Transactional leadership is a leadership style which motivates followers through the use of tangible rewards and punishments (Webster and Webster n.d.). Also known as the “managerial leadership”, it focuses on supervision, organisation, and group performance (Lea 2019). Transactional leadership incentivises good performance while also penalizing bad ones (Ingram 2019).
Transformational leadership refers to a leadership style which encourages, inspires, and motivates followers to foster innovation and drive change for the collective success of the organization (White 2018). This is accomplished by articulating a clear vision and generating group buy-in, setting an example and being a mentor to the followers, being considerate of the individual differences and motivations of the team members, and having the courage challenge the status quo (Hein 2013). Transformational leadership goes further than transactions, exchanges, or rewards (Aarons 2006).
In Maslow’s Hierarchy, transactional leadership works on the extrinsic lower-level needs (Odumeru and Ogbonna 2013) while transformational leadership is focused on higher-level intrinsic needs (Akilu and Junaidu 2015).
In Herzberg’s Two Factor Theory, transactional leadership touches on the hygiene factors, which demotivates employees when absent. On the other hand, transformational leadership, contributes to the motivating factors such as responsibility, growth, and sense of achievement (Terkowski, van de Loo, and Pelikan 2019).
Douglas McGregor’s X and Y Theories also apply wherein X-type of people needs transactional leaders who punishes bad behaviours and rewards good ones, while Y-type tend to gravitate towards transformational style due to innate positive traits such as trust, innovation, and self-motivation (Odumeru and Ogbonna 2013).
Transactional leadership is concerned with maintaining the normal operations, or “keeping the ship afloat” (Ingram 2019). This style is rooted in keeping things consistent and working smoothly, with the aim of minimising errors and mistakes. It is all about the present efficiency and is not concerned with future (White 2019).
Transformational leaders goes beyond the normal day-to-day management. They are involved in strategies which can take the team onto the next level (Ingram 2019). This style is not afraid of “rocking the boat” in order to drive innovative change (Hein 2013).
In transactional leadership style, followers are not expected to be innovative. But rather, they are expected to focus on accomplishing tasks a certain way, in a clearly defined expectation and structure. Leaders in this style are to ensure that things get completed accordingly to the specified standards, communicating both the rewards for a good job and the consequences of bad performance. They are envisaged to drive efficiency and productivity (St. Thomas University 2018). Therefore, transactional leadership style is appropriate for situations where there is a clear set of tasks to perform, structure to follow, and results to achieve (Wongyanon et al 2015). Examples are manufacturing assembly line, a fast food restaurant, or even a crisis situations where the attention is on accomplishing a specific task (Cherry 2020).
Transformational style of leadership is better suited for situations where design, strategy, and innovation are expected, including the communication and generating buy-ins (Ingram 2019). This style supports “agile” environments, where risk-taking and learning is encouraged to drive creativity (White 2019). Leaders employing transformational style provide certain liberties for experimentation and exploration to their follower, in addition to the coaching and mentoring, while remaining focused on the big picture (White 2019). Information technology, engineering, and research and development are some of the key situations where employing transformational leadership will be beneficial.
I believe that part of being a great leader is knowing what drives and motivates your constituents. While recognition, accomplishments, and growth are important, there are “minimum” benefits a leader should to provide to his or her followers in exchange for their performance. As evident using Maslow’s model, transactional leadership fulfils the basics such as physiological and safety needs, or in case of Herzberg’s, the hygiene factors. Once the minimum has been fulfilled which serves as the foundation for the higher-level needs (or in Herzberg’s, the motivators), we can then employ transformational style.
Another aspect I would consider is the personalities of my followers. Transactional, authoritarian style is suited for McGregor’s X people, where a need for a rigid structure is required while transformational, participative style is more appropriate for self-motivated McGregor’s Y people.
In addition, the situation or environment will influence the style I will employ. For routine tasks, cases where efficiency is paramount, or a specific result is expected, then transactional style is well suited (i.e. routine IT maintenance tasks). For situations where there is a need to innovation and creativity, transformational style is more appropriate (i.e. software development).
In a rapidly changing environment, we need to be both strategic and tactical. Being transformational will enable us to be strategic and mission-oriented while being transactional keeps us focused on the tasks-at-hand and see the finer details.
Aarons, G. A. (2006) ‘Transformational and transactional leadership: association with attitudes toward evidence-based practice’. Psychiatric Services 57(8), 1162–1169. DOI: 10.1176/ps.2006.57.8.1162
Akilu, N. and Junaidu, A. (2015) ‘The Intersection of Self-Actualization, Entrepreneurship and Transformational Leadership: A Review of Maslow’s Perspective of Eupsychian Management’. American Journal of Trade and Policy 2, 93-100. DOI:10.18034/ajtp.v2i3.388
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Terkowski, A. C., van de Loo, J., and Pelikan, P. (2019) Leaders’ Perception of the Connection between Sustainability and Employee Engagement [online] MA dissertation. Malmo University. Available from http://urn.kb.se/resolve?urn=urn:nbn:se:mau:diva-21435 [28 April 2021]
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Wongyanon, S., Wijaya, A., Mardiyono, and Soeaidy, M.S. (2015) ‘Analysis of the influence of leadership styles of chief executives to organizational performance of local organization in Thailand (A case study of transformational, transactional and laissez-faire styles of leadership in Pattaya City, Laemchabang city municipality and chonburi provincial organization)’. International Journal of Applied Sociology 5(2), 76-83. DOI: 10.5923/j.ijas.20150502.02