Difference between Transactional and Transformational Leader

Keywords: transactional vs transformational leadership

Compare and contrast between Transactional Leadership and Transformational Leadership. What are the significant differences between the two leadership models? Give relevant examples.

1.0 What is Leadership?

Leadership has been described as the process of social influence in which one person can enlist or procure the aid and support of others in the accomplishment of a common task. It is the way of organizing a group of people for the purpose of achieving a common goal. A leader is the person to who is capable of guiding, inspiring and associating others with the dream goal.

In addition, there are various types of leadership models which include transactional leadership, transformational leadership, and charismatic leadership and so on. In this contest, transactional leadership and transformational leadership will be compared and contrasted.

2.0 Description

Transactional Leadership

Transactional leadership is a term used to classify a formally known group leadership theories that inquire the interactions between leaders and followers. A transactional leader focuses more on a series of “transactions”. This person is interested in looking out for oneself, having exchange benefits with their subordinates and clarifies a sense of duty with rewards and punishments to reach goals.

The transactional leadership style developed by Bass is based on the hypothesis that followers are motivated through a system of rewards and punishment.  The transactional leader’s view of the leader / follower relationship is one of quid pro quo – or this for that.  If the follower does something good, then they will be rewarded.  If the follower does something wrong, then they will be punished.

Transformational Leadership

Transformational leadership is defined as a leadership approach that causes change in individuals and social systems. In its ideal form, it creates valuable and positive change in the followers with the end goal of developing followers into leaders. Enacted in its authentic form, transformational leadership enhances the motivation, morale and performance of his followers through a variety of mechanisms. These include connecting the follower’s sense of identity and self to the mission and the collective identity of the organization; being a role model for followers that inspires them; challenging followers to take greater ownership for their work, and understanding the strengths and weaknesses of followers, so the leader can align followers with tasks that optimize their performance.

The theory behind transformational leaders, on the other hand is based, on the hypothesis that leaders can exploit a need of the follower.  These particular needs are not based on quid pro quo transactions, but higher order needs.  These needs are those of the total person, and are closely aligned with the internal motivational factors of the follower.

So at one end of the spectrum we have transactional leaders that are making many “deals” with those being led.  On the other end of the spectrum, we have transformational leaders, which are looking to satisfy a greater need of an individual.

3.0 Mission

Transactional Leader:

“approaches followers with an eye to exchanging one thing for another” Burns

pursues a cost benefit, economic exchange to met subordinates current material and psychic needs in return for “contracted” services rendered by the subordinate . Bass

Here, transformational leaders make exchange of work with their followers for benefit or rewards. Followers are motivated with the rewards being given.

Transformational Leader:

“recognizes and exploits an existing need or demand of a potential follower (and) looks for potential motives in followers, seeks to satisfy higher needs, and engages the full person of the follower” Burns

The leader who recognizes the transactional needs in potential followers “but tends to go further, seeking to arouse and satisfy higher needs, to engage the full person of the follower to a higher level of need according to Maslow’s hierarchy of needs” Bass

Here, transformational leaders tend to focus on the move to change the followers and the organization. In addition, as explained by Bass, the transactional leaders focus on the organizational work within the organizational culture as the way it exists; on the other hand, the transformational leaders try to bring changes to the organizational culture”.

4.0 Personal characteristics

Transactional

• Directive
• Dominating
• Action-Oriented

Transformational

• Self Confident
• Assertive
• Seizes Opportunities
• Tolerates Risk
• Uses Systems Thinking

5.0 Characteristics of Transactional leaders

1. Contingent rewards: 

Transactional leaders link the goal to rewards, clarify expectations, provide necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for successful performance. They set SMART (specific, measurable, attainable, realistic, and timely) goals for their subordinates. These leaders work on some aspects which include;

• Exchange of rewards for effort contracted.
• Rewards for achieving goals promised.
• Accomplishments recognized.

Clear goals and recognition once they are reached is held to result in individuals and groups achieving expected levels of performance.

2.  Management by exception (active):

Transactional leaders actively monitor the work of their subordinates, watch for deviations from rules and standards and taking corrective action to prevent mistakes. These personalities also include;

• Standards specified by leader.
• Deviations are searched from the rules and standards.
• Corrective action taken quickly if necessary. May involve follower punishment.

3.  Management by exception (passive):

Transactional leaders intervene only when standards are not met or when the performance is not as per the expectations. They may even use punishment as a response to unacceptable performance. These leaders have some uniqueness which include;

• Leader awaits emergence of problems before acting.
• Intervenes only if standards are not met.

4.  Passive-avoidant/Laissez-faire:

The leader provides an environment where the subordinates get many opportunities to make decisions. The leader himself abdicates responsibilities and avoids making decisions and therefore the group often lacks direction. This can also be explained as;

Agreements are not specified; there are no expectations set; and goals and standards are avoided.

6. 0 Characteristics of Transformational Leadership

1. Charisma or idealized influence

The degree to which the leader behaves in admirable ways that cause followers to identify with the leader. Charismatic leaders display convictions, take stands and appeal to followers on an emotional level. This is about the leader having a clear set of values and demonstrating them in every action, providing a role model for their followers.

2. Inspirational motivation

The degree to which the leader articulates a vision that is appealing and inspiring to followers. Leaders with inspirational motivation challenge followers with high standards, communicate optimism about future goals, and provide meaning for the task at hand. Followers need to have a strong sense of purpose if they are to be motivated to act. Purpose and meaning provide the energy that drives a group forward. It is also important that this visionary aspect of leadership be supported by skills that allow the leader to articulate his or her vision with precision and power in a compelling and persuasive way.

3. Intellectual stimulation

The degree to which the leader challenges assumptions, takes risks and solicits followers’ ideas. Leaders with this trait stimulate and encourage creativity in their followers.

4. Individualized consideration or individualized attention

The degree to which the leader attends to each follower’s needs, acts as a mentor or coach to the follower and listens to the follower’s concerns and needs. This also encompasses the need to respect and celebrate the individual contribution that each follower can make to the team (it is the diversity of the team that gives it its true strength).

Transformational Leaders

• Motivating for performance beyond expectations.
• Inspiring for missions beyond self interest.
• Instilling confidence to achieve performance.Transformational leadership goes beyond transactional leadership.

Transactional Leaders

• Motivating for performance at expected levels.
• Initiating structure to clarify the task and roles.
• Stressing the link between reward and goal achievement.
• Uses agreed upon performance to motivate.
• Performance beyond expectations

7.0 Assumptions

Transformational leaders

• People get inspired by a person then they will follow that person.
• Great things can be achieved by person with vision and passion.
• Things are gotten done by the way they are injected with enthusiasm and energy.

Transactional Leaders

• Followers/Employees are motivated by reward and punishment.
• Orders are given by the superiors, and the subordinates have to obey the orders.
• These subordinates are not self-motivated rather they need to be intimately monitored and controlled in order to get the work done from them.

8.0 Differences

Transitional leaders

• Transactional leaders are aware of the link between the effort and reward
• Transactional leadership is responsive and its basic orientation is dealing with present issues
• Transactional leaders rely on standard forms of inducement, reward, punishment and sanction to control followers
• Transactional leaders motivate followers by setting goals and promising rewards for desired performance
• Transactional leadership depends on the leader’s power to reinforce subordinates for their successful completion of the bargain.

Transformational leaders

• Transformational leaders arouse emotions in their followers which motivates them to act beyond the framework of what may be described as exchange relations
• Transformational leadership is proactive and forms new expectations in followers
• Transformational leaders are distinguished by their capacity to inspire and provide individualized consideration, intellectual stimulation and idealized influence to their followers
• Transformational leaders create learning opportunities for their followers and stimulate followers to solve problems
• Transformational leaders possess good visioning, rhetorical and management skills, to develop strong emotional bonds with followers
• Transformational leaders motivate followers to work for goals that go beyond self-interest.
• In addition, the below table will give a detailed contrast of the differences between Transactional leadership and transformational leadership.

Transactional Leadership

• Leadership of the status quo. Effective in stable organizations and contexts. More likely to be observed in a well-ordered society.
• Focuses on social and economic exchanges between leaders and followers, using contingent rewards and administrative actions to reinforce positive and reform negative behaviors.
• Leader-follower relationship sees each exchange needs and services to satisfy their independent objectives.
• Follower response based on compliance. Supervision likely to be important.
• Leadership ‘act’ takes place but leaders and followers not bound together in mutual pursuit of higher purpose.
• Founded on people’s need to make a living by completing tasks.
• Focuses on situational authority, politics and perks. Involves values, but typically those required for successful exchange relationships (for example, reciprocity, and integrity). 
• Emphasis on day-to-day affairs, business needs short-term goals and quantitative information.
• Leader-follower relationship may be established quickly. A relatively impersonal relationship maintained only as long as benefits outweigh costs. 
• Tends to be transitory. Once a transaction is completed, relationship may need to be redefined.
• Emphasizes tactical issues.
• Typically involves working within current systems. 
• Supports structures and systems that emphasize outcomes.
• Follower counseling focuses on evaluation.
• Atomistic worldview and moral altruistic motives based on teleological perspective (that is to say, based on consequences).
• Motivates followers by appealing to their own self-interest (for example, pay, and promotion).
•  Based on directive power acts.

Transformational Leadership

• Leadership of change (within leaders, followers and organizations). Important in times of distress and rapid and destabilizing change.
• Focuses on organizational objectives and organizational change by disseminating new values and seeking alternatives to existing arrangements.
• Leader-follower relationship sees purposes of both become fused, leading to unity and shared purpose.
• Attempts to raise follower needs (following Maslow’s hierarchy) to higher levels (for example, self-esteem) and to develop followers into leaders.
• Based on interaction and influence.
• Follower response based on commitment. Supervision may be minimal.
• Leaders and followers raise one another to higher levels of motivation and morality.
• Founded on people’s need for meaning.
• Focuses on personal power, values, morals and ethics. May be demonstrated by anyone in an organization in any type of position.
• Transcends daily affairs, concentrating on long-term issues.
• May take time for leader-follower bonds to develop. A personal relationship that may persist when costs outweigh benefits.
• Tends to be enduring.
• Emphasizes missions and strategies for achieving them.
• May involve redesigning of jobs to make them more meaningful and challenging. Emphasizes realization of human potential.
• Aligns structures and systems to overarching values and goals.
• Follower counseling focuses on personal development.
• Organic worldview and moral altruistic motives based on deontological perspective (that is to say, based on promises).

In addition to the above table, their differences can also be categorized as the following;

• Basis Servant or steward Leadership

Transformational leaders have idealized vision. They are likable and honorable hero that worth imitating and identifying. They lead to promote change in the environment. On the other hand, Transactional leaders have the basis of exchange process. They work on mutual need satisfying, giving rewards for job performance. They lead to promote stability in the workplace.

• Leadership development

Transformational leaders tend to have more power. They empower and energize their followers excel. They re-engineer their followers. On the other hand, Transactional leaders design structures, control and reward system in their workplace to improve effectiveness and efficiency.

• Lead by example

Transformational leaders are charismatic. They handle and meet individual’s needs. As well, they upgrade the level of the needs. On the other hand, Transactional leaders possess different types of leadership style, using the right style at the necessary time.

• Proactive change agent

Transformational leaders make an effort to inspire their followers to help them change and transcend their selves for greater purposes. On the other hand, Transactional leaders reward their followers in terms of their performance. They are reactive to change at instances.

• Vision creator & propagandist

Transformational leaders make effort to create a vision of desired future state. They communicate pain of change that worth the effort. On the other hand, Transactional leaders focus on company goals and objectives. They make sure the needed goals are achieved.

9.0 Examples

• Transactional Leadership

In this kind of leadership, a clear chain of command is established. The leader motivates his subordinates by presenting them rewards and punishments. All requirements for a subordinate are clearly stated with corresponding rewards. If they fail to satisfy those requirements, they will receive a corresponding punishment. A couple of famous examples of transactional leaders are Joseph McCarthy and Charles de Gaulle.

• Transformational Leadership

Transformational leaders lead by motivating by their followers. Leaders appeal to their followers’ ideals and morals to motivate them in accomplishing their tasks. Basically, these kinds of leaders empower their followers using their own beliefs and personal strengths. Simply put, they inspire their followers. Famous transformational leaders include Martin Luther King Jr. and Walt Disney.

10.0 Conclusion

Finally, the transactional style of leadership is viewed as insufficient, but not bad, in developing the maximum leadership potential. It forms as the basis for more mature interactions but care should be taken by leaders not to practice it exclusively, otherwise it will lead to the creation of an environment permeated by position, power, perks, and politics. On the other hand, transformational Leadership by definition, seek to transform. When the organization does not need transforming and people are happy as they are, then such a leader will be frustrated. Like wartime leaders, however, given the right situation they come into their own and can be personally responsible for saving entire companies.