In recent decades, public administration has taken a great interest in leadership. However, this interest has been met with concerns that the effects of leadership are overestimated compared to other relevant organizational factors. In this article, we explore the relative importance of formal, vertical leadership, specifically transformational leadership, and horizontal relations, that is, the internal team relations, for different employee outcomes and user satisfaction. We argue that both factors may work through public service motivation (PSM). Based on survey data collected in Danish nursing homes linked with a user satisfaction survey and employee sickness absence data, we find that the internal team relations have the strongest association with some outcome measures, whereas others are more substantially related to vertical leadership. We further find that the relationship between transformational leadership and these outcome measures is fully mediated by PSM, whereas this is not the case with the internal team relations.