The world is changing, sometimes it changes in a way you like, but not always. In a highly competitive and continuously evolving world, the leaders should be aware of the change is coming in, and try to manage the change successfully. In this blog, we will discuss two kinds of different leadership, transformational leadership and transactional leadership, and how the two kinds of leadership styles can effectively lead and contribute to change in the organization.
Transactional Leadership vs Transformational leadership
Acording to (James, 2001), Transactional leadership is to pursue a cost-benefit economic exchange with followers, in this relationship, followers’ material and psychical needs are satisfied in return for expected work performance. Transactional leadership is a based on reward and punishment system, the leader views the relationship between managers and subordinates as an exchange – you give me something for something in return. Transactional leadership consists of two factors: contingent reward and management by exception (James, 2001).
Contingent rewards– if the performance of employee could reach the expectation, the reward will be attained, it is kind of contract between the manager and the subordinate (David A, 1990)
Management by exception– leaders set work objectives and standards but wait for the problems to arise before reacting to them. (James, 2001)
Based on the two factors of transactional leadership, the characteristics of the transactional leadership could be listed as below:
Since the contingent reward could be regarded as kind of contract between manager and employee, executive who use contingent reward are expected to show directions to the employee so the job gets done(James ,2001), also the reward system fulfill the need of individual , which will generate motivation of employee to working hard to some extent , the positive effect of transactional leadership will be efficiency during some period, the immediate result will be productivity of the organization, however , since the transactional leadership focus on temporary exchange with employee , the efficiency will be limited to some extent.
Since the transactional leadership is based on the legitimate authority of bureaucrat organization, they tend to rely more on structure and rules to govern subordinates, which make them inflexible to the change of the environment (Haq, 2017).
Short-term Success Focus
The transactional leader see performance in dollar terms, ignore the culture of
the organization and the vision of the entity , leadership is limited to the material instead of meaningful outcome(James, 2001)
The transactional leadership will be more effective in the area of military and athletic teams, in military, the leader motivate their followers through fear and punishments to inspire motivation and transformation. The successful example of transactional leadership is Norman Schwarzkopf.
He graduated from West Point University, Schwarzkopf was essential in helping revolutionize the coordinated efforts of a United States military in Operation Desert Storm in the 1990s and was also efficient in using the rules and regulations of the US Military to manage strategic efforts on every continent during his time as commander in chief. (http://www.leadershipgeeks.com/transactional-vs-transformational-leadership/)
Transformational leaders are those who 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 to achieve extraordinary outcomes. (Bass, 2006), the below are the characteristics of transformational leaders:
Being a role model
They are model of integrity and fairness and get people to look beyond their self-interest .(idealized influence)
Inspiring the Team
They set clear goals and has high expectations, they encourages others and provide support (inspirited motivation)
Challenging the Status Quo
They solid the new approach for the performance of work and encourage creative and innovative of the followers (intellectual stimulation)
Taking care of specific needs
They listen to the employee and take care of the specific need and development of the Individuals (individual consideration). The successful transformation leader is Mark Zuckerberg
Who changed the face of internet and the way we interacted with one another with the creation of Facebook, he encourages the innovative and creativity of employee, he himself is a role model by his determination and integrity.
Similarities between Transactional and Transformational Leadership
Both Transactional and Transformational leadership styles share many commonalities,
Both the two kinds of leadership pursue the good expectation of performance, both
The two kinds of leadership meet the need of employee, physiological or self-
Differences in Managing
Between Transactional Leadership and Transformational Leadership
|What Transactional Leaders Do||What Transformational Leaders Do|
|Focuses on:||Short-term success; getting today’s work done today||Long-term success, getting people and systems in place for future growth|
|Style is:||Command & Control; authority-based to get immediate results||Heart & Soul; influence-based to emotionally engage employees|
|Power source:||Policies, performance management, extrinsic motivations (carrot & stick)||Inclusion, interest in individuals and|
their potential, intrinsic motivations
|Spends time:||In meetings, monitoring metrics and reports, checking on daily tasks||Coaching, developing, listening, giving individual feedback & encouragement|
|Talks about:||KPIs, measurable goals, recent job performance, policies, best practices||A shared vision for the future that includes all team members|
|See success as:||Output rate, savings, profit,|
programs, goal attainment for month/quarter
|Expanded competence & confidence|
of employees; growth in team capacity
|Results are:||Stuck and unsure how to get ahead, not promotable due to poor following||High levels of employee engagement, promotable due to impact/following|
How transactional and transformational leadership styles can effectively lead and contribute to change in the organization
We are living in a changing world, the driver of change could be various, the leaders’ role play in important in managing the change, let us analysis how transformational leadership and transactional leadership could manage and lead the change successfully.
Function of Change Agent
In the context of planned change, there must be agents that envision and influence all stakeholders to focus on achieving the strategic intent (senior and flemm,2006), the agent could express a strategic vision for the organization to motive and persuade others to follow that vision. Transformational leadership could be suitable to play the role of above mentioned, transformational leaders are visionary, showing confidence in the self and in others, communicating high- performance expectations and standards (Senior & Fleming, 2006).
Maintain Energy for Change
According to (McKinsey & Company 2010), Strong leadership and maintaining energy for change among employees are two principles of success , ensure that frontline staff members feel a sense of ownership and frontline employees take the initiative to drive change, the component of transformational leadership will match the two principals , since the transformational leaders pay attention to intellectual stimulation, which will encourage the employee to be initiative and creative, and the transformational leader take care of employee’s self-esteem ,which will motivate the employee to feel a sense of ownership and will reduce the resistance of employee towards change.
Incentive Reward Scheme
According to (Mullins,2010) , incentive reward scheme is one of the elements should be considered , change is a process with a step-by-step movement, the manager should allocate the resources in the process of change , when the change is coming ,the resistance of individual such as economics implication or fear of unknown might be generated (Mullins,2013) , the transactional leader could set up clear goal and standard to the employee through incentive reward scheme , to some extent, which will remove the obstacle of resistance of employee , the resources are allocated based on the performance of employee ,which could be regarded as direction of manager ,the employee especially the lower level of employee is not necessary to identify the future of the change, which could push the change program smoothly and quickly go forward. At the same time, the short-term win of transactional leadership could strength the confidence of employee. Transactional leadership could play positive role to lead change.
To some extent, the transformational leadership and transactional leadership are not contradictory to each other, in the process of change management, they can be supplementary to each other.
Transformational leadership and transactional leadership are both effective
Management based on different scenario and conditions. Of course generally speaking, transformational will be more effective in the long term, it motivates the employee and promote the new idea to solve problem, but transactional leadership is necessary to help to carry on the mission of an organization in the short term, but transactional leadership is not easy to stimulate the potential strength of employee to the maximum extent. Personally perspective, the ideal is to have a visionary or transformational leader at the top level of organization, while having several managers using the transactional style managing the employees at the middle levels.
In the dynamic environment that keeps on going, the leader are facing the change forces of internal and external organization, the effective leadership could play important role to lead the change in the organization, the manager should learn how to manage the change successfully, the leader should not only say” why”, they should also learn to say “why not “.
Andrea Lai, 2011, Transformational-Transactional Leadership Theory, Olin College.
Bass, 2006, Transformational leadership, books.google.com
David M. Herold and Donald B. Fedor, 2008, The Effects of Transformational and Change Leadership on Employees’ Commitment to a Change, Journal of Applied Psychology, P36-357.
Marie H. Kavanagh and Neal M. Ashkanasy, 2006, The Impact of Leadership and Change Management Strategy on Organizational Culture and Individual Acceptance of Change during a Merger, British Journal of Management, P82-99.
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Transformational and Transactional Leadership and Followers’ Achievement Goals, J Bus
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JC Kotler, 2002, the Heart of Change, Business School Press, Boston, Massachusetts, US
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