The Qualities Of Transactional Leadership

Published Date: 02 Nov 2017

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ABDUL BASEER

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KPK Agriculture University Peshawar.

REVIEW OF LITERATURE

1. TRANSACTIONAL LEADERSHIP

Transactional Leadership, also known as managerial leadership, focuses on the role of supervision, organization, and group performance; transactional leadership is a style of leadership in which the leader promotes compliance of his followers through both rewards and punishments. Unlike Transformational leadership, leaders using the transactional approach are not looking to change the future; they are looking to merely keep things the same. Leaders using transactional leadership as a model pay attention to followers' work in order to find faults and deviations. This type of leadership is effective in crisis and emergency situations, as well as when projects need to be carried out in a specific fashion.

1.1 QUALITIES OF TRANSACTIONAL LEADERSHIP

Transactional leaders use reward and punishments to gain compliance from their followers. They are extrinsic motivators that bring minimal compliance from followers. They accept goals, structure, and the culture of the existing organization. Transactional leaders tend to be directive and action-oriented.

Transactional leaders are willing to work within existing systems and negotiate to attain goals of the organization. They tend to think inside the box when solving problems

Transactional leadership is primarily passive. The behaviors most associated with this type of leadership are establishing the criteria for rewarding followers and maintaining the status quo.[4]

Within transactional leadership, there are two factors, contingent reward and management-by-exception. Contingent reward provides rewards for effort and recognizes good performance. Management-by-exception maintains the status quo, intervenes when subordinates do not meet acceptable performance levels, and initiates corrective action to improve performance.[4] the transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic management process of controlling, organizing, and short-term planning. The famous examples of leaders who have used transactional technique include McCarthy and de Gaulle.

Transactional leadership involves motivating and directing followers primarily through appealing to their own self-interest. The power of transactional leaders comes from their formal authority and responsibility in the organization. The main goal of the follower is to obey the instructions of the leader. The style can also be mentioned as a ‘telling style’.

The leader believes in motivating through a system of rewards and punishment. If a subordinate does what is desired, a reward will follow, and if he does not go as per the wishes of the leader, a punishment

will follow. Here, the exchange between leader and follower takes place to achieve routine performance goals.

1.2 TRANSACTIONAL LEADERSHIP

ASSUMPTIONS

People are motivated by reward and punishment.

Social systems work best with a clear chain of command.

When people have agreed to do a job, a part of the deal is that they cede all authority to their manager.

The prime purpose of a subordinate is to do what their manager tells them to do.

STYLE

The transactional leader works through creating clear structures whereby it is clear what is required of their subordinates, and the rewards that they get for following orders. Punishments are not always mentioned, but they are also well-understood and formal systems of discipline are usually in place.

The early stage of Transactional Leadership is in negotiating the contract whereby the subordinate is given a salary and other benefits, and the company (and by implication the subordinate's manager) gets authority over the subordinate.

When the Transactional Leader allocates work to a subordinate, they are considered to be fully responsible for it, whether or not they have the resources or capability to carry it out. When things go wrong, then the subordinate is considered to be personally at fault, and is punished for their failure (just as they are rewarded for succeeding).

The transactional leader often uses management by exception, working on the principle that if something is operating to defined (and hence expected) performance then it does not need attention. Exceptions to expectation require praise and reward for exceeding expectation, whilst some kind of corrective action is applied for performance below expectation.

Whereas Transformational Leadership has more of a 'selling' style, Transactional Leadership, once the contract is in place, takes a 'telling' style.

DISCUSSION

Transactional leadership is based in contingency, in that reward or punishment is contingent upon performance.

Despite much research that highlights its limitations, Transactional Leadership is still a popular approach with many managers. Indeed, in the Leadership vs. Management spectrum, it is very much towards the management end of the scale.

The main limitation is the assumption of 'rational man', a person who is largely motivated by money and simple reward, and hence whose behavior is predictable. The underlying psychology is Behaviorism, including the Classical Conditioning of Pavlov and Skinner's Operant Conditioning. These theories are largely based on controlled laboratory experiments (often with animals) and ignore complex emotional factors and social values.

In practice, there is sufficient truth in Behaviorism to sustain Transactional approaches. This is reinforced by the supply-and-demand situation of much employment, coupled with the effects of deeper needs, as in Maslow's Hierarchy. When the demand for a skill outstrips the supply, then Transactional Leadership often is insufficient, and other approaches are more effective.

1.3 POSITIVE CONSEQUENCES

Followers that are motivated by a clearly defined system of rewards and punishments will work well under a transactional leader. There is often a quid pro quo arrangement to this relationship. For example, if a worker accomplishes a set goal or objective, he will be rewarded with a bonus. Alternatively, if he fails to achieve this goal or objective by a certain date, then a negative ramification is going to occur.

Furthermore, there is a degree of certainty to this relationship. The transactional leader must clarify beyond a doubt what is expected with clear goals and objectives. The followers must be clear about what needs to be accomplished and the methods for accomplishing their goals.

Another potentially positive consequence of transactional leadership is a clear line of authority from the leader to the follower. A transactional leader is responsible for making sure that their followers are working on goals and objectives in alignment with overall organizational objectives.  There is no dispute as to who is in charge and generally little dispute about what the goals and objectives are.

Transactional leadership is effective in areas where it is clear what goals and objectives need to be accomplished and there is little room for creativity and innovation or alternative methods for goal accomplishment. For example, an effective manufacturing plant must have a well thought out process for producing a product. This process needs to be well defined with no room for error. Therefore, a transactional leadership style in the production of this product is appropriate and effective.

1.4 NEGATIVE CONSEQUENCES

All leadership styles have deficiencies and weak spots. The transactional leadership style is flawed because it motivates at a base level only. Reward and punishment do not motivate at the higher levels of human development and thought. Therefore, the transactional style of leadership only works well with followers performing tasks and processes that are well designed and produce dependably strong results.

This style is poor if higher level thinking skills need to be utilized.  Creativity is limited with the transactional leadership style because goals and objectives cannot be simply defined with a set process.  For example, if a team is brought together to improve and redefine a process, this project requires creativity and high level thinking skills that are not easily defined. The quid pro quo system of rewards and punishments will not be effective here.

In addition, the transactional style of leadership will limit followers who wish to engage in a professional environment at a higher level. These types of followers are motivated individually in unique ways. Transactional leadership is not effective at motivating at this level. Reward and punishment are too basic of a motivator for this level of employee. 

1.5 EXAMPLES OF TRANSACTIONAL LEADERSHIP

Coaches of athletic teams provide one example of transactional leadership. These leaders motivate their followers by promoting the reward of winning the game.[ They instill such a high level of commitment that their followers are willing to risk pain and injury to obtain the results that the leader is asking for.

Another example of transactional leadership is former Wisconsin state senator, Joseph McCarthy. His ruthless style of accusing people of being Soviet spies during the Cold War. By punishing for deviation from the rules and rewarding followers for bringing him accused communist infiltrators, McCarthy promoted results among followers.[9] Because this leadership style is especially effective in crisis situations, another example of this type of leadership, was Charles de Gaulle. Through this type of reward and punishment he was able to become the leader of the free French in a crisis situation.

2. TRANSFORMATIONAL LEADERSHIP enhances the motivation, morale, and performance of followers through a variety of mechanisms. These include connecting the follower's sense of identity and self to the project and the collective identity of the organization; being a role model for followers that inspires them and makes them interested; 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 enhance their performance.

2.1 DEVELOPMENT OF CONCEPT

James MacGregor Burns (1978) first introduced the concept of transforming leadership in his descriptive research on political leaders, but this term is now used in organizational psychology as well (Bass & Riggio, 2006). According to Burns, transforming leadership is a process in which "leaders and followers help each other to advance to a higher level of morale and motivation". Burns related to the difficulty in differentiation between management and leadership and claimed that the differences are in characteristics and behaviors. He established two concepts: "transforming leadership" and "transactional leadership". According to Burns, the transforming approach creates significant change in the life of people and organizations. It redesigns perceptions and values, and changes expectations and aspirations of employees. Unlike in the transactional approach, it is not based on a "give and take" relationship, but on the leader's personality, traits and ability to make a change through example, articulation of an energizing vision and challenging goals. Transforming leaders are idealized in the sense that they are a moral exemplar of working towards the benefit of the team, organization and/or community. Burns theorized that transforming and transactional leadership were mutually exclusive styles.

Bernard M. Bass (1985), extended the work of Burns (1978) by explaining the psychological mechanisms that underlie transforming and transactional leadership. Bass introduced the term "transformational" in place of "transforming." Bass added to the initial concepts of Burns (1978) to help explain how transformational leadership could be measured, as well as how it impacts follower motivation and performance.[1] The extent to which a leader is transformational, is measured first, in terms of his influence on the followers. The followers of such a leader feel trust, admiration, loyalty and respect for the leader and because of the qualities of the transformational leader are willing to work harder than originally expected. These outcomes occur because the transformational leader offers followers something more than just working for self gain; they provide followers with an inspiring mission and vision and give them an identity. The leader transforms and motivates followers through his or her idealized influence (earlier referred to as charisma), intellectual stimulation and individual consideration. In addition, this leader encourages followers to come up with new and unique ways to challenge the status quo and to alter the environment to support being successful. Finally, in contrast to Burns, Bass suggested that leadership can simultaneously display both transformational and transactional leadership.

Now 30 years of research and a number of meta-analyses have shown that transformational and transactional leadership positively predicts a wide variety of performance outcomes including individual, group and organizational level variables.

The full range of leadership introduces four elements of transformational leadership:

2.2 INDIVIDUALIZED CONSIDERATION:

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. The leader gives empathy and support, keeps communication open and places challenges before the followers. This also encompasses the need for respect and celebrates the individual contribution that each follower can make to the team. The followers have a will and aspirations for self development and have intrinsic motivation for their tasks.

2.3 INTELLECTUAL STIMULATION:

The degree to which the leader challenges assumptions, takes risks and solicits followers' ideas. Leaders with this style stimulate and encourage creativity in their followers. They nurture and develop people who think independently. For such a leader, learning is a value and unexpected situations are seen as opportunities to learn. The followers ask questions, think deeply about things and figure out better ways to execute their tasks.

2.4 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. The visionary aspects of leadership are supported by communication skills that make the vision understandable, precise, powerful and engaging. The followers are willing to invest more effort in their tasks, they are encouraged and optimistic about the future and believe in their abilities.

2.5 IDEALIZED INFLUENCE 

Provides a role model for high ethical behavior, instills pride, gains respect and trust.

As a development tool, transformational leadership has spread already in all sectors of western societies, including governmental organizations. As an example, the Finnish Defense Forces is using widely Deep Lead Model as basic solution of its leadership training and development. The Deep Lead Model is based on the theory of transformational leadership.

Transformational leadership consists of six behaviours: articulating a vision; setting a positive example; communicating high performance expectations; showing sensitivity to individual followers’ needs; encouraging a team attitude; and providing intellectual stimulation.

Research shows that groups led by transformational leaders boast higher levels of performance than groups led by other types of leaders. Transformational leaders' high expectations give their subordinates the self-confidence to persist in the face of setbacks, often resulting in exceptional performance.

EXAMPLE

Executives who are often described as transformational leaders include Richard Branson of the Virgin Group. Branson pays attention to his followers’ individual concerns about the company, expresses confidence in his employees' abilities to perform at a very high level, and puts forth a mission that is clear and engaging to members of the Virgin community.

2.6 TRANSFORMATIONAL LEADERSHIP AS AN EFFECTIVE

EADERSHIP STYLE

Different leadership styles are present in every business around the world. Typically the leadership style that is chosen to lead an individual business is based upon the culture of the company or the style of the person that is doing the hiring. The style that ultimately becomes in charge of an organization is going to ultimately determine how the people within the organization function. It will also determine the morale and success of the people as well. When the people of an organization have a direct impact on the success of that organization a transformational leader can be the greatest asset.

What is transformational leadership?

A transformational leader is one that has the ability to inspire. Typically the definition of leader in general is someone that is able to inspire or motivate people to do things. A transformational leader is one that displays this ability more than any other type of leader. Transformational leaders are leaders that often times will ask a lot of questions when talking with their employees. They will normally make solid eye contact and stop everything so that the employee understands that they are being focused on. This type of leader is one that will take extra care to ensure that their employees are cared for and their needs are met.

To keep the concept of a transformational leader simple, it is best put as a leader that cares about the feelings of their employees. Often times the successful transformational leader is going to take extra effort to find out how employees under them feel about changes that are being made, ask for their opinion on a variety of matters, and attempt to motivate them to better their own situation. For this type of leader it is about empowering each individual employee to push harder for their own reasons and not necessarily because the company says so.

Why transformational leadership is good for a company

When a company has a transformational leader morale is often times the biggest overall change. The leader will go into an organization and find out what the major concerns are of the employees and find a way to make their situation better. Not only will they work to make the work environment a little more friendly, they will also work to develop their individual talents. Under a transformational leader employees are going to be apt to work towards promotions as this type of leader is going to push them to work harder and develop as an employee. They are also going to find ways to encourage them during the tough times, congratulate them for their successes, and acknowledge important events in their life.

Transformational leaders are often good at retaining employees as they know what to say to keep their people happy. This leadership type is one that is going to have much lower turnover and will result in lower training costs. This is especially important when training can be expensive such as companies that rely on employees to have certications that they provide the training for. The greater level of training required to obtain and work in a position the more money a transformational leader can save a company. Often times the money saved through retention can far outweight the costs of this manager's salary and the costs they may incur attempting to increase morale.

This type of leader also inspires employees to look out for not only themselves but their company. By giving the employee a sense that the company cares about their accomplishments, the employees are more likely to look out for the company. This new outlook can often mean great savings for the company as employees are going to be less willing to take office supplies, more likely to cut costs, and definitely more likely to share their ideas for improvements. Since a transformational leader is going to ask for opinions it is likely that more ideas are going to flow from the lower levels up through the management chain. This could result in money saving ideas or even a completely new product line that could create considerable profits for the company. Often these front line employees when motivated can not only become more productive in their positions but also generate more idea power for the company.

FIGURE 1: MODEL OF TRANSFORMATIONAL LEADERSHIP

INSPIRATIONAL MOTIVATION: The foundation of transformational leadership is the promotion of consistent vision, mission, and a set of values to the members. Their vision is so compelling that they know what they want from every interaction. Transformational leaders guide followers by providing them with a sense of meaning and challenge. They work enthusiastically and optimistically to foster the spirit of teamwork and commitment.

INTELLECTUAL STIMULATION: Such leaders encourage their followers to be innovative a and creative. They encourage new ideas from their followers and never criticize them publicly for the mis takes committed by them. The leaders focus on the "what" in problems and do not ocus on the blaming part of it. They have no hesitation in discarding an old practice set by them if it is found ineffective.

IDEALIZED INFLUENCE: They believe in the philosophy that a leader can influence followers only when he practices what he preaches. The leaders act as role models that followers seek to emulate. Such leaders always win the trust and respect of their followers through their action. They typically place their followers needs over their own, sacrifice their personal gains for them, ad demonstrate high standards of ethical conduct. The use of power by such leaders is aimed at influencing them to strive for the common goals of the organization.

INDIVIDUALIZED CONSIDERATION: Leaders act as mentors to their followers and reward them for creativity and innovation. The followers are treated differently according to their talents and knowledge. They are empowered to make decisions and are always provided with the needed support to implement their decisions.

The common examples of transformational leaders are Mahatma Gandhi and Obama.

Criticisms of Transformational Leadership Theory

Transformational leadership makes use of impression management and therefore lends itself to amoral self promotion by leaders

The theory is very difficult to e trained or taught because it is a combination of many leadership theories.

Followers might be manipulated by leaders and there are chances that they lose more than they gain.

Implications of Transformational Leadership Theory

The current environment characterized by uncertainty, global turbulence, and organizational instability calls for transformational leadership to prevail at all levels of the organization. The followers of such leaders demonstrate high levels of job satisfaction and organizational commitment, and engage in organizational citizenship behaviors. With such a devoted workforce, it will definitely be useful to consider making efforts towards developing ways of transforming organization through leadership.

To use this approach in the workforce, one must first understand exactly what transformational leadership is. In the simplest terms, transformational leadership is a process that changes and transforms individuals (Northouse, 2001). In other words, transformational leadership is the ability to get people to want to change, to improve, and to be led. It involves assessing associates' motives, satisfying their needs, and valuing them (Northouse, 2001). Therefore, a transformational leader could make the company more successful by valuing its associates.

One such example is Sam Walton, founder of Wal-Mart, who often visited Wal-Mart stores across the country to meet with associates to show his appreciation for what they did for the company. Sam Walton gave "rules for success" in his autobiography, one of which was to appreciate associates with praise (Walton, 1996).

There are four factors to transformational leadership, (also known as the "four I's"): idealized influence, inspirational motivation, intellectual stimulation, and individual consideration. Each factor will be discussed to help managers use this approach in the workplace.

Idealized influence describes managers who are exemplary role models for associates. Managers with idealized influence can be trusted and respected by associates to make good decisions for the organization.

Inspirational motivation describes managers who motivate associates to commit to the vision of the organization. Managers with inspirational motivation encourage team spirit to reach goals of increased revenue and market growth for the organization.

Intellectual Stimulation describes managers who encourage innovation and creativity through challenging the normal beliefs or views of a group. Managers with intellectual stimulation promote critical thinking and problem solving to make the organization better.

Individual consideration describes managers who act as coaches and advisors to the associates. Managers with individual consideration encourage associates to reach goals that help both the associates and the organization.

Effective transformational leadership results in performances that exceed organizational expectations. Figure 1 illustrates the "additive" effect of transformational leadership because managers must pull together the components to reach "performance beyond expectations" (Northouse, 2001).

  

2.7 ADDITIVE EFFECT OF TRANSFORMATIONAL LEADERSHIP.

Each of the four components describes characteristics that are valuable to the "transformation" process. When managers are strong role models, encouragers, innovators, and coaches, they are utilizing the "four I's" to help "transform" their associates into better, more productive and successful individuals. Northouse (2001) states that in 39 studies of transformational literature, individuals who exhibited transformational leadership were more effective leaders with better work outcomes. This was true for both high- and low-level leaders in the public and private sectors (Northouse, 2001). Therefore, it can be very advantageous for managers to apply the transformational approach in the workplace.

2.8 TRANSACTIONAL LEADERSHIP VS.

TRANSFORMATIONAL LEADERSHIP

Votes

Number of Leadership theories evolved on the basis of Trait, Behavioral, Transformational, Situational, Charisma. Researchers and thinkers made efforts linking some of the theories across these leadership islands. But each model has its own pros, cons, assumptions & limitations. Latest researches are conducted on Situational & Transformational leadership styles. Leadership gurus presented new models as variations to the already existing models. Max Weber, MacGregor Burns, Bernard M.Bass, Warren Bennis & Nanus are few important researchers in the area of transformational leadership.

Understanding the difference between transactional and transformational leadership is vital in getting the whole concept of transformational leadership theory.

As a starting point, let us review our everyday life. In general, a relationship between two people is based on the level of exchange they have. Exchange need not be money or material; it can be anything. The more exchange they have the more stronger the relation. Your manager expects more productivity from you in order to give good rewards. In this way, if something is done to anyone based on the return then that relation is called as ‘Transactional’ type. In politics, leaders announces benefits in their agenda in exchange to the vote from the citizens.  In business, leaders announces rewards in turn to the productivity. These relation is all about requirements, conditions and rewards (or punishment). Leaders who show these kind of relationship are called ‘Transactional Leaders’.

In life, at one point of time, things happen without expectation from other side. Say, mom’s dedicated service to her kid. Mom doesn’t expect anything from the child and the service she provides in raising the child is unconditional, dedicated, committed. Mom plays a major role in shaping up the kid’s future life. This type of relation is called as ‘Transformational’. Leaders do exist in this world with these behaviors. Transformational Leaders work toward a common goal with followers; put followers in front and develop them; take followers’ to next level; inspire followers to transcend their own self-interests in achieving superior results.

2.9 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

3.0 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

 "Transformational Leader facilitates a redefinition of a people’s mission and vision, a renewal of their commitment and the restructuring of their systems for goal accomplishment. It is a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents. Hence, transformational leadership must be grounded in moral foundations"….(Leithwood, as cited in Cashin et al., 2000, p.1)

As exactly said by Bass – "the transactional leaders work within the organizational culture as it exists; the transformational leader changes the organizational culture".

Following table shows difference of transactional and transformation leadership.

TRANSACTIONAL LEADERSHIP

TRANSFORMATIONAL LEADERSHIP

Leaders are aware of the link between the effort and reward

* Leadership is responsive and its basic orientation is dealing with present issues

* Leaders rely on standard forms of inducement, reward, punishment and sanction to control followers

* Leaders motivate followers by setting goals and promising rewards for desired performance

* Leadership depends on the leader’s power to reinforce subordinates for their successful completion of the bargain.

Initial studies portrayed Transactional Leadership and Transformational Leadership as mutually exclusive, but Bass viewed the transactional & transformational leadership as continuum rather than opposites. The transformational leadership style is complementary to the transactional style and likely to be ineffective in the total absence of a transactional relationship between leaders and subordinates.

Based on detailed studies of various works in Transformational Leadership reveals following broader characteristics of Transformational Leader which includes (not limited to)

Clear sense of purpose, expressed simply

Value driven (e.g. have core values and congruent behavior)

Strong role model

High expectations

Persistent

Self-knowing

Perpetual desire for learning

Love work

Life-long learners

Identify themselves as change agents

Enthusiastic

Able to attract and inspire others

Strategic

Effective communicator

Emotionally mature

Courageous

Risk-taking

Risk-sharing

Visionary

Unwilling to believe in failure

Sense of public need

Considerate of the personal needs of employee

Listens to all viewpoints to develop spirit of cooperation

Mentoring

Able to deal with complexity, uncertainty and ambiguity