Employee turnover has become one of the most pressing challenges for organizations, particularly with the emergence of Generation Z in the workforce. Unlike previous generations, Gen Z employees often prioritize career development, flexible work arrangements, work-life balance, meaningful leadership, and psychologically supportive workplaces. When these expectations are unmet, they are generally more willing to seek employment elsewhere, creating higher recruitment costs, productivity losses, and organizational instability.
Recognizing this challenge, Irfan Pangestu and Prof. Muafi investigated whether transformational leadership could help organizations retain young employees by creating healthier workplace conditions. Rather than focusing solely on leadership itself, the researchers examined how employees’ feelings of psychological safety and their engagement at work explain the relationship between leadership and turnover intention.
Why Leadership Matters for Generation Z
Generation Z employees value leaders who encourage innovation, communicate openly, provide individual support, and inspire personal growth. According to the researchers, transformational leadership represents this leadership style because it emphasizes trust, motivation, intellectual stimulation, and individualized consideration.
The study argues that these leadership behaviors foster an environment where employees feel comfortable expressing ideas, asking questions, admitting mistakes, and participating in decision-making without fear of negative consequences. Such an environment strengthens employees' emotional connection with their work and reduces their desire to leave the organization.
How the Study Was Conducted
The researchers used a quantitative survey design involving 293 Generation Z employees aged 18–28 years working in the service sector in Yogyakarta City, Indonesia. Participants represented various industries, including food and beverage, retail, hospitality, education, creative services, and other service businesses.
Data were collected through structured questionnaires measuring transformational leadership, psychological safety, work engagement, and turnover intention. The researchers then analyzed the relationships among these variables using Partial Least Squares Structural Equation Modeling (PLS-SEM) to identify both direct and indirect effects.
Key Findings
The study produced several important findings:
- Transformational leadership significantly increased psychological safety among Generation Z employees.
- Transformational leadership also strengthened work engagement, encouraging employees to become more dedicated and enthusiastic about their jobs.
- Higher psychological safety reduced employees’ intention to leave their organizations.
- Greater work engagement also lowered turnover intention, making employees more likely to remain with their employers.
- Psychological safety and work engagement both acted as mediating factors, meaning transformational leadership reduces turnover intention not only directly but also by creating safer and more engaging work environments.
The statistical analysis showed that transformational leadership explained a substantial proportion of variation in psychological safety, while the overall research model explained 89.2% of the variation in turnover intention, indicating a strong relationship between leadership practices and employee retention in the study sample.
Implications for Organizations
The findings suggest that retaining Generation Z employees requires more than competitive salaries or career advancement opportunities. Organizations should also invest in leadership development programs that encourage managers to communicate openly, build trust, recognize employee contributions, and support individual growth.
A psychologically safe workplace allows employees to speak openly without fear of criticism or punishment. When combined with meaningful work engagement, these conditions help create stronger organizational commitment and reduce employees’ intentions to resign.
For companies experiencing high turnover among younger workers, adopting transformational leadership practices may become a practical strategy to improve employee retention while reducing recruitment and training costs.
The study also reinforces two well-established organizational behavior theories—Social Exchange Theory and the Job Demands–Resources Theory—by demonstrating that supportive leadership encourages positive employee attitudes through reciprocal relationships and enhanced workplace resources.
Research Contribution
According to Irfan Pangestu and Prof. Muafi of Universitas Islam Indonesia, transformational leadership becomes more effective when it simultaneously creates psychological safety and work engagement among Generation Z employees. Rather than influencing turnover intention through a single pathway, leadership operates through multiple psychological mechanisms that strengthen employees’ commitment to their organizations. This integrated perspective expands existing research on employee retention, particularly within Indonesia’s service sector.
The researchers acknowledge that the study has limitations because it focused only on service-sector employees in Yogyakarta City and used a cross-sectional design, which captures conditions at one point in time. They recommend that future studies include other industries, broader geographic areas, and additional variables such as organizational commitment, job satisfaction, and perceived organizational support to provide a more comprehensive understanding of turnover intention among Generation Z employees.
Author Profile
Irfan Pangestu is a researcher from Universitas Islam Indonesia (UII) specializing in Human Resource Management, Organizational Behavior, Leadership, and Generation Z workforce studies.
Muafi is a professor at Universitas Islam Indonesia (UII) whose expertise includes Strategic Management, Human Resource Management, Organizational Leadership, and Organizational Behavior.
Source
Article Title: The Effect of Transformational Leadership on Turnover Intention: The Mediating Role of Psychological Safety and Work Engagement among Generation Z Employees
Authors: Irfan Pangestu, Muafi
Journal: Formosa Journal of Multidisciplinary Research (FJMR), Vol. 5, No. 7 (2026)
DOI: https://doi.org/10.55927/fjmr.v5i7.133
Official Journal: https://journalfjmr.my.id/index.php/fjmr
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