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This paper aims to explore employee perceptions of companies engaged in services and banking of the role of change leadership on the application of artificial intelligence (AI) that will impact the performance and work engagement in conditions that are experiencing rapid changes.

This study has used a quantitative research approach, and data analysis uses an approach structural equation modeling (SEM) supported by program computer software AMOS 22.0. A total of 357 respondents were involved in this study, but only 254 were qualified. In this study, the respondent is an employee of companies engaged in the services and banking sector in the East Java, Indonesia region.

The results reveal that AI has a significant positive effect on employee performance and work engagement. Change leadership positively moderates the influence of AI on employee performance and work engagement.

The development of this model has a novelty by including the moderating variable of the role of change leadership because, in conditions that are experiencing rapid changes, the role of leaders is essential. After all, leaders are decision-makers in the organization. The development of this concept focuses on studies of companies engaged in services and banking. Employee performance is an essential determinant in the organization because it will improve organizational performance. In addition, the application of AI in organizations will experience turmoil, so that the critical role of leaders is needed to achieve success with employee work engagement.

The paper focuses on bridging the existing literature gap on the role of leadership in influencing employee engagement considering the advancement in technologies. With this, the author explores how the three critical elements of service-based companies' business environment-artificial intelligence (AI) success, employee engagement, and leadership are interlinked and are valuable for raising the engagement level of employees.

A purposive sampling strategy was used to select the employees working in the respective companies. The survey was distributed to 150 senior management employees but responses were received from only 56 employees making the response rate 37.33%. Consequently, an empirical examination of these 56 senior management employees belonging to service-based companies based in Delhi NCR using a survey questionnaire was conducted.

The PLS-SEM (partial least squares structured equation modelling) revealed that AI has a positive role in affecting employee engagement levels and confirmed the mediation of leadership. The magnitude of the indirect effect was negative leading to a reduction in total effect magnitude; however, as the indirect effect model has a higher R square value, the inclusion of a mediating variable made the model more effective.

This study contributes to extending the existing knowledge of the academicians about the relationship theory of leadership, AI implementation in organizations, AI association with leadership and AI impact on employee engagement. The author extends the theoretical understanding by showing that more integration of AI-supported leadership could enable organizations to enhance employee experience and motivate them to be engaged. Despite its relevance, due to the limited sample size, focus on a specific geographic area (Delhi NCR) and the constraint of only using quantitative analysis, the findings open the scope for future research in the form of qualitative and longitudinal studies to identify AI-supported leadership roles.

The study findings are beneficial majorly for organizations to provide them with more in-depth information about the role of AI and leadership style in influencing employee engagement. The identified linkage enables the managers of the company to design more employee-tailored strategies for targeting their engagement level and enhancing the level of productivity of employees. Moreover, AI-supported leadership helps raise the productivity of employees by amplifying their intelligence without making technology a replacement for human resources and also reducing the turnover rate of employees due to the derivation of more satisfaction from existing jobs. Thus, given the economic benefit and societal benefits, the study is relevant.

The existing studies focused on the direct linkage between AI and employee engagement or including artificial intelligence as a mediating variable. The role of leadership is not evaluated. The leadership enables supporting the easy integration of AI in the organization; therefore, it has an important role in driving employee engagement. This study identifies the contribution of leadership in organizations by providing the means of enhancing employee satisfaction without hampering the social identity of the company due to the integration of AI.