Leadership: Transactional vs Transformational

In other words: Management and Leadership

Leadership is defined as the ability to influence a group towards the achievement of a set of goals (Robbins, S. P., & Judge, T. A., 2016, pg. 191). Of course, it is only one of the 350 definitions that have developed over the past several decades and unlike management skills, it is not tied to a position (The duties and definition of leadership, December, 2007). Transactional leadership is also known as managerial leadership and it focuses on the role of supervision, organization and group performance (Bojeun, 2014, pg. 83). Under transactional leadership work is performed to achieve goals and a reward is received for performance (Bojeun, 2014, pg. 84). It is generally short term in nature and there is reward for delivering tasks on time and penalty for not achieving targets (Bojeun, 2014, pg. 84). This leadership style lends itself best to situations where rules and operations are clearly identified and both the supervisor and subordinate view the relationship as an exchange. Research has found that “transactional leadership tends to be most effective in situations where problems are simple and clearly defined and is least effective in situations where creativity, innovation and long-term benefits are encouraged,” (Bojeun, 2014, p. 85). In politics, too, there is transactional leadership. Candidates seek votes of people and promise to work on their behalf once in the office.

By contrast, transformational leadership motivates and places more faith in employees and teams by creating common vision (Bojeun, 2014, p. 88). Transformational leadership is proactive and forms new expectations in followers, driving intrinsic motivation and innovation (Bojeun, 2014, p. 90). Transactional and transformational leaderships are not mutually exclusive, instead they complement each other and the best leaders are both transactional and transformational (Robbins, S. P., & Judge, T. A., 2016, pg. 202). It seems there is a ceiling when it comes to transactional leadership and to achieve higher results, you have to have transformational leadership. Transformational leadership gives people autonomy over specific jobs and the authority to make decisions (“What is Transformational Leadership? How New Ideas Produce Impressive Results”, 2015). There are certain benefits to having transformational leadership. Companies show greater agreement about the organization’s goals and it results in superior performance (Robbins, S. P., & Judge, T. A., 2016, pg. 203). Transformational leadership also has greater impact on the bottom line in smaller, privately held firms (Robbins, S. P., & Judge, T. A., 2016, pg. 202). According to GLOBE study, vision is the most important element of transformational leadership in any culture (Robbins, S. P., & Judge, T. A., 2016, pg. 202). In general, organizations perform better when they have transformational leaders (Robbins, S. P., & Judge, T. A., 2016, pg. 202).

The differences between the two leadership styles (transactional and transformational) can be seen below, taken from (“What is Transformational Leadership? How New Ideas Produce Impressive Results”, 2015):

Transformational leaders specialize in:

  • Working to change the system
  • Solving challenges by finding experiences that show that old patterns do not fit or work
  • Wanting to know what has to change
  • Maximizing their teams’ capability and capacity

Transactional leaders do the following:

  • Work within the system
  • Start solving challenges by fitting experiences to a known pattern
  • Want to know the step-by-step approach
  • Minimize variation of the organization

Organizations have both transactional leaders as well as transformational leaders.

Leadership and organizational performance are linked and leadership does matter. If we take a quick survey of some leaders in various industries, we see how they have influenced their organizations and people and achieved a level of success managers (or transactional leaders) just cannot achieve. Business leaders, such as Richard Branson, Warren Buffett, Bill Gates, Steve Jobs, Jeff Bezos have led their organizations from the bottom to become world-class and they have influenced tens of thousands of people, within their organizations as well as outside.

John Kotter, who is considered by many as the authority on leadership and change, characterizes the difference between leadership and management this way:

Peter Drucker said: “The difference between a manager and a leader is that a manager focuses on doing things right, while a leader focuses on doing the right things.”

References:

Robbins, Stephen. P., & Judge, Timothy. A. (2016). Essentials of Organizational Behavior (Thirteenth Ed.). Upper Saddle River, NJ: Prentice Hall

The duties and definition of leadership. (December, 2007). Health Governance Report, 17(12)

Bojeun, M. C. (2014). Program management leadership: Creating successful team dynamics. Boca Raton: CRC Press.

Transformational Leadership: Definition, Examples, Futurehttp://online.stu.eduTransformational leadership inspires people to achieve unexpected or remarkable results. It gives workers autonomy over specific jobs, as well as the authority to make decisions once they have been trained.

 

Graphic: Business vector designed by Dooder – Freepik.com

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