Transactional leadership is a style that focuses on creating clear expectations and providing rewards or consequences based on performance. It is a goal-oriented style that emphasises maintaining the status quo by ensuring that followers comply with established rules, processes, procedures, and expectations.
A transactional leader invariably appreciates order and structure. They are known more for commanding military operations, managing large enterprises, or leading worldwide initiatives that need the application of rules and regulations to meet deadlines in an orderly manner.
Transformational leadership is frequently contrasted with transactional leadership.
Self-motivated individuals who perform well in a structured, guided atmosphere are required for transactional leadership. Transformational leadership, on the other hand, tries to excite and inspire employees, preferring to influence rather than direct people.
The distinction between transactional and transformative leadership is also significant. Simply put, transactional leadership is a “telling” approach, whereas transformational leadership is a “selling” type. While transactional leadership uses positive and negative reinforcement, transformational leadership focuses on motivation and inspiration.
Transformational leaders are proactive, whereas transactional leaders are reactive. Individual self-interest is prioritised in transactional leadership, but group growth is prioritised in transformational leadership.
Most often, the transactional leaders are fast to act. When they are at their best, they become excellent executors. They can take authority, change the tide, and are extremely skilled in times of crisis. This is because they use their power to take decisive action even when the situation is uncertain.
The goal of transactional leadership is to achieve results. Therefore, a transactional leader always conveys their team’s expectations. They define their goals, performance targets, and the motivations and repercussions of their activities. It also eliminates doubts about what defines success at their organisation.
Leadership styles
Most of the leadership styles practised in the corporate world currently are empathetic in application. In structure and technique, transactional leaders differ from charismatic and transformational leaders. Charismatic leadership focuses on inspiring a group of people to improve results. The emphasis of transactional leadership is on controlling an individual’s performance and determining how well he or she works in a controlled context.
Transactional leadership bases incentives and punishments on the performance of the followers. The leader sees the manager-subordinate relationship as an exchange. When subordinates do admirably, they are rewarded, and they will be penalised in some way if they perform poorly.
Transactional leaders closely monitor their subordinates in order to enforce rules, reward achievements, and punish or reprimand failures. They do not, however, serve as accelerators for growth and change. Instead, they are concentrating on preserving the status quo and upholding established laws and expectations. These leaders are adept at defining expectations and standards that optimise an organisation’s efficiency and production, and they often provide constructive directives on follower performance to increase their output.
Although the general opinion is that transactional leadership works best with large organisations, it can also be extremely useful in developing mutual exchange between leaders and employees in small and medium-sized enterprises as well. This method of leadership assumes impersonal interaction, where leaders do not concentrate heavily on building higher-level humanistic relationships between them and their subordinates.
However, this does not by any means mean that the leaders should treat the workers immorally or excessively harshly. Depending on the situation, they must be considerate about the workers’ mental status as well. While the transactional leadership model has limitations when it comes to managing SMEs, it is still widely used in the sector today.
The transactional style of leadership has its own unique characteristics. They always act with urgency to face a situation, even when they are not. They are always effective executors who desire to produce quick results by taking charge of a situation. They are especially effective in times of crisis when the organisation faces threats or challenges. Transactional leaders are not afraid to take decisive steps to come out of a crisis.
They are usually excellent communicators who can clearly and precisely communicate their expectations to their subordinates. Hence, the employees understand exactly what their leader expects from them, which makes them feel productive in reaching defined goals and objectives. Transactional leaders are direct and transparent when they extend a message to their workers. This type of leader commands respect and knows that people follow them because of the trust placed in them by their subordinates.
Short-term goals
Transactional leaders usually oppose change, although some analysts consider it a negative factor, they have their own approach to work tasks and direct followers to execute them effectively.
Transactional leadership is best for short-term goals. The leaders clearly understand the goals and the time limits they have to achieve the goals. Their style is to break the organisation’s long-term goals into short-term assignments and work on those. This means short-term results excel, and the employees energetically follow the leader to achieve quick results.
As for the advantages of this type of leadership, first and foremost, it provides clear expectations and structure, which can help create a sense of stability and order within an organisation. This can be particularly useful in environments where there is a need for predictability and control, such as in production-oriented businesses.
The transactional leadership style is also straightforward and easily implementable, making it ideal for organisations that require a quick response to challenges.
The focus on clear goals, rules, and procedures makes it easy for leaders to establish their authority and for followers to understand what is expected of them.
Transactional leaders use rewards and consequences to motivate followers, which can be an effective way of ensuring that goals are met. This can create a sense of accountability and drive among followers who are motivated to meet the expectations set.
Also, by setting clear expectations and providing regular feedback, transactional leaders can help improve the performance of their followers. This can lead to greater productivity, better quality work, and an increased sense of accomplishment among followers.
A transactional leadership style is not without its own pitfalls and disadvantages. Key among them is the limited creativity allowed to workers. As this style is focused on maintaining the status quo, that can limit the ability of followers to be creative and innovative. It can be problematic in situations where change and innovation are needed.
The focus on rewards and consequences in transactional leadership can lead to a reduction in intrinsic motivation among followers.
This can create an environment where followers are more concerned with pleasing the leader than with their own personal growth and development, which can affect productivity.
As transactional leadership is based on strict rules and procedures, the employees may feel that the leader’s approach is too rigid and inflexible. This can be a problem in rapidly changing environments where leaders may struggle to adapt to new circumstances. Due to this, the followers may become disengaged, which may lead to distrust. If distrust is created, building a strong relationship among workers may be difficult.
Transactional leadership can be an extremely effective style that contains advantages and disadvantages, just as other types of leadership theories do. It can be best in situations where there is a need for clarity, structure, and stability, but it may not be well-suited to situations that require creativity, innovation, or the development of strong relationships between the leader and followers. Therefore, the best approach is to understand the situation and choose the leadership style that is most appropriate for the organisation and the employees.