Transactional vs transformational leadership

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Today I am going to delve into two different leadership styles, transactional leadership and transformational leadership. We will have a look at what they are, how to employ them, what their pros and cons are and I will evaluate them against my own experience.

Transactional leadership is about an exchange of reward for effort and compliance between team leaders and their team/followers. There is also room for punishment where a team member fails to meet the agreed expectations of their role. Transactional leadership is all about what value I want to get out of the relationship.

Transformational leadership takes a different stance, focusing on the needs of the team rather than the leader. Bernard M. Bass, a theorist of transformational leadership, said that transformational leadership occurs when “leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group, and when they stir their employees to look beyond their own self-interest for the good of the group.” Transformational leadership, therefore, has a strong cultural focus.

Transformational Leadership

What does a transformational leader look like?

There are four main characteristics of a transformational leader (as per the definitions from Bass in 1997):

  • Motivation
    • Sets clear goals that push the team and unlock potential
    • Encourages employee development
    • Has a compelling vision of the future
  • Intellectual stimulation
    • Enabling team members to focus on the interests of the team as a whole rather than the individual
    • Encouraging the team to pursue excellence
    • Driving growth and performance of team members by challenging their ideas and mindsets
    • Encouraging collaboration and creativity
  • Consideration for the individual
    • Focusing on the needs of an individual to provide an empowering environment by understanding their needs, dreams and fears
  • Influence
  • Acts a role model by employing ideal behaviours and the overall vision to push employees towards the same walk

I think the key to being an effective transformational leader is to have a clear vision that you develop and agree with your team/employees. As soon as you have this vision, it’s not about you and your ideas it’s about the company or team as a whole. Everyone is invested and has created their own expectations to live up to.

The benefits of transformational leadership

In the book Transformational Leadership, authors Bass and Riggio said the following about the impact of transformational leadership: “Transformational leaders…are those who stimulate and inspire followers to both achieve extraordinary outcomes and, in the process, develop their own leadership capacity. Transformational leaders help followers grow and develop into leaders by responding to individual followers’ needs by empowering them and by aligning the objectives and goals of the individual followers, the leader, the group, and the larger organization.”

Transformational leadership empowers your followers to grow and develop. Empowering people can allow them to be creative and solve problems themselves rather than coming to the team leader for a solution. Having a team that feel empowered to make their own decisions and choices means that the organisation and team are as good as the combined brainpower and creativity of the team, rather than just being as good as the leader alone.

There have been well documented and researched benefits for assuming a transformational leadership style. One example was conducted by Limsili & Ogunlana (2008), who found that transformational leadership helped facilitate both organisational commitment and employee productivity. Another example was in a study run by Zwingmann et al (2014) who found that employees led by a transformational leader have better health than those led by a laissez-faire (apathetic, hands-off) leader due to a “health-promoting phenomena” created by having a shared vision.

Transactional Leadership

What does a transactional leader look like?

Transactional leadership is grounded in the following assumptions:

  • People perform better when there is a clear chain of command
  • The goal of the followers is to obey the leader
  • There should be regular reviews to ensure that workers are meeting the leaders’ expectations
  • Workers are motivated by punishment and reward

There is a strong sense that transactional leadership is about dealing with the here and now, whereas transformational leadership is about looking forward. A transactional leader tends to be more reactive than proactive.

We see transactional leadership every day in the sports teams we love to watch. When a team does well, when players do well, they are rewarded with trophies, bonuses and fame. However, when teams or individuals do badly they are rejected, side-lined and often forgotten about. What this means is that players will be extremely motivated to succeed – and that’s how transactional leadership works. Transactional leadership relies on the fact that humans want to succeed and attain rewards, whilst doing what they can to avoid punishment.

When does transactional leadership work well?

Transactional leadership is a very good approach for situations where solutions are well defined or problems are simple and don’t require much creativity. Transactional leadership is also good in high-pressure situations where you are racing against the clock to deliver a task. Transactional leadership is very good at maintaining the status quo and keeping the ship afloat.

I do also believe in the short term, transactional leadership is a time saver though it does put extra strain on the leader as they have to come up with all the answers.

Which style is better?

I believe, as with most leadership styles, assuming either style should be done with respect to the current situation. Sometimes transactional leadership is more appropriate as it will give followers a clear direction – they know exactly what is expected, what their goals are, what the rewards are and what the consequences are if they fail. However, transformational leadership can give followers the opportunity for growth and development and could provide more creative solutions to difficult problems the team or organisation may be facing.

Personally, I oscillate between both styles depending on the project I am working on, the specific problems I am facing and most importantly the people I am working with. Some people would like to be delegated more responsibility and some people aren’t at that point yet. With people I can delegate to, I try to empower them using a more transformational style of leadership. If my team largely consists of those who aren’t yet receptive to the full delegation, I assume a transactional style of leadership.

I have personally found that assuming a transformational leadership style and empowering my team provides me with big returns in the form of free time. Where I have been able to delegate and empower team members, they come up with the solutions rather than asking me for them, which is a huge time saver and means I can focus on growing and developing the team and working alongside the client.

As a leader, it is important to understand your style of leadership and what you could do differently or better in certain situations. You need to be agile and have the correct tools for any situation so that you adapt to any situation you may face. To keep your feet nimble and to grow your toolset, keep learning, keep reading, keep practising and keep growing.

Let me know your thoughts fellow leaders. Have you tried these styles? What works best for you and your situation? Do you naturally gravitate to a particular style?

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