2023 8th International Conference on Business and Industrial Research 18 - 19 May 2023

(ICBIR2023) Bangkok, Thailand

How Do Transformational Leadership and The

Work Environment Affects Employee Retention?
Rahma Saida Ali Budi Rianto
Management Department Management Department
BINUS Online Learning BINUS Online Learning
Bina Nusantara University Bina Nusantara University
Jakarta, Indonesia 11480 Jakarta, Indonesia 11480
[email protected] [email protected]

Teguh Sriwidadi Hartiwi Prabowo

Management Department Management Department
2023 8th International Conference on Business and Industrial Research (ICBIR) | 979-8-3503-9964-6/23/$31.00 ©2023 IEEE | DOI: 10.1109/ICBIR57571.2023.10147695

BINUS Online Learning BINUS Online Learning

Bina Nusantara University Bina Nusantara University
Jakarta, Indonesia 11480 Jakarta, Indonesia 11480
[email protected] [email protected]

Abstract — The hotel property business is projected to be the variables that affect employee retention, leadership style
more prospective in the coming years compared to last year. comes in third and workenvironment comes in sixth.
This is in line with the recovery of the tourism business and the
increasingly controlled Covid-19 pandemic. This study From the results of interviews that the authors did, work
examines the impact of a transformational leadership style of environment factors can cause employees not to survive in
work and environment on employee retention in the hospitality this business. Another thing that can also cause employees to
sector. Cross-sectional survey data are gathered in this feel uneasy at work is the leadership style applied by the hotel
quantitative study. Data was collected using a simple random management. A high turnover rate can have a negative
sampling from 40 low-level managerial employees and non- impact on the hotel which will lead to instability, and an
managerial employees of Ocean View Residence Hotel in increase in costs used to meet human resource needs such as
Jepara. The questionnaire was given to the selected sample to recruitment costs and employee training. Turnover can also
get the needed data, and SPSS was used to analyze the data. result in the hotel not running effectively because it is
This study demonstrates that a transformational leadership possible to lose experienced employees. With these
approach and work environment positively and significantly conditions, management needs attention to be able to retain
affect employee retention. Positive employee perceptions of the employees and reduce employee turnover rates in hotels.
workplace and effective leadership can lessen turnover plans.
According to the results of the current study, hotels need to The researchers hope to gain new insights into how
identify the best leadership style to create environments that transformational leadership affects employee retention and
encourage employees to stay committed and focused on how the work environment affects employee retention by
maintaining high morale and lowering staff turnover. conducting this research. The researchers expected to
contribute to the knowledge of human resource management
Keywords—transformational leadership style, work in the hospitality sector, and help the hotel owners, especially
environment, employee retention, SPSS, hospitality sector. Ocean View Residence Hotel, in considering which
I. INTRODUCTION leadership could be applied in their business and what kind
of work environment could enhance employee productivity,
Known as a tourist destination and located strategically in leading to employee retention.
a beach area as well as a mountainous area and also has an
archipelago area, Karimun Jawa. The number of tourist sites II. LITERATURE REVIEW
is quite large. Not only for its natural tourist sites but also for
its culture and heritage. In the past ten years, the hospitality A. Transformational Leadership
industry has experienced rapid expansion. Anthonius (2021) According to Ekhsan [2] the role of leaders who provided
claims that the expansion and competition in Indonesia's support can strengthen the importance of activity values so
hospitality sector, particularly in the hotel industry, have not that they can aid in locating resources to provide assistance
really pushed the country to maintain its corporate and with specific tasks.
workforce throughout the COVID-19 pandemic. Transformational leaders can inspire and stimulate
This causes the hotel to continue to innovate in followers to reach their potential besides they also have good
formulating its business strategy. To stay afloat, the hotel judgment skills, and interpersonal skills [3]. Thus, the
must strive to develop human resources to provide good transformational leadership style is the way a leader
service to visitors and further enhance the hotel's good empowers individuals or groups by instilling organizational
image. In developing its business, Ocean View Residence values for skills at work. Transformational leadership
Hotel encountered problems in managing its human includes initiatives to get workers to behave more positively
resources. In a study conducted by Adzka & Surya Perdhana or better than usual, which influences performance
[1], leadership style and work environment influence low improvement [2]. Better performance improvement also
employee retention to leave. According to the study, among makes a good result in job satisfaction so that the employees’

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 2023 8th International Conference on Business and Industrial Research 18 - 19 May 2023
(ICBIR2023) Bangkok, Thailand

intention to turn over can be decreased, which means that the multiple linear regression analysis, coefficient of
retention rate will be higher [4]. determination, analysis and hypothesistest analysis.
B. Work Environment The validity test was conducted to evaluate the reliability
Kurniawaty [5] claims that the workplace environment of statements distributed by researchers through
has a significant impact on how well employees perform their questionnaires to respondents. The normality test was
duties in because it is something that is all around them. The conducted to test whether the research data had a normal
work environment also includes everything around distribution or not.
employees that could interfere with them performing their The multicollinearity test aims to test the relationship
duties, both physically and virtually. between the dependent and independent variables. If there is
The work environment has two dimensions, such as the no relationship between the dependent variable and the
physical condition of the work environment and the social independent variable, it can be called a good regression
conditions of the work environment [6]. model. The heteroscedasticity test looks at the variance of the
residuals from one observation to the next in a regression
Thus, all things that affect employees in carrying out model to see if there is any inequality. A good regression
their duties, both physical and non-physical as well as social model should not have heteroscedasticity symptoms.
aspects enhance working conditions [7]. In [8] stated that in
the hospitality industry work environment does directly Using coefficient of determination analysis, use the F test
influence the continuity of employment (employee retention). to assess the simultaneous effects of a transformational
leadership style and work environment. T-test was conducted
C. Employee Retention to partially examine the effect of each independentvariable on
Employee retention [9] is an organizational process and the dependent variable.
initiative that aims to retain staff for as long as possible or This research consists of two independent variables and
until the project is finished. one dependent variable. The independent variables included
Employee retention needs to be considered by an in this study were transformational leadership style and work
organization because losing employees will cause high costs environment, while the dependent variable included
for the organization than retaining them through employee retention. The operational variables in this study
compensation plans [10], and even worse if those who leave are described in the following table:
are employees who have good performance.
TABLE I. OPERATIONAL VARIABLE
Gireesh [11] describes five dimensions of employee
Variable Dimension Indicator
retention, namely: job recognition and support, compensation
Transformational The leader instils the vision of the
and career growth, organizational culture, job suitability, and Leadership company
autonomy and freedom. [15] Inspirational Leaders provide support
Motivation Leaders generate enthusiasm
D. Relationship Between Variables
Leaders teach to learn from every
1. The Effect of Transformational Leadership Style on mistake
Employee Retention. Leaders create a sense of calm in the
The results of research conducted by Lal & face of adversity
Viswanathan [12] state that transformational Idealized Employees respected leaders
Influence Employees trust the leader.
leadership has an effect on employee retention. Employees feel proud to be part of the
Likewise, Mwita [13] in their research on leadership company
and employee retention, found that transformational The leader can be used as anexample
leadership influences employee retention.
Leaders can persuade employees to be
2. Workplace Environment's Effect on Employee more concerned with the interests of
Retention. the company
Research conducted by Hanai [14] found that the Leaders provide training whenneeded
work environment influenced employee retention.
Indivi- dualized Leadership values employees
3. Adzka & Surya Perdhana [1] found in their research Considera-tion The leader provides counselling
that Leadership Style and Work Environment are Leaders give value to every input
important factors in employee retention. from employees
Leaders provide learning
III. METHODOLOGY opportunities
The study used simple random sampling to collect the Leaders are able to provide a new
perspective in dealing withproblems.
data. The respondents are 40 people from low-level Intellectual
managerial and non-managerial employees of Ocean View Stimulation Leaders provide opportunities to
Residence Hotel Jepara. Respondents were given a solve problems in their own way.
questionnaire of 35 questions related to the variables. The Leaders encourage employees to be
response rate was 100%, and all respondents returned the more creative at work.
questionnaires. In this study, IBM SPSS was the analytical Work Environment Physical Work There is satisfaction in theworkspace
[16] Environment
tool used in Statistics 25 software. After the data has been Adequate space
collected, the IBM SPSS will be used to test the hypothesis Fun work environment
and find reliability. The analysis of this study was using Non-physical Safety at work
Work A good relationship with colleagues

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 2023 8th International Conference on Business and Industrial Research 18 - 19 May 2023
(ICBIR2023) Bangkok, Thailand

Variable Dimension Indicator old and 25-32 years old. The working period is also
Transformational The leader instils the vision of the dominated by a 1-5 years period of working.
Leadership company
[15] Inspirational Leaders provide support TABLE II. RESPONDENT PROFILE
Motivation Leaders generate enthusiasm
Leaders teach to learn from every Respondent Profile N %
mistake Gender
Leaders create a sense of calm in the Male 26 65%
face of adversity Female 14 35%
Employees respected leaders Age Range
Idealized
Influence Employees trust the leader. 18-25 16 40%
Employees feel proud to be part of the 25-32 12 30%
company 32-39 6 15%
>39 6 15%
The leader can be used as anexample
Working Period
<1 7 17,5%
Environment Recognition for good performance
1-5 24 60%
Employee Retention Possibility for personal development
6-10 8 20%
[17] and growth in employment.
>10 1 2,5%
Intrinsic Possibility of helping others in my
Motivation line of work. A. Validity Test
Being in my position gives one a
feeling of self-worth. The validity test was run to determine the accuracy of the
The prestige of my job position inside statements distributed by researchers through questionnaires
the organization. to respondents. In this test, the researcher tested on 35
Role in the current job position. questions consisting of 18 statements about transformational
Life Interests Satisfaction with my job and has a
leadership style, 6 statements about the work environment
and Work sense of accomplishment.
Compatibility The chance to advance in life. and 11 statements about employee retention.
Consideration is given by the In this test, the researcher used IBM SPSS software with
government to this profession. a total sample of 40 people. With a sample of 40 people, the
My overall participation in thework.
degree of freedom (df-2) value is 40-2 = 38 and the
Involvement The feeling of responsibility as a confidence level is 0.05.
worker in my position.
The following facts serve as the foundation for decisions
Possibility of independent judgment
and action. regarding the validity test:
The statement from the survey is true if the R count
exceeds the R table.
The validity test of the transformational three variables
(X1, X2, and X3)

TABLE III. VALIDITY TEST

Variable Indicator R Count
Transf. Leadership X12, X13, X14, X111 0.3 – 0.39
X11, X112 0.4 – 0.49
X15, X19, X110, X114, 0.5 – 0.59
X116, X118
X16, X17, X18, X113, 0.6 – 0.69
Fig. 1. The Research Model X115
X117 0.7 – 0.79
H1 = Transformational leadership significantly Work Environment X23, X25 0.5 – 0.6
influences employee retention at Ocean View Residence X21, X24, X27 0.7 – 0.8
X22 0.8 – 0.9
HotelJepara.
Employee Retention Y1, Y7, Y8, Y9 0.4 -0.49
H2 = Work environment significantly influences Y3, Y10, Y11 0.5 – 0.59
employeeretention Ocean View Residence Hotel Jepara. Y2, Y4, Y5, Y6 0.6 – 0.69
From the table above, it can be seen that all of the R values
H3 = Transformational leadership and work environment of the indicators are higher than the R table, which is 0.312.
significantly influence employee retention Ocean View Thus, the transformational leadership style variable (X1),
Residence Hotel Jepara. work environment variable (X2), and employee retention in
this study are valid.
IV. RESULT
A two-part questionnaire was designed for this study. B. Reliability Test
The first part focuses on the respondent profile which is
TABLE IV. RELIABILITY TEST AND MULTICOLLINEARITY
shown in the table. The second part of the questionnaire
elicits respondent levels of importance for each factor with a Variable Cronbach’sAlpha VIF
six- points Likert scale (1= highly disagree; 6= highly agree). TransformationalLeadership 0.852 2.242
The table represents the respondent profile. The respondent Work Environment 0.805 2.242
profile in the table shows that male employees dominated the Employee Retention 0.778
survey. The age range with the most employees is 18-25 years

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 2023 8th International Conference on Business and Industrial Research 18 - 19 May 2023
(ICBIR2023) Bangkok, Thailand

From the outcome of the reliability outcome of the of determining the coefficient of determination are displayed
transformational leadership approach, work environment, in the table below (R2).
and employee retention factors are 0.852, 0.805, and 0.778
respectively. It proved that the Cronbach alpha value was TABLE VII. RESULTS OF COEFFICIENT OF DETERMINATIONS ANALYSIS
above 0.6. So, it can be concluded that the reliability test (R2)
results for the above-mentioned three variables are reliable. Model R R2 Adjusted Std. The error in the

Based on the table of multicollinearity test results above, R2 Estimate

the VIF value is 2.242 < 10 it can be said that there is no 1 ,911a ,831 ,822 1,47264
multicollinearity between the independent variables because Predictors: (Constant), Work Environment,Transformational
the tolerance value is 0.446 > 0.10. Leadership Style

C. Classical Assumption Test From the table above, as can be observed, the value of R
Normality Test square is 0.831, or 83.1%, which indicates that in this study
model, transformational leadership style and work
The normality test was conducted to test whether the environment influence 83.1% of employee retention, whereas
research data had a normal distribution or not. In this study, the remaining 16.9% is influenced by variables not
researchers conducted a normality test using the IBM SPSS investigated in this study.
software by the Kolmogorov-Smirnov method with the basis
for making the following decisions: E. Hypothesis Test
Sig > Alpha (0.05), then the data is normally distributed T-TEST

Sig < Alpha (0.05), then the data is not normally distributed T-test was conducted to partially examine the effect of
each independent variable (transformational leadership style
TABLE V. TEST OF THE NORMALITY and work environment) regarding the dependent variable
(employee retention). The T-test’s findings are as follows:
Normal Parameters ,b
Mean ,0000000
Std. Deviation 1,43438487 TABLE VIII. T-TEST AND F-TEST RESULTS
Most ExtremeDifferences Absolute ,115
T-Test F-Test
Positive ,063 Model Coefficient t Sig F Sig
Negative -,115 (Constant) 10.45 3.07 0.004 90.78 0.000
T-Statistic ,115 Transformational 0.29 4.79 0.000
Asymp. Sig. (2-tailed) ,197c Leadership Style
Work Environment 0.62 4.84 0.000
From the results of the normality test above, it can be seen
Predictors: (Constant), Work Environment, Transformational
that the sig value is 0.197 > 0.05, so it can be concluded that Leadership Style
the research data is normally distributed. Dependent Variable: Employee Retention
Test for Heteroscedasticity
Test the Effect of Transformational Leadership Style (X1) on
This test looks to see if a regression model's residual employee retention (Y)
variance differs from one observation to the next. There
shouldn't be any signs of heteroscedasticity in a successful Table 9's T-test findings reveal that the sigma value is
regression model. 0.000, which means it is less than 0.05. With a Beta value
of 0.29 so it can be concluded that the
If sig > 0.05, then there is no heteroscedasticity. transformational leadership style (X1) has a significant and
If sig < 0.05, then heteroscedasticity occurs. positive effect onemployee retention (Y).
Test the Effect of Work Environment (X2) on employee
TABLE VI. RESULT OF THE HETEROSCEDASTICITY TEST
retention (Y)
Model Coefficient t Sig
Constanta 2.90 1.337 It can be deduced from the output of the T-test findings
Transformational - 0.00 -0.021 0.983 that the work environment (X2) has a considerably favorable
Leadership Style impact on employee retention because the sigma value is
Work Environment -0.07 -0.795 0.432 0.000, which is smaller than 0.05 and has a beta value of 0.62.
(Y). With a beta value of 0.62 and a sigma value of 0.000,
Based on the table above, we can see that the sig value for which indicates that it is less than 0.05, it can be stated that
the sig value for the work environment variable is 0.432 > the work environment (X2) considerably improves employee
0.05 and the transformational leadership style variable is retention (Y).
0.983 > 0.05, hence it can be stated that there is no F-TEST
heteroscedasticity.
The F test was conducted to determine the simultaneous
D. Coefficient of Determination Analysis (R2) effect of several independent variables (transformational
To determine the magnitude of the influence of leadership style and work environment) on the dependent
transformational leadership style and work environment on variable. The F-test’s findings are as follows.
employee retention in the form of a percentage, the
Test the Effect of Transformational Leadership Style (X1) and
coefficient of The R2 determination test was run. The results
Work Environment (X2) on employee retention (Y)

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 2023 8th International Conference on Business and Industrial Research 18 - 19 May 2023
(ICBIR2023) Bangkok, Thailand

It is clear from the output of the F test result presented in be captured by the five senses, but can be felt to have a
Table 9 that the sig. The value is 0.000, which is smaller than considerable influence on the company's ability to retain
0.05, and the transformational leadership style and work potential employees to remain loyal to the company. At
environment (X2) have an impact on employee retention Ocean View Residence Hotel Jepara, both the physical work
simultaneously (Y). environment and the leadership style have an impact on staff
retention. For this study, employee retention is strongly and
V. DISCUSSION directly correlated with leadership style and non-physical
According to our research, transformational leadership work environment. This explains that the way aperson uses to
would improve employee comfort, which can be effectively influence the group towards achieving goals and a work
fueled by the correct kind of support that the transformational environment that cannot be captured by the five senses but
leader offers. The characteristics it is possible to expand the can be felt to have a major influence on the company's
use of transformative leadership to meet the needs of ability to retain potential employees to remain loyal to the
employees because the transformational leader can further company. As a result, hotels must pay close attention to the
induce these employees' high comfort to give more discretion selection of leadership styles as well as the creation of an
to act and support individual initiatives, as well as to give appropriate work environment. Ocean View Residence Hotel
enhanced feelings of responsibility [18]. Our findings also should not overlook this because the impact is significant
show that adequate leadership support can boost employee and ignoring it will increase the risk of employee turnover.
comfort levels. Therefore, the researchers think that
managers who use the right transformational style and give ACKNOWLEDGMENT
their staff assistance for both tasks and related activities can We are very grateful to all parties who have helped our
lead their teams effectively. research process, especially the Research and Technology
Transfer Office (RTTO) of BINUS University. Not to forget
The results of this study also showed that establishing a Ms Sela as the Human Resource Officer of Ocean View
supportive learning environment and workplace with clear Residence Hotel Jepara. Who has helped us in conducting
rules and guidelines to adhere to enhances the intention to research as well as the manager and hotel owner who has
continue working in the present [19]. The perceived climate is allowed us to carry out the research? And what we most
the lens through which an employee perceives and views respect, are all the employees who participated in our
their work environment in terms of environmental indicators' research as respondents, without them our research would
social and physical systems. Employees respond positively to not run smoothly.
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