Gen Z, born between 1995 and 2010, has unique characteristics that distinguish them from previous generations. Recent studies show that Gen Z values transparent, fair and empowering leadership more than traditional hierarchical approaches (Burhan, 2023; Steffens et al., 2021). They are more responsive to leadership styles that support flexibility, work–life balance and the search for meaning in work (Li et al., 2024). Unlike Millennials or Gen X, Gen Z tends to be more critical of authority, desires two-way communication and relies more on relational psychological factors such as trust, competence and job satisfaction (Kuzior et al., 2022; Reinikainen et al., 2020; Stevanovski et al., 2024). Therefore, it is important to understand the psychological mechanisms that mediate between transformational leadership and Gen Z performance.

The conceptual framework of this study was developed by integrating three main theories. Firstly, social exchange theory (SET) (Blau, 1964) explains that transformational leadership encourages the formation of trust through reciprocal relationships based on integrity, support and transparency. Secondly, SCT (Bandura, 1997) emphasises the importance of self-efficacy as individuals’ belief in their abilities, which is reinforced through modelling and support from leaders. Thirdly, self-determination theory (SDT) (Deci & Ryan, 2000) emphasises that job satisfaction arises when basic psychological needs – autonomy, competence and relatedness – are met, which can be influenced by trust and self-efficacy. Thus, trust, self-efficacy and job satisfaction do not stand alone but are interrelated as psychological mechanisms that mediate the relationship between transformational leadership and performance.

Transformational leadership has been consistently shown to enhance trust in leaders by creating a supportive and transparent work environment that fosters engagement and positive performance outcomes (Islam et al., 2021). Trust serves as a key mediating mechanism between leadership style and employee behaviours such as innovation and knowledge-sharing, with influence-based trust found to play a stronger role than cognition-based trust (Cao & Le, 2022; Naeem et al., 2021). Moreover, transformational leadership cultivates altruistic values and organisational commitment, which further reinforce trust as the foundation of effective leader–follower relationships (Kement et al., 2024).

Beyond trust, transformational leadership empowers employees by promoting a motivating work climate that strengthens self-efficacy – the belief in one’s ability to perform tasks effectively. This effect has been demonstrated across various contexts, including higher education and primary education (Hoang & Le, 2024; Lin et al., 2022), and has been associated with knowledge-sharing behaviours and innovative performance (Karimi et al., 2023; Sánchez-García et al., 2024). Self-efficacy, in turn, facilitates employees’ willingness to take initiative and adapt in dynamic work environments.

Transformational leadership also contributes to job satisfaction by inspiring employees and enhancing their sense of connectedness and work meaningfulness. Studies in nursing and education have shown that such leadership fosters satisfaction through personalised leader–follower exchanges and contextual support (Dababneh et al., 2021), while other research highlights its role in improving autonomy, engagement and work design effectiveness across sectors (Hundie & Mannekulih Habtewold, 2024; Kebe et al., 2024; Saif et al., 2024; Vila-Vázquez et al., 2024).

Integrating these findings, SET, SCT and SDT collectively explain how transformational leadership shapes employee outcomes. Leaders who inspire trust (exchange-based), strengthen self-efficacy (cognitive) and fulfil psychological needs that underpin job satisfaction (autonomy, competence, relatedness) ultimately foster higher levels of job performance. Accordingly, the following hypotheses are proposed:

Trust in leadership has a significant influence on employee self-efficacy. Leaders who demonstrate support, humility and strong motivation are able to increase employees’ confidence in their abilities (Castelnovo et al., 2023). Behaviours such as delegation and recognition also serve as indicators of trust that positively impact self-efficacy and performance (Rosenbruch et al., 2023). From the perspective of SCT (Bandura, 1997), trust provides a supportive social environment that reinforces employees’ belief in their capabilities, thereby strengthening self-efficacy. Empirical studies also highlight that trust mediates the relationship between leadership style and employee voice participation, with self-efficacy acting as a moderator (Dedahanov et al., 2022). In addition, trust indirectly contributes to self-efficacy through increased commitment, psychological well-being and autonomy (Mitson et al., 2024).

Trust also plays a crucial role in shaping job satisfaction. As a mediator between leadership style and work attitude, trust built through transformational, servant or inclusive leadership directly impacts higher job satisfaction (Rashid & Ilkhanizadeh, 2022). In educational and financial organisations, trust in leaders enhances satisfaction through feelings of being valued and the meaningfulness of work (Ashfaq et al., 2023). According to SDT (Deci & Ryan, 2000), trust fulfils employees’ basic psychological need for relatedness, which in turn fosters higher satisfaction. Trust is also considered an important prerequisite for successfully implementing sustainable HRM practices that support employee well-being and satisfaction (Farmanesh et al., 2023).

Consistently, trust in leadership has a significant impact on job performance. Trust-based leadership enhances adaptability, task performance and organisational stability (Perrier et al., 2024). Trust fosters a collaborative work environment that strengthens commitment and well-being (Kuráth et al., 2023). From the lens of SET (Blau, 1964), employees who trust their leaders are more likely to reciprocate with higher performance as part of a mutual exchange relationship. Meta-analyses also indicate that trust is the primary mechanism linking leadership style to performance (Legood et al., 2021), particularly in the healthcare sector with high psychological empowerment (Saleem et al., 2022). Based on the literature, the following hypotheses are proposed:

Social cognitive theory (Bandura, 1997) posits that self-efficacy reflects individuals’ beliefs in their capabilities to organise and execute the actions required to achieve desired outcomes. Employees with high self-efficacy tend to feel more competent and confident, which directly enhances their job satisfaction because they perceive greater control and mastery over their work (Fang & Qi, 2023; García-Lázaro et al., 2022; Ghahremani et al., 2024).

In addition to shaping satisfaction, self-efficacy is also a critical predictor of job performance. Bandura (1997) emphasised that individuals with stronger efficacy beliefs demonstrate greater persistence, resilience and willingness to engage in innovative behaviour, which collectively contribute to higher performance outcomes (Li et al., 2022; Namono et al., 2024). Furthermore, self-efficacy has been found to mediate the link between supervisor support and performance (Zeb et al., 2024) and to amplify the influence of transformational leadership on performance (Kusumah et al., 2021). A meta-analysis by Judge and Bono (2001) further validates that generalised self-efficacy is a robust predictor of both job satisfaction and performance.

At the same time, SDT (Deci & Ryan, 2000) provides an additional explanatory lens for the role of job satisfaction as a determinant of performance. When employees’ psychological needs for autonomy, competence and relatedness are fulfilled, they experience greater satisfaction, which subsequently fosters intrinsic motivation and enhances performance (Alkandi et al., 2023; Egemen, 2024; Hu et al., 2024; Li & Ao, 2024). Thus, job satisfaction not only reflects employees’ emotional well-being but also serves as a proximal driver of sustained performance across diverse organisational contexts. Accordingly, the following hypotheses are proposed:

Transformational leadership is measured using four items developed by Robbins and Judge. For example, ‘My boss pays personal attention to my needs and development as an employee’ (individualised consideration), ‘My boss encourages me to think creatively and find new solutions to work problems’ (intellectual stimulation), ‘My boss conveys a clear vision and motivates us to achieve it together’ (inspirational motivation) and ‘My supervisor serves as a role model whom I admire and aspire to emulate in my work’ (idealised influence). Trust in leadership is measured using five items developed by Robbins and Judge (2016), which include: integrity, competence, consistency, loyalty and openness. Self-efficacy is measured based on previous research that includes the following items: motivation, cognitive resources and level of work difficulty (Steca et al., 2024). Job satisfaction is measured based on five items from Colquitt et al. (2021): salary satisfaction, promotion satisfaction, supervision satisfaction, coworker satisfaction and satisfaction with the job itself. Job performance is measured based on items from previous studies: work quality, work quantity, responsibility, cooperation and initiative (Green et al., 2024).

Ethical approval to conduct this study was obtained from the Universitas Pembangunan Nasional “Veteran” Yogyakarta Ethics Committee (No. 23A/UN62.15/2025).

Based on descriptive analysis, the majority of respondents in this study were women (80%). This indicates that the information technology (IT)-based startup company has been able to attract female job seekers and has been able to accommodate the discourse on gender equality in the workplace. Most respondents hold a bachelor’s degree (42%), indicating that the employment rate for bachelor’s degree holders is relatively high. The company accepts bachelor’s degree holders from all academic programmes. These bachelor’s degree graduates were hired after undergoing a rigorous recruitment and selection process. In addition, most respondents were in the age range of 25–26 years (39%). They were born between 1999 and 2000, which, in terms of generational classification, falls under Gen Z. This explanation is presented in Table 1.

The validity and reliability of the construct were confirmed through loading factor, Cronbach’s alpha, composite reliability (CR) and average variance extracted (AVE). The loading factor for each item exceeded the recommended threshold of 0.700. This indicates that the items accurately represent their respective constructs. For example, the items for transformational leadership have loadings between 0.733 and 0.871, while the items for trust in leadership range from 0.789 to 0.858, the items for self-efficacy range from 0.825 to 0.865 and the items for job satisfaction range from 0.773 to 0.890. Moreover, job performance items range from 0.755 to 0.843. All Cronbach’s alpha values are above 0.700, indicating strong internal consistency for each construct. Similarly, the CR values exceeded the threshold of 0.700, and the AVE values were above 0.500, confirming adequate convergent validity. These results indicate that the measurement model is reliable, and that constructs are well represented by their items. Table 2 presents the complete data.

The research hypothesis was evaluated by testing the significance of the relationship between constructs using t-statistics. Path coefficients were obtained using the PLS bootstrapping model. The results of the hypothesis testing are summarised in Table 3 and Figure 1.

The results of hypothesis testing are shown in Table 3. Of the 11 hypotheses proposed, most were significantly supported. Transformational leadership had a positive effect on trust in leaders, self-efficacy and job satisfaction (H1–H3), with a high level of significance (p < 0.01). In addition, trust in leaders has a significant positive effect on self-efficacy, job satisfaction and performance (H5–H7). Job satisfaction is also proven to have a positive effect on performance (H8). Conversely, some hypotheses show weaker support. The direct effect of transformational leadership on performance (H4) is only marginally significant (p close to 0.05), indicating that its effect is more limited than the mediation path. Furthermore, hypothesis H9, which tests the direct effect of self-efficacy on performance, is not supported (p > 0.05). Thus, H9 is the weakest finding in this study.

The theoretical contribution of this study is to expand the literature on transformational leadership by showing that for Gen Z, the influence of leadership works more through trust and job satisfaction than through direct effects. This differs from findings on previous generations, where the direct influence of leadership and self-efficacy on performance was relatively stronger. Thus, this study confirms the existence of boundary conditions in the application of transformational leadership theory. In addition, this study also enriches the integration between transformational leadership theory (Bass & Avolio, 1994) and SCT (Bandura, 1997), by showing that relational and social psychological processes are more determinative of Gen Z’s work behaviour than individual cognitive factors alone.

From a practical perspective, these findings suggest that digital organisations, particularly in Indonesia, should develop leadership strategies that build trust and job satisfaction among Gen Z employees. Leadership training programmes should not only focus on technical skills but also on developing interpersonal skills, transparent communication, psychological empowerment and the ability to use digital media to reach young employees. In addition, organisations need to build real-time feedback systems, digital-based mentoring programmes and non-financial reward systems such as public recognition, learning opportunities and work flexibility.

The policy implications of this study are that organisations, industry associations and policymakers need to design leadership programmes tailored to the characteristics of the new generation. This can be achieved through employment policies that support hybrid working, regulations that promote work–life balance and sustainable investment in digital leadership training. Thus, this study not only provides guidance for human resource management development but also lays the foundation for modern employment policies that are more inclusive and adaptive to the needs of the younger generation.

Several limitations should be noted to provide context for the findings of this study. Firstly, the cross-sectional design of the study limits the ability to draw strong causal conclusions. Secondly, data were collected through self-report questionnaires, so the potential for respondent perception bias could not be completely avoided. Thirdly, this study was conducted in a single cultural context, namely Indonesia with its collectivist characteristics, so the results may not be fully generalisable to other countries or cultures.

In line with these limitations, future research could use longitudinal designs to test causal relationships more convincingly, combine perceptual data with objective organisational data to reduce self-report bias and expand the research context to cross-cultural settings to compare Gen Z responses in different environments. In addition, subsequent research could also examine the role of moderator variables, such as leadership communication style, gender or job complexity, to provide a deeper understanding of the dynamics of transformational leadership and the performance of the younger generation.