The Impact of Incentive Systems on Employee Performance:The Mediating Role of Transformational Leadership in Oman’s Banking Sector
DOI:
https://doi.org/10.14419/g80g9g38Published
27-12-2025Keywords:
Incentive Systems; Transformational Leadership; Employee Performance; Oman; Banking Sector; Resource-Based ViewAbstract
Incentive systems are among the most strategic human resource mechanisms used to enhance employee motivation and organisational performance. However, the behavioural processes through which incentives lead to improved performance outcomes remain underexplored, particularly in developing economies. This study examines the mediating role of transformational leadership in the relationship between incentive systems and employee performance in Oman's banking sector. Grounded in the Resource-Based View (RBV) and Transformational Leadership Theory, the study proposes that well-designed incentive systems promote transformational leadership behaviours, thereby enhancing employee motivation, engagement, and performance. Data were collected from 346 non-managerial employees of the Central Bank of Oman (CBO) using a structured questionnaire. Partial Least Squares Structural Equation Modeling (PLS-SEM) was applied to test the hypothesised model. The results show that incentive systems have a significant positive effect on both transformational leadership and employee performance. Moreover, transformational leadership partially mediates this relationship, suggesting that incentives not only motivate employees extrinsically but also cultivate leadership behaviours that strengthen intrinsic motivation and collective achievement. The study contributes to strategic human resource management (SHRM) theory by identifying leadership behaviour as a key mechanism linking HR systems to performance outcomes, and it provides practical insights for Omani banks to design incentive frameworks that reinforce leadership-driven excellence.
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