The Effect of Leadership and Compensation on Employee Performance: Evaluating the Role of Work Motivation
This research aims to evaluate the effects of leadership and compensation toward employee performance, and the role of motivation in Savings and Loans Co-operatives in Palembang, Indonesia. The study took 100 respondents from a population of 130 co-operatives’ managers. The researchers applied validity and reliability testing towards 30 pilot testing respondents. The descriptive analysis used SPSS and inferential analysis used Lisrel 8.8. with Structural Equation Model (SEM). The findings revealed that leadership significantly affect work motivation. Compensation does not affect work motivation.Meanwhile, work motivation significantly influence job performance. Leadership owns a more considerable direct influence (0.23) on job performance than indirect effect through work motivation (0.08). Compensation has a more prominent direct influence (0.32) on performance than the indirect impact through work motivation (0.03). It means that leadership is not the mediating variable. The findings showed that leadership and compensation could directly improve employee performance without the involvement of employees’ motivation. The total influence of leadership towards job performance through work motivation is more significant (0.55) than the total influence of compensation towards job performance through work motivation (0.24). The critical finding of this research is improving job performance in Savings and Loans Co-operatives in Palembang by increasing work motivation and leadership capacity.