&A) as the vehicle for improving
Vol. 5| No. 2
ISSN: 2089-6271
Value Creation through Acquisition Strategy:
A Study of Volvo’s Acquisition by Geely