Islamic Leadership and Employee Retention in Islamic Non-profit Organisations in Indonesia

The purpose of this study was to examine the direct relationship between the Islamic leadership practices and employee retention and to examine the mediating role of employee commitment in Islamic charity organizations in Indonesia. In Indonesia, the existing empirical studies on employee turnovers focus mainly on traditional businesses such as manufacturing and retail sectors, excluding empirical studies of employee turnovers in faith aligned businesses, such as Islamic non-profit organizations. The present study fills this gap by exploring the effect of implementing ethical and Sharia compliant leadership principles as a strategic approach to reducing high employee turnover in these important social financing institutions. In the implementation of the research, the survey method is applied by using an explanatory, quantitative, cross sectional research design design. The research was carried out with 348 active amil and administrative employees in major non-profit institutions such as BAZNAS, Dompet Dhuafa, Rumah Zakat and Lazismu. Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS 4.0 was used for analyzing the structural framework. The results of the empirical tests are consistent with the hypothesis that Islamic leadership practices have a strong positive direct impact on employees' willingness to stay. In addition, through the lens of structure, it is found that job commitment is a strong partial mediator that explains how much of the positive effect of the leadership system leads to stability of human capital over time. The integrated model was able to predict 90.8% (R2 = 0.908) of the overall variance in employee retention. Overall, this study provides a solid strategic guide for decision makers in faith-based non-profit organizations to integrate these aspects of Sharia compliance, structural justice and consultation (shura) to increase the psychological attachment and values alignment of its members, thereby protecting important missions for poverty alleviation in Indonesia.

Islamic Leadership, Employee Retention, Employee Commitment, Non-profit Organizations, Indonesia, Zakat Institutions.

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