The Effect of Management Contracts on Employee Performance, with Work Motivation as a Mediating Variable at PT PLN (Persero) Project Management Center – UPMK IV

Abstract

This research aims to analyze the influence of management contracts on employee performance with work motivation as a mediating variable at PT PLN (Persero) Project Management Center – Construction Management Implementation Unit IV (UPMK IV). The management contract is a formal performance control instrument that aligns individual targets with organizational targets through the determination of key performance indicators (KPIs), periodic evaluation mechanisms, and reward and sanction systems. The study used a quantitative approach with causal associative design and saturated sampling techniques. Data was collected through a Likert scale questionnaire 1–5 distributed to all employees of PT PLN UPMK IV, and analyzed using Structural Equation Modelling–Partial Least Squares (SEM-PLS) with SmartPLS 4.0 software. The results showed that: (1) management contracts had a positive and significant effect on work motivation (??0.79; p<0.05); (2) work motivation has a positive and significant effect on employee performance (??0.541; p<0.05); (3) management contracts have a positive and significant effect on employee performance (??0.312; p<0.05); and (4) work motivation was proven to partially mediate the influence of management contracts on employee performance (indirect effect: ? = 0.427; p < 0.05). This research contributes to the study of human resource management by placing management contracts as formal performance control instruments and work motivation as psychological mechanisms that connect the two, in the specific context of the electricity project management unit.