Employee Performance and Mental Well-Being: The Mitigating Effects of Transformational Leadership during Crisis

The positive role of transformational leadership on productivity and mental wellbeing has long been established. Transformational leadership behavior may be particularly suited to navigate times of crisis which are characterized by high levels of complexity and uncertainty. We exploit quasi-random assignment of employees to managers and study the role of frontline managers' leadership styles on employees' performance, work style, and mental well-being in times of crisis. Using longitudinal administrative data and panel survey data from before and during the Covid-19 pandemic, we find that frontline managers who were perceived as having a more transformational leadership style before the onset of the pandemic, lead employees to better performance and mental well-being during the pandemic.