The effect of leadership and teamwork on employee loyalty and organizational trust as a mediating variable

Abstract

The objective of this study is to determine the mediating role of organizational trust between the effect of transformational leadership and teamwork towards employee loyalty in the financial sector of Pakistan. 243 responses have been collected from the active employees of private banks of Pakistan using a 5-point Likert scale questionnaire and survey method while nonprobability purposive sampling strategy has been opted for the selection of participants. PLS-SEM has been employed for data analysis using SmartPLS v3. Organizational trust and teamwork have a positive effect on employee loyalty while transformational leadership has an insignificant effect on employee loyalty. Further, transformational leadership and teamwork have a positive effect on organizational trust. Lastly, organizational trust significantly mediates the effect of transformational leadership and teamwork on employee loyalty. Leader should also make an effort to inspire their direct reports by showing charisma and paying attention to each one of their needs. Intense competition and high customer expectations are challenges for the banking industry. Manager’s support will increase the sense of loyalty among the employees, fostering a trusting environment that encourages employees to keep working hard even under difficult conditions.