Transactional leadership
Transactional leadership is a management style characterized by a focus on the exchange of rewards and punishments to motivate employees. This approach emphasizes maintaining order in daily operations, often relying on authority rather than personal charisma. Transactional leaders typically view their role as one of task delegation and supervision, believing that employees are driven primarily by self-interest. This leadership style is most effective in organizations with clear rules and established goals, as it tends to reinforce the status quo and may lead to low job satisfaction and retention rates due to its punitive nature.
The concept contrasts with transformational leadership, which seeks to inspire and motivate employees toward higher-level goals beyond mere compliance. Early theorists like James MacGregor Burns and Bernard M. Bass contributed significantly to understanding these leadership styles, debating their effectiveness in various contexts. Research indicates that while transactional leadership may yield better performance in structured environments like sports or military settings, transformational leadership often results in greater employee happiness and productivity in business contexts. Ultimately, the effectiveness of either style can depend on the specific situation, suggesting that a blend of both approaches may sometimes yield the best results.
Transactional leadership
Transactional leadership is a style of management based on the distribution of rewards and punishments. Transactional leaders are primarily concerned with maintaining order in day-to-day operations. They usually rely on authority instead of personal charisma and tend to disregard the feelings of their employees. Transactional leadership is often contrasted with transformational leadership.
Early Theorists
Political theorist James MacGregor Burns proposed both transactional leadership theory and transformational leadership theory in the 1970s. Burns used his research on leadership types to categorize major political figures. Researcher Bernard M. Bass blended Burns's politically oriented leadership theories with psychology. Bass asserted that leaders' transformational and transactional qualities could be quantified and measured primarily by examining their influence on their subordinates. Bass also developed the Multifactor Leadership Questionnaire, a detailed survey used for quantifying a leader's characteristics.
Transactional Leadership
Transactional leaders rely on authority to motivate subordinates. Managers believe their job is to delegate tasks and supervise and that employees should do as they are told. These leaders assume that most subordinates are only working out of self-interest and threatening punishment is the best way to motivate subordinates to work harder. Transactional leaders do not tolerate any challenges to authority nor do they allow subordinates to question their decisions. These types of managers set goals and then use their authority to punish any employee who fails to meet these goals. They believe that doing high-quality work at the pace dictated by the leader is part of the work contract and thus only praise truly exemplary work. In employment situations, the constant threat of punishment and lack of praise often causes low job satisfaction and low employee retention rates.
Because transactional leaders focus on punishments for breaking rules or submitting substandard work, transactional leadership tends to work best in an organization that already has clearly defined rules and goals. This method enforces the status quo and does not challenge it. For this reason, transactional leaders are a poor choice for any organization that needs a new direction. Instead, transactional leaders are best at keeping an already successful organization on track.
Transformational Leadership
Transformational managers do not utilize a system of rewards and punishments to motivate employees. Instead, they motivate their employees to work toward a goal that is greater than their employees' self-interests. Transformational leaders earn respect by leading through example, acting as a role model for their subordinates. They use a clear vision for the future of their organization to motivate their subordinates. They intellectually stimulate employees, challenge the status quo, and answer questions. They may even individually coach and mentor employees.
Transformational leadership is best used when an organization needs to be revitalized or redirected. Unlike transactional leaders, transformational leaders are not afraid to take risks and completely change an organization's goals. They earn loyalty and respect of their subordinates in a way that transactional leaders cannot. However, transformational leadership does have downsides. Excessive risks are dangerous to an organization. For example, a few bad gambles can ruin a company. Additionally, because transformational managers act as role models for the rest of the company, their negative traits or bad habits may be emulated by their employees. These type of managers may also focus the organization on a single goal to the detriment of other objectives.
Which Theory Works Best?
Researchers disagree about which leadership theory works best, or if a leader can blend the two techniques for better results. Burns asserted that transactional leadership and transformational leadership were mutually exclusive techniques. However, Bass and many of his contemporaries believed that the best leaders display both transactional and transformational qualities. Apple Inc. founder and chief executive officer Steve Jobs is commonly cited as an example of a leader who successfully blended both leadership theories. Jobs was notoriously harsh on employees who failed to meet his expectations, sometimes even insulting them in front of other coworkers. However, he highly praised those who impressed him. Jobs also took risks, trusted his personal vision above everything else, and inspired followers and admirers.
Studies show that the best technique to use depends on the specific situation. When researchers studied the leadership tactics of several sports coaches, they discovered that teams being coached by a transactional leader usually performed better than teams coached by a transformational leader. Additionally, researchers studied military exercises where officers used transactional or transformational leadership techniques. They found that teams with a transactional commanding officer usually scored higher than teams with a transformational commanding officer.
On the other hand, most leadership studies involving businesses show that companies with a transformational leader tend to have happier employees with higher levels of productivity than businesses with a transactional leader. Strict regulation and fear of punishment seem to motivate employees less. Employees that have respect and admiration for their superiors typically are more motivated. For this reason, some experts suggest that low-level managers act in a transactional manner to ensure structured employee productivity, while high-level executives act in a transformational manner to guide the company and inspire employees.
Bibliography
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