Purpose

This paper aims to examine the direct and indirect effects of substitutes for leadership on performance outcomes.

Design/methodology/approach

A self‐report questionnaire was distributed to a sample of 177 Australian local council employees. The responses were analysed using ICLUST analysis and hierarchical multiple regression analysis.

Findings

The results indicated significant positive effects of some substitutes for leadership on performance outcomes. Furthermore, some substitutes for leadership moderated the effects of transactional leadership behaviours on performance outcomes, whereas another sub‐component of substitutes for leadership moderated the effects of social processes of leadership on performance outcomes. In addition, some substitutes for leadership partially mediated the relationship between transformational leadership and performance outcomes.

Research limitations/implications

The cross‐sectional design of the study reduces the capacity to draw definitive causal inferences.

Practical implications

The current study supports the view that council leaders could have influenced the employees' attitudes, perceptions, and performance by indirectly shaping the environment in which the subordinates worked (i.e. shaping task and organisational characteristics). The study implies the need for leaders in the local councils to understand those substitutes for leadership that mediate the influence of transformational leadership (such as group and work design capacities) and how they can be managed to enhance employee performance outcomes.

Originality/value

This is one of the first Australian studies to comprehensively examine the influence of substitutes for leadership on performance outcomes.