Transactional leadership is a leadership style in which leaders promote follower compliance through rewards and punishments. Through a system of rewards and punishments, transactional leaders are able to keep followers motivated in the short term. In transactional leadership, rewards and punishments depend on the performance of the followers. The leader views the relationship between managers and subordinates as an exchange: you give me something in return for something.
When subordinates perform well, they receive a reward. When they perform poorly, they are punished in some way. Rules, procedures and norms are essential in transactional leadership. Transactional leadership is defined by control, organisation and short-term planning.
Leaders who adopt this style rely on a system of rewards and punishments to motivate their followers. A transactional leader will know the goals he or she is trying to achieve. Typically, these goals are short-term and do not take into account long-term organisational goals. Transactional leadership involves motivating and leading followers primarily by appealing to their self-interest.
The power of transactional leaders comes from their formal authority and responsibility in the organisation. The follower's primary objective is to obey the leader's instructions. One can also speak of a revelatory style. Transformational leadership focuses primarily on motivation and collaboration through teamwork at all levels of the company, including the organisational hierarchy.
Transformational leadership focuses on a more open approach that encourages employees to think outside the box and to find new and inventive ways to address the needs of the company. As a result, companies that practice transactional leadership often lack innovation and creativity. Transactional leaders place too much emphasis on detailed, short-term goals and standard rules and procedures. In contrast, transactional leaders are dedicated to maintaining the status quo, but not in a negative way.
However, for the right business, company and management team, transactional leadership skills can be used to motivate their employees to be more productive. In 1978, James McGregor Burns, a political scientist, wrote a book on leadership and argued that leaders based on the transactional model should employ the approach from a foundation of morality, accountability and honesty. This style of leadership encourages personal, emotional and professional growth in addition to monetary rewards. All decisions are final on the part of the transactional manager, but the responsibility for the achievement of objectives also rests squarely on his or her shoulders.
In transactional leadership, the emphasis is on managing the individual's performance and determining his or her performance in a structured environment. Recognition of performance by meeting quotas is common in companies with transactional leadership. For example, a company with a large sales force may use commissions as a type of transactional leadership method. Transactional leadership does not focus on changing or improving the organisation as a whole, but aims to achieve short-term goals while establishing unity and compliance with the company.
Take a closer look at how the transactional style works, as well as some of the potential benefits and drawbacks of this style. Unlike transactional leadership, transformational leadership aims to change the status quo or motivate employees to take the company to the next level of profitability and success. Transactional leaders differ from charismatic and transformational leaders in both structure and method.
