Determinants of sustainable employee performance: A study of family businesses in Indonesia

Abstract

Family businesses play a crucial role in the Indonesian economy, yet few survive to achieve long-term sustainability. This study explores the factors influencing sustainable employee performance in family businesses in Indonesia, focusing on leadership style, motivation, compensation, job satisfaction, and work environment. It seeks to determine the major determinants of employee performance in family firms, as well as how these factors are interrelated in creating sustainable performance. The study employs a quantitative approach with a cross-sectional survey design. Data collection was done via Google Forms from 250 full-time family-firm employees. A structural equation modeling analysis was performed using Smart PLS 4 software. The results show that job satisfaction, transformational leadership style, motivation, work environment, and compensation substantially impact employee performance. Notably, the work environment serves as a moderator that enhances the connection between employee performance, job satisfaction, and leadership style. In addition, job satisfaction emerges as the most significant variable affecting employee performance. The study reveals that transformational leadership, motivation, and good compensation can improve family firm job satisfaction and employee performance. Additionally, a supportive work environment plays an important role in strengthening the influence of these variables on employee performance. To achieve sustainable performance, family firms should prioritize improving human resource policies and fostering a conducive work environment. This study adds to the body of knowledge regarding employee performance in family business and provides practical implications for managers in managing employees through appropriate leadership and compensation policies.