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Transactional vs Transformational Leadership

This lesson explores in more detail the characteristics of Transactional and Transformational leadership.
It highlights the differences between these two complimentary and widely used leadership styles.

Lesson 2

What is Transactional and Transformational Leadership?

 

As mentioned in lesson one, Transactional and Transformational leadership are two different styles of leadership first introduced by James McGregor Burns (1978) and is widely used in organizations today. The table below highlights the key differences between these two styles of leadership.

Transactional

  • Directive / Action Orientated
  • Accepts goals, structure, and culture of organization
  • Use reward and punishment to gain compliance
  • Uses extrinsic motivators
  • Concerned with process over ideas

Transformational

  • Builds on “Need for Meaning” which transcends daily tasks
  • Inspires change
  • Promotes teamworking, mutual admiration / respect
  • Motivates intrinsically
  • Concerned with ideas over process

Transactional Leadership

Transactional leadership is sometimes referred to as “managerial leadership” and as the name suggests, it’s primarily about a transaction. For example, you provide your knowledge, skills, and experience between the hours of nine to five and in return I will pay you at an agreed rate.

Transactional leaders are generally very action oriented as their primary goal is to achieve the task at hand. They tend to focus on efficiencies and increasing productivity and often accept the status quo, in terms of the organization’s goals, structure, and culture. They are slow at responding to opportunities and threats that would bring about future change and therefore perform more effectively when conditions are stable.

This type of leadership is very effective in emergency situations and in projects where there are clearly defined outcomes and strict deadlines that need to be met.

Transformational Leadership

Transformational Leadership, on the other hand, is an ongoing process, where “leaders and followers raise one another to higher levels of morality and motivation.”

Transformational leaders are more interested in building relationships that go beyond the achievement of short term goals and the completion of daily tasks. They are concerned with demonstrating integrity and authenticity that will inspire people to follow, and to become leaders themselves.

Exploring the four main components of Transformational Leadership (Burns, 1978), is helpful to understanding this style of leadership:



As a supervisor/manager, understanding leadership styles is important as it directly impacts on the attitude, motivation and performance of the people you manage. For example, if you are overly controlling with a team who is talented and experienced, this is likely to adversely affect team morale and job satisfaction, resulting in reduced productivity. If however, you are able to modify your style to take account of their knowledge and experience, you are more likely to have an engaged, motivated and high performance team.

Transactional leadership provides structure, consistency and clarity, which is helpful particularly in large organizations. Employees benefit from knowing what is expected of them and the material rewards associated with the achievement of goals. This type of leadership addresses the basic needs of employees and as previously mentioned, works well in situations where there are strict deadlines that need to be met or in crisis situations.

Research has shown that Transformational leadership is perceived to be more effective in communicating the organization's mission and vision for the future. This style of leadership engages employees at a more emotional level where they are willing to expend extra discretionary effort which contributes significantly to individual and organisational success. This is partly due to the leader's ability to inspire confidence, stimulate learning experiences and transmit a sense of mission.

It should be noted however, that no one leadership style fits every situation, and that the most effective leaders are those who are able to adapt their approach to deal with different situations.


Activity

Using your pen and notepad, write down the main components of Transformational Leadership, in your own words.

  • How would you describe your own style of leadership?
  • Are there elements in the four components that you think would strengthen your performance as a leader?
  • Choose one component, and start working on strengthening it today. For example, do you involve your team in problem solving or identify learning opportunities that would contribute to their development?

Key Learning Points

  • Transactional Leadership is concerned with the completion of tasks and uses reward and punishment to gain compliance.
  • Transactional leadership tends to be effective when conditions are stable, emergency situations or where deadlines need to be met.
  • Transformational Leadership is concerned with building relationships that go beyond the completion of daily tasks/short term goals.
  • Transformational leadership does not accept the status quo and inspires/responds well to the need for change.
  • Four main components of Transformational Leadership are: Idealized influence, Inspirational Motivation, Intellectual Stimulation, and Individual Consideration.
  • Research across a range of industries, including the hospitality industry, has shown that transformational leadership is more effective, compared to transactional leadership, in motivating employees to expend extra discretionary effort which leads to higher levels of productivity.

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