Introduction
High-quality employees are one of
the determinants of the company’s success in competing. This success
cannot be separated from the high employee performance, which is the
main factor in the business processes of a company. Several previous
studies have proven the role of employee performance in improving
company performance (Lajili et al., 2020; Makarius & Stevens, 2019;
Otoo & Mishra, 2018; Salman et al., 2020). Companies that consider
employees as company assets have spent a lot of budgets investing in
improving employee performance (Lajili et al., 2020; S. Lee, 2018).
Dankyi et al. (2020) explain that human capital is a company’s valuable
asset in increasing competitive advantage in a sustainable manner. Other
studies explain that good employee performance can meet customer
expectations (Leung et al., 2020), customer satisfaction and loyalty
(Maxham et al., 2008), high peer helping behavior (Pradhan & Jena,
2017), good decision making (Jordan & Audia, 2012), and increased
salary (Banker et al., 2013). The performance itself can be formed from
the ability to do work and previous experience (Pradhan & Jena, 2017).
For these reasons, this study tries to see the role of those factors
toward employee performance.
In addition to employee performance, work engagement is also seen as
important in indirectly improving company performance. Employees who
dedicate themselves to their work will be more serious in their work so
that they will indirectly contribute to the company’s performance.
Employees who have high work engagement also directly love their work so
they are more productive than employees with low work engagement. A
literature review by Wood et al. (2020) explains that work engagement is
an antecedent of work-life balance. Seeing the importance of employee
work engagement, several recent studies have examined the positive
impact of work engagement on employees and companies (Decuypere &
Schaufeli, 2020; Eldor et al., 2020; Lai et al., 2020; Mostafa & Abed
El-Motalib, 2020; Zheng et al., 2020).
One of the most influential factors in increasing employee performance
and work engagement is the role of the leader in the company. Apart from
being an administrative function in the company, a leader also plays a
very important role in communication and increasing employee work
motivation so that a quality leader can improve employee performance and
create employee work engagement. Regts et al. (2019) argue that leaders
in companies can directly improve employee performance. Another study by
Sheikh et al. (2019) also argues that leaders in companies can create
employee work engagement. However, a leader can also have a negative
impact on employees with the incivility/abusive behaviors carried out by
the leader. Several previous studies have explained that
incivility/abusive behavior by leaders can have a negative impact on
employees (Alola et al., 2019; Burton et al., 2012; K. Y. Kim et al.,
2019; A. C. Peng et al., 2019; Thompson et al., 2018; Waldman et al.,
2018; Watkins et al., 2019). This behavior can be formed from the
experience of the leader’s relationship with his employees so as to
shape the behavior of employees and leaders. One of the variables that
can explain the relationship between leaders and their subordinates is
the Leader-Member Exchange (LMX) which is the most studied dyad
relationship variable.
LMX is the closeness of the leader with his subordinates, both formally
and informally. LMX is also a situational variable that can explain the
influence of the leader’s role in improving employee performance. In
addition, employees who are close to their leaders (LMX in-group) get
more information, attention, and motivation compared to employees who
only have work contracts with their leaders (LMX out-group). A high LMX
can also minimize psychological uncertainty experienced by employees, so
employees feel calmer in carrying out their work and have clarity about
their future in the company (Zakiy, 2019). Leaders who are close to
employees are also more willing to help employees who experience
difficulties in their work so that employee work engagement can be
created. Several previous studies have confirmed the role of LMX in
improving employee performance and work engagement (Johnson et al.,
2017; Kim & Koo, 2017; Quade et al., 2020; Regts et al., 2019; S. Singh
& Vidyarthi, 2018).
High LMX between leaders and subordinates can be created due to several
factors such as demographic similarities between leaders and
subordinates (Emirza & Katrinli, 2019; Zagenczyk et al., 2015), the
personality of superiors (Kahya & Şahin, 2018), subordinates’ efforts
in building relationships (Maslyn et al., 2017), rewards from superiors
to subordinates (Young et al., 2020) informal communication between
leaders and subordinates (Peng & Lin, 2016). High interaction between
leaders and subordinates is carried out continuously, causing both
parties to understand each other, thus causing a high LMX between the
two. The match between leader and subordinates is the dominant factor in
forming LMX. Kristof-Brown et al. (2005) explained that
Person-Supervisor Fit (PS-Fit) is the most studied dyadic fit between
leaders and subordinates in the work environment. Leaders who have a lot
of compatibility with their subordinates are more often involved in work
that is carried out together. With a high PS-Fit, it will affect the LMX
between the two.
This study tries to look at the
role of leaders in influencing the performance and work engagement of
Islamic Bank employees. Researchers tried to see the effect of PS-Fit on
employee performance and work engagement with LMX as a mediating
variable. The LMX variable is placed as a liaison because the role of
PS-Fit does not directly affect employee performance and work engagement
but must pass LMX first. Employees who are compatible with their leaders
will form an LMX in-group to affect the performance and work engagement
of these employees. The Path-Goal Theory by House (1971) explains that
an effective leader is a leader who can motivate employees to work so
that work goals can be achieved. For this reason, the researchers tried
to connect PS-Fit with performance and work engagement through LMX.
The selection of Islamic banks as the object of research is because
banking services are the primary needs of modern society in carrying out
their daily activities. A study from McKinsey & Company in 2012
projected that the saving and investment industry, such as banking, will
become one of the highest consumption posts for Indonesians in 2030
(Zakiy, 2021). For this reason, Islamic banking must prepare Human
Resources to compete in retaining customers and attracting new
customers. Seeing that most of Indonesia’s population is diverse in
Islam, the prospect of Islamic banks in the future is very profitable.
In addition, the concept of Islamic banks that offer alternative
Islamic-based financial services is welcomed by both Muslim and
non-Muslim communities (Adelekan, 2021; Mohd Thas Thaker et al., 2020;
Olayiwola, 2021; Wu et al., 2019). During the Covid 19 era, Islamic
banking still exists and provided many benefits to the community
(AbdulGaniyy et al., 2021; Afandi, 2021).