Employee Well-Being as a Mediating Mechanism Between Leadership, Team Dynamics, Empowerment, and Performance in UAE Manufacturing SMEs

Abstract

Employee performance in manufacturing small and medium enterprises (SMEs) is increasingly influenced by psychological and relational factors rather than solely technical or operational aspects. This study investigates the role of employee well-being as a mediating mechanism linking engaging leadership, team effectiveness, employee empowerment, and performance among employees in UAE manufacturing SMEs. Data were obtained from 352 employees across multiple manufacturing organisations in several emirates through a structured questionnaire addressing leadership, empowerment, teamwork, well-being, and performance, employing a cross-sectional quantitative research design. The analysis utilised Partial Least Squares Structural Equation Modelling (PLS-SEM) via SmartPLS, applying a two-step procedure to estimate both the measurement and structural models. Findings indicate that supportive leadership and employee empowerment exert direct effects on individual performance, whereas team effectiveness predominantly impacts performance indirectly by enhancing employee well-being. Employee well-being emerged as a significant determinant of performance and served as the principal mediator connecting leadership, teamwork, and empowerment to performance outcomes. The model demonstrated substantial explanatory capacity for both employee well-being and performance, indicating robust predictive validity. The study emphasises that a supportive and empowering leadership approach is critical for performance improvement when psychological well-being is prioritised within the workforce of manufacturing SMEs. These results carry theoretical, managerial, and practical implications for SME managers, policy-makers, and researchers seeking to foster workforce sustainability, organisational resilience, and competitive performance within the UAE manufacturing sector.