Transformational and Transactional Leaders

This blog entry was developed by Nancy Harrower and Steve Manderscheid. We discussed this topic over lunch one day and decided to collect our thoughts. To that end, we will focus on two different methods of leadership. James Burns, a prominent leadership theorist, suggested that leadership is one the most observed, yet least understood phenomena on earth. We agree with this observation. Just doing a quick Google search on the term “leadership” yielded more than 110,000,000 hits! Since no one has time to surf through all this data to find a few important insightful and practical theories on leadership, we chose to examine two prominent types of leadership: Transformational and Transactional Leadership.  These two types of leadership are common throughout most industries and organizations – we have seen these styles many times.

Transformational leadership can best be illustrated by a direct contrast with transactional leadership. According to Burns, a transformational leader changes the lives of followers and organizations by changing perceptions, values, and aspirations of the employees. Transformational leadership concept was further developed by Bernard Bass when he introduced the concept of segmenting transformational leadership into four components: high ethical standards, intellectual stimulation, a display of empathy, and inspired vision.

Transformational leaders are those unique individuals who truly work to improve the lives of others in their organization. The strength of the organization depends on the strength of the individual, and the transformational leader shows respect for the individual members. They guide others into enlightened action; they do not dictate action. They seek collaboration.

Transactional leadership, as first described by Max Weber in the late 1940s, and then revisited by Bass in the 1980s, is an opposite approach. Transactional leaders approach followers with a quid pro quo mentality; meaning that “you do this for me, and I do something for you.” This may mean that something positive will happen, but if you don’t do this, than something negative will happen. Do this for me, and I will reciprocate. The relationship of the leader to followers is based on power over task completion, as well as positive and negative consequences. Transactional leaders expect followers to act as directed; the individual’s overall growth and change may not be an element of concern to transactional leaders.

Moreover, transactional leaders like to dangle rewards to get desired behaviors. They often use the classic “carrot-and-stick” approach. Transactional leaders like to give rewards (carrots) or punishments (a poke with a stick) to drive desired behavior. Some of the managers (leaders) we have observed over the years were subtle transactional leaders. These leaders may be liked and respected, and perhaps even enjoyable to be around. However, the basis of the relationship was transactional in nature – again, specific actions of the individual were directed, not requested. Collaboration was often missing.

On the other hand, we have also observed very good transformational leaders. Those transformational leaders elicited a strong sense of commitment to their followers as well as to the organization’s vision, mission, and goals. All leaders can benefit from self-reflection and leadership development to drive organization results through transformational leadership.