There are several leadership styles, and one such effective leadership style is the transactional leadership.
In this guide, you learn more about transactional leadership. We’ll look at what it is, the theories connected to it, its characteristics, as well as its pros and cons.
Let’s get started.
What is Transactional Leadership?
Transactional leadership is a leadership style that emphasizes on monitoring, organization, and employee performance. These leaders utilize incentives and punishments as an exchange to inspire people and keep them on course.
Leaders in this category believe in a reciprocal relationship with their staff. They utilize a system of incentives and sanctions to drive staff, making the style most effective during crisis management.
But there’s a caveat.
Leaders in this bracket lacks imagination and problem-solving skills, a disadvantage that leads to rigidity and inflexibility in organizations.
Transactional Leadership Theory
According to the transactional leadership theory, employees are not self-motivated. To execute tasks, they require structure, supervision, and directions.
The philosophy of Transactional Leadership lies on the notion that managers offer employees something in exchange for what they desire from them.
The characteristics of transactional leaders are being straightforward, truthful, and directive. These characteristics promote order and eliminate prejudice among personnel. The employee is aware of the organization’s expectations, so much so that they focus on being effective and productive.
The characteristics of a transactional leader contribute to the harmony and prosperity of the organization. Not to mention that clear objectives, motives, and incentives enhance employee performance.
Transactional Leadership vs Authoritative Leadership
Authoritative leaders are harsh, severe, and egocentric but less strict than transactional leaders.
The Authoritarian authorities have no faith in any form of incentive. They do not believe in intrinsic motivation or incentives as motivation. The transactional leaders utilize extrinsic motivation to improve staff performance.
Transactional Leadership vs Charismatic Leadership
Leaders with charisma utilize their personality to influence others. This sort of leader is valuable because they have the ability to elevate and alter a whole organization.
The major objective of charismatic leaders is to enhance the organization as well as to exert influence on everyone. The transactional leaders concentrate on the performance of each team member.
Charismatic leaders value creativity. These leaders question the existing quo, as opposed to Transactional leaders who lack imagination and innovation.
At work, charismatic leaders become one with the group. In a controlled atmosphere, transactional leaders analyze individual effort rather than collective activity.
What are the Characteristics of Transactional Leadership?
The following are the characteristic of transactional leaders:
1. Extrinsic Inspiration
Transactional leaders are egocentric. They believe in the concept of extrinsic motivation and contingent incentives. Therefore, they utilize incentives to motivate staff and punishments to correct bad performance.
2. Commanding
To keep people on target, these leaders establish specific objectives and predetermined procedures. In addition, these processes adhere to stringent norms, guidelines, laws, and regulations.
3. Resistance to Change
They are not receptive to innovation, transformation, or change. As problem-solvers, they prefer to think inside the confines of the box.
4. They’re Extremely Passive
Leaders offer each employee with positive performance feedback and they prioritize preserving the status quo.
These leaders are also attentive to the finer points, deviations, irregularities, and errors. They do not take preventative measures against anything. Consequently, these leadership styles are optimal for attaining short-term objectives.
5. They’re Selfish
Transactional leaders disregard the emotions, values, and identities of their employees. They seek effective and fruitful outcomes for the organization because they only prioritize productivity and objective achievement for their organization.
6. Emphasis on Hierarchy
These leaders place a significant emphasis on organizational structure. Consequently, they enhance a strict organizational structure.
7. They’re Practical
These leaders are pragmatic and consider actual restrictions. Due to this, they are efficient and capable of acting promptly in times of crisis.
In times of crisis, such as the Covid-19 outbreak, transactional leaders may be extraordinarily effective.
8. They Discourage Independent Thoughts
They do not inspire workers to be inventive or to take risks. They cherish simple, straightforward communication and loyalty.
Advantages of Transactional Leadership
- Sense of justice at workplace
- There is a systematic and simple to comprehend structure
- Employee incentive guaranteed
- Focuses on attainable short term objectives
- Concentrates on Crisis Management
- It has a clear structure
- Profitability and expense
Disadvantages of Transactional Leadership
- It discourage originality and innovation
- There’s a lack of emphasis on connection development
- Leaders only motivate employees through rewards
- Transactional leadership discourage independent thinking
- Lacks Long-term aims
- Inflexible
- No potential for development
Is Transactional Leadership Still Relevant?
Businesses need innovation and teamwork to thrive in the current day. Transactional Leaders, on the other hand, are hard and inflexible. So are these leaders even relevant in this time and age?
Well a transactional leader may still be relevant in the following cases:
1. Crisis-Management
There are several situations when this style of leader is optimal. During the opening days of the Covid-19 outbreak, for instance, companies were unable to operate smoothly.
Globally, productivity and efficiency of enterprises dropped. The rapid adoption of digitalization by businesses caused employees to get confused. They were no longer aware of the organization’s expectations. During this period, transactional form of leadership flourished.
This method provided employees with a clear path to success and achievement of corporate objectives.
This conventional leadership approach is therefore quite successful under such circumstances.
2. Industrial Facilities and Factories
Companies with routine and repetitive work employ this style of leadership. Manufacturing units are a good example.
The majority of global organizations implement diversity and inclusion initiatives. These programs assist to preserve the organization’s diversity.
Diversity refers to the distinct qualities and characteristics of individuals. On the contrary, inclusion relates to organizational activities and social norms. These can be maintained by predetermined operating procedures.
Transactional leaders facilitate these methods of operation.
3. Sales Profession
When staff goals are present, this leadership style is utilized in the sales business.
If employees meet or exceed predetermined objectives, they receive incentives, bonuses, and privileges. They are punished for their poor performance.
Final Thoughts
Transactional leaders play an important role in the growth of an organization. However, there are apparent disadvantages.
These leaders are exclusively concerned with production and results, ignoring staff involvement. A worker may see a transactional boss as inflexible and harsh, which is something that have a significant impact on the employee’s performance.