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Advances in Social Sciences Research Journal – Vol. 9, No. 9
Publication Date: September 25, 2022
DOI:10.14738/assrj.99.13155. Algathia, S. A., Mohamed, R., Choy Leong, Y., & Abdullah, A. R. (2022). The Mediating Effect of Psychological Contract and Job
Satisfaction on the Relationship between Leadership and Job Performance: A Proposed Framework. Advances in Social Sciences
Research Journal, 9(9). 475-485.
Services for Science and Education – United Kingdom
The Mediating Effect of Psychological Contract and Job
Satisfaction on the Relationship between Leadership and Job
Performance: A Proposed Framework
Salem Ali Algathia
Ph.D. Candidate; School of Business and Economics UPM, Malaysia
Rosmah Mohamed
Ph. D, School of Business and Economics, UPM, Malaysia
Yee Choy Leong
Ph. D, School of Business and Economics, UPM, Malaysia
Abdul Rashid Abdullah
Ph. D, School of Business and Economics, UPM, Malaysia
ABSTRACT
Today, more than ever, achieving Job Performance is one of the most challenging
objectives for companies. The main objective of this paper is to investigate the role
of Psychological Contracts and Job Satisfaction as mediators in leadership and Job
performance relationships in the Saudi hospital sector. Moreover, the direct effect
of leadership practice on Job performance. Simultaneously, the literature
background of variables of study under the psychological contract theory would be
discussed to propose the research model. The study depends on the secondary
resource, the nature of the study, therefore, is exploratory, and the analysis relies
on critical content analysis and theming procedure to construct its findings. The
study found that both psychological contracts and job satisfaction have a mediating
role in the relationship between leadership and job performance.
Keywords: leadership, Psychological Contract, Job Satisfaction, Job Performance, Hospital
Sector, Saudi Hospital Sector.
INTRODUCTION
There has been a shift in the traditional employee's commitment, resulting in the concept of
psychological agreement becoming a center for leadership studies. The effect of psychological
contracts on job satisfaction increases the chances of people getting hired, their happiness on
the job, and their organizational citizenship behavior [1]. As understood, leadership is the
capacity to motivate and direct subordinates or other employees toward reaching common
goals. Being a competent leader necessitates a wide variety of skill sets because of the nature
of the position itself. It encourages leaders to create a compelling vision, helps them set
attainable goals, and equips their followers with the information and resources they need to
succeed [1]. Leadership is essential in many spheres of modern life, from businesses and
governments to nonprofits and civic groups [2]. As in every company, the leadership position
is crucial to the achievement or collapse of a corporation. Successful companies owe a great
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Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 9, September-2022
Services for Science and Education – United Kingdom
deal to the leadership that guides them. This research investigates the mediating function of
psychological contracts and job satisfaction between leadership and performance in the
workplace.
Bowling and Sessa [3] have spent the last few decades investigating unproductive workplace
job satisfaction patterns and the connection to psychological contracts. Their findings
categorized these tendencies under multiple names, including organizational transgression,
workplace aggressiveness, and unethical conduct. Although each of these acts was widely
debated, they all have one thing in common. Bowling and Sessa [3] added that they were
voluntarily harmful activities that damaged or lowered workers' productivity. Some
businesses' employment of contract workers on a short-term basis may be driven for several
reasons, including cheaper compensation, less financial rewards, and more versatility of
business hours.
Leadership is the most difficult challenge that businesses confront daily to ensure that their
employees are happy in their positions to increase their production and keep their company's
operations running smoothly [4]. Unfortunately, this is never an easy process because
employees' relationship is influenced by psychological factors [4]. Therefore, most scholars
believe that the psychological contract significantly affects the level of work satisfaction that
employees experience [4]. Accordingly, these studies have acknowledged it as a meditation
framework for this study.
The effect of leadership on job performance has resulted in a steady increase in the number of
studies seeking to explain the relationship between the two variables in the framework of other
variables. Manzoor, Wei [5] studied the relationship between leadership and job performance,
and its finding published in a 2019 article. However, that study considered the relationship
between servant leadership and job performance within the framework of cooperative social
responsibility as the mediating factor. Another recent study by Kadarusman and Bunyamin [6]
investigated this topic by focusing on knowledge sharing and trust as mediating factors. A lack
of research publications on the relationship between leadership and job performance within
the framework of psychological contract and job satisfaction, which are believed to have a
mediating effect on this topic, is a critical theoretical gap.
The gap in the existing literature regarding the topic of this study means that empirical evidence
on the mediating effect of psychological contract and job satisfaction on the relationship
between leadership and job performance is missing. A psychological contract is critical for
employees’ work satisfaction and retention [7]. Besides, leadership style has also been reported
to influence employees’ job satisfaction and job performance [8]. As a result, there is a need to
address this missing gap in the literature.
THEORETICAL FRAMEWORK
Psychological contracts are expectations, ambitions, beliefs and obligations held by employees
as perceived by their employers and other workers. Psychological contract theory is critical in
understanding the employment relationship. Employees with a poor view of the company's
working environment, interpersonal relationships, or management style might have reduced
level of satisfaction [3]. Satisfied workers will be motivated to work thus improving their
individual and overall job performance. According to Fuadah, Daud [9], employees will be more
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Algathia, S. A., Mohamed, R., Choy Leong, Y., & Abdullah, A. R. (2022). The Mediating Effect of Psychological Contract and Job Satisfaction on the
Relationship between Leadership and Job Performance: A Proposed Framework. Advances in Social Sciences Research Journal, 9(9). 475-485.
URL: http://dx.doi.org/10.14738/assrj.99.13155
likely to work hard for the company and form a good relationship with the leaders if they
perceive their leadership style to be supportive and inclusive, thus improving job performance.
According to the hypothesis, there is a clear correlation between a high degree of internal envoy
and the following employee outcomes: loyalty, involvement, engagement, and performance
[10]. Therefore, it is more reasonable to hypothesize that an organization's staff performance
would improve if its employees' goals were met since this would increase their dedication to
the company's success and their likelihood of staying with the company for a more extended
time. The mediation framework is crucial to the success of a corporation in today's market
because of the widespread availability of trained workers and business expertise [11]. The
psychological theory ensures that the area of information management is frequently hindered
in industries by two variables:
Ø Employee turnover
Ø A reluctance to share information
The psychological theory ensures that employee retention is not a problem even though the
refusal of certain workers to share their expertise becomes destructive [9]. Staff may choose to
suppress information to increase its value, despite being aware that information is power.
Okabe [12] explains that incorporating intelligence-sharing techniques into business goals,
people management procedures, connections, and the institution's culture may support and
drive continuous, constant demand, which is crucial for preventing the spread of such trends.
The notion of a psychological contract was first introduced in Montes, Rousseau [13] book.
These obligations may take the shape of a thing or a set of steps. According to this critical
thinking, a psychological contract rests on the idea that workers and management have mutual
responsibilities [13]. However, Špaček [14] adds that each company promised to fulfill these
responsibilities at all times. The psychological agreement must be used as a theoretical basis to
explain the connection between leadership and work performance [15].
van der Heijden, Kuhlmann [16] discovered that most companies had embraced this initiative
to develop a deeper conceptualization of the notions. This was done to make clear the
cornerstones of any enterprise. Employees believe their employers are obligated by law to
provide them with salary, professional opportunities, and protection due to their
psychologically grounded ideas about what they are legally bound to attain for their
organization, such as efficiency [17]. These assumptions are based on what they perceive
compelled to get for their company, such as efficiency.
Leaders have the potential to improve productivity by fostering a positive work environment
and encouraging employees to provide their best efforts. They may be referring to processes
like adopting the best method of leadership [18]. Every manager has a distinct management
style, consisting of a set of habits of behavior that usually work well together and significantly
impact morale in the workplace [19].
According to Bulin [20], in the psychological contract framework, staff members feel they have
an implicit employment agreement with their organization because they regard their employer
as being devoted to supplying their financial and superficial requirements in exchange for the
employees' success. In other words Haque [21] adds that employees believe that their company
owes them something in return for the job they have done for the firm. Fryer [22] argued that