The Role of Transformational Leadership, Organizational Culture, Work Motivation, and Competence on Employee Performance in Craft-Based MSMEs in Gondanglegi District, Malang Regency

Abstract

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Micro, Small, and Medium Enterprises (MSMEs) in the craft sector play a crucial role in Indonesia's economic development, particularly in rural areas like Gondanglegi District. However, these enterprises face significant challenges in maintaining competitive employee performance amid rapid market changes and technological advancement. This study examines the influence of transformational leadership, organizational culture, work motivation, and competence on employee performance in craft-based MSMEs in Gondanglegi District, Malang Regency. A quantitative approach was employed using a cross-sectional survey design. The sample consisted of 185 employees from 35 craft-based MSMEs in Gondanglegi District, selected through stratified random sampling. Data were collected using validated questionnaires and analyzed using Structural Equation Modeling (SEM) with AMOS 24.0.

The findings reveal that transformational leadership (β = 0.342, p < 0.001), organizational culture (β = 0.287, p < 0.001), work motivation (β = 0.315, p < 0.001), and competence (β = 0.398, p < 0.001) significantly influence employee performance. The model explained 67.8% of the variance in employee performance (R² = 0.678). Competence emerged as the strongest predictor, followed by transformational leadership, work motivation, and organizational culture. All four variables significantly contribute to employee performance in craft-based MSMEs. The study recommends that MSME owners focus on developing employee competencies through training programs while implementing transformational leadership practices to enhance overall organizational performance