The impact of leadership style on employee motivation and performance in the Saudi financial sector

Abstract

This study investigates the impact of four leadership styles—transformational, transactional, authoritarian, and laissez-faire—on employee motivation and performance in the Saudi financial sector, within the broader context of institutional reforms and Vision 2030. A quantitative, positivist approach was adopted, using a structured online questionnaire distributed to a sample of 80 employees from government, semi-government, and commercial financial institutions. The data were analysed using SPSS, applying descriptive and inferential statistical methods such as correlation and multiple regression analysis. The results showed that the transactional leadership style was the most successful, exerting a significant beneficial impact on performance and motivation. Although it did not immediately result in better performance, transformational leadership dramatically increased employee motivation, indicating that institutional and regulatory limitations might restrict its usefulness. Laissez-faire leadership was negatively correlated with motivation and did not significantly correlate with performance, whereas authoritarian leadership had no discernible impact on either. Additionally, a strong positive link between motivation and performance was validated, highlighting the essential role of motivation as a mediating component in the dynamics between leadership and performance. Theoretically, this study challenges the notion that transformational leadership is always preferable by providing a comparative analysis of leadership philosophies in a Saudi setting. It offers valuable perspectives for managers, legislators, and human resources specialists, emphasising the importance of fusing the motivating attributes of transformational leadership with the accountability and structural clarity of transactional leadership. The study findings also advise reducing the dependence on authoritarian and laissez-faire methods.