The purpose of this paper is to investigate the mediating role of Internal Service Quality (ISQ) on the relationship between internal marketing and organizational performance. The study focused on the ISQ of different banks operating in Peshawar. Stratified random sampling technique was utilized to collect the data from different banks operating in the city of Peshawar. A total of 564 questionnaires were distributed in 80 different branches of medium and large sized banks. In the present study 404 questionnaires were returned, constituting the response rate of 71.63%. A total of 63 questionnaires were rejected. The total number of questionnaires usable for the study was 341. The findings reveal that in the banking sector, internal marketing and internal service quality have a direct and positive influence on the organizational performance, furthermore the results revealed that ISQ partially mediates the relationship between internal marketing and organizational performance. The findings provide useful insights for organizations, particularly in the banking industry, seeking to be competitive and responsive to the increasing challenges. Conclusions emphasize that mechanisms to encourage and foster ISQ in the organization are likely to facilitate the introduction, adoption, and diffusion of service quality both within and outside the organization which in turn, is likely to result in achievement of superior bank performance.
Keywords: Internal Marketing, Internal Service, Quality, Organizational Performance.