What is Transactional Leadership?
Feb 1, 2023 • 16 min read
Transactional leadership is a style of managerial leadership where managers focus on getting things done rather than trying to improve the overall culture of an organization. This approach tends to be used in organizations where performance is measured against set targets and short-term goals.
In contrast, transformational leadership encourages employees to think about how they want to contribute to their organization and helps them develop their skills and abilities. Transformational leaders encourage employees to feel part of something bigger than themselves.
Transactional leadership can be seen in large organizations with clear targets and rules. However, it can also be found in smaller companies too.
You’ll learn:
- Transactional leadership characteristics
- Brief history of transactional leadership
- Characteristics of the Transactional Leadership Model
- Transactional vs. transformational leadership
- Advantages and disadvantages of transactional leadership
- Examples of transactional leadership
- When Is Transactional Leadership the Most Effective?
Ready to build your remote team?
Use the DigiWorks platform to hire, manage, and pay remote talent from all over the world.
Transactional leadership characteristics
Transactional leadership is based on the idea that people are motivated by rewards and punishments – extrinsic motivation. In contrast to transformational leaders, the transactional style focuses on the delivery of results rather than inspiring others. They follow instructions and deliver what they promise. This type of leader is concerned with efficiency and effectiveness. Transactional leaders are rule followers and do what they’re told.
In contrast to transformational leaders who inspire and motivate employees using charismatic leadership, transactional leaders focus less on motivation and more on employee performance and output. Transformational leaders inspire people to change themselves and become better versions of themselves. However, the transactional approach doesn’t necessarily inspire people to change, because they want to see results. For example, a leader might tell you to go out there and sell more products, even though he knows you won’t enjoy it. He wants you to make sales.
Brief history of transactional leadership
Transactional leadership is a style where a leader sets clear goals, rewards people who meet them and corrects people who do not. It is often compared with transformational leadership, where the leader inspires people to look beyond their own interests. The two styles are not strict opposites, and many leaders use both.
The idea comes from the political scientist James MacGregor Burns, who contrasted transactional and transformational leaders in his 1978 book Leadership. The organizational psychologist Bernard Bass later developed the theory further in the 1980s. Both described transactional leaders as people who offer rewards for good performance and correction for poor performance.
Characteristics of the Transactional Leadership Model
1. Hierarchical
Hierarchy is one of the most powerful tools we use in our everyday lives. We see it everywhere — from the way we organize our homes to the way we organize our businesses. But hierarchy isn’t just about organization; it’s about power. And while you might think that having a boss gives you some sort of authority over others, that’s actually not true. In fact, hierarchy is a tool used to keep employees under control.
The reason why hierarchies are so effective is that they’re based on trust. When someone tells us what to do, we tend to follow those instructions without question. Even though we know that there could be consequences if we don’t, we still obey. This is because we believe that the person giving the command knows what he or she is doing.
In addition to keeping people under control, hierarchies help organizations function efficiently. They make sure everyone plays his or her part in carrying out the overall plan. For example, if you work in a large corporation, chances are that you’ll find yourself working within a department or division. If you work in marketing, you might report directly to a vice president.
2. Micromanaging
Micromanagers are bosses who try to control everything, even down to the smallest detail. They tend to micromanage employees because they don’t trust anyone else to do their job properly and believe this approach will improve organizational performance. These leaders often feel insecure about making decisions themselves, so they prefer to make sure that everyone follows directions exactly.
This approach works well when you’re dealing with small tasks, like ordering lunch or picking up dry cleaning. But it doesn’t work very well when you’re trying to lead a team of people into action. When you give someone too much direction, he or she might not understand what you really mean. And since no one understands what you want, there’s always confusion and miscommunication.
3. Contingent reward
Contingent reward is the core of the transactional style. The leader agrees clear goals with each person and promises a reward, such as a bonus, praise or a better role, when the goal is met.
This works well when tasks are clear and results are easy to measure, because people know exactly what is expected and what they get in return.
4. Practical
The term practical refers to how leaders act in real life situations. In contrast, visionary leaders are often seen as idealistic and unrealistic. If you want to lead effectively, it pays to know what makes a leader “practical.”
5. Motivation by self-interest
Transactional leadership is about getting things done. This type of leader focuses on individual performance and is motivated by personal gain. They are often seen as selfish because they don’t care about what others think or feel. However, transactional leaders are actually very concerned about how they are perceived by others. They want to look good and make sure everyone knows it.
Motivating employees to do well requires motivating them individually. If you motivate someone based on helping others, you’re likely to end up with a lot of unhappy workers.
The key to motivating people is to give them something to strive for. You must show them why they should care about doing well. This will help them see themselves as part of a larger group rather than just one person working alone.
If you want to motivate someone to perform well, focus on his/her strengths. People tend to like those who praise them for their abilities. Give credit where credit is due.
6. Management by exception
Transactional leaders usually do not step in while things are going to plan. They act when a mistake happens or a standard is missed, then they correct it and move on.
This keeps the leader’s time free, but problems may only be noticed after they happen. Some leaders watch the work closely to spot mistakes early, while others wait until a problem is raised.
Transactional vs. transformational leadership
Transformational leaders inspire followers to look beyond their own interests and work toward a shared vision. They listen to ideas, coach people and encourage them to try new approaches.
Transactional leaders
A transactional leader is someone who works best in a large organization where there are clear standards, processes, and procedures. They like to follow rules and adhere to regulations. They don’t like ambiguity. If you’re looking for a transactional leader, look for someone who likes structure and consistency. A transactional leader tends to work well in organizations where there are clear expectations about what needs to happen next. In a small business, it might be difficult for a transactional leader to make decisions because there aren’t many rules to follow.
In short, transactional leadership is a style of management that emphasizes getting things done through clear rules, goals and rewards, rather than inspiring people.
Transformational leaders
Sales managers often struggle to motivate their teams because they lack transformational leadership skills. Sales managers must understand how to communicate effectively, inspire trust, build relationships, and lead by example. They must know how to develop a vision and plan a strategy for their team. These sales managers must also be able to motivate their team members to take action and innovate.
In addition to being a great manager, a transformational leader is charismatic and connects well with others. A transformational leader drives change through experimentation and innovation and inspires his or her team to do the same.
Servant leaders
Servant leaders put the needs of their people first, while transactional leaders focus mainly on results for the company.
The difference between transactional leadership and servant leadership is subtle, but it’s important. In fact, there are three types of leaders: transactional leaders, servant leaders, and transformational leaders. Transformational leaders inspire and motivate people. They encourage growth and development. And they make sure everyone feels like part of something bigger than themselves.
Transactional leaders focus on what’s best for the company. They make decisions based on metrics, data, and numbers. They tend to be very practical. But they don’t always think about how their actions affect the people around them.
Servant leaders focus on serving people and helping them develop. They take pride in being helpful and supportive. They want to help others succeed. They show compassion and empathy toward others.
What does this mean for you? If you’re a leader, you need to understand what type of leader you are. You need to know whether you work better in a transactional environment or a servant one.
If you do decide to change jobs, you’ll probably find yourself in a different type of organization. So it might be worth considering where you’d fit best.
Advantages and disadvantages of transactional leadership
Transactional leadership is about getting things done. This type of leadership focuses on following procedures and processes, rather than inspiring employees to do great things.
In contrast, transformational leadership encourages people to think outside the box, develop others, and make decisions based on values. Transformational leaders focus on developing people, rather than controlling them.
The advantages of transactional leadership are that it gets things done quickly and efficiently, and it makes expectations clear. However, there are some drawbacks to this style of leadership. For example, transactional leaders don’t take risks; they’re afraid to fail. They also tend to be less creative and innovative. In addition, they often lack empathy.
Transformational leaders, on the other hand, are able to motivate people because they understand what motivates them. They know how to connect emotionally with their team members.
Disadvantages
Transactional Leadership is a style of management where leaders focus on getting things done. They do not allow employees to make decisions because it takes too much time and effort to change direction. This type of leader prefers to work within a set process and structure. When you are working under a transactional leader, you are expected to follow directions without question.
Examples of the Disadvantages of Transactional Leadership
1. You cannot challenge authority.
2. You will never feel like you are making a difference.
3. There is no room for creativity.
4. Your job is to keep up with the status quo.
5. You will always be behind the times.
Examples of transactional leadership
Transactional leaders are those whose style of leadership is based on motivating people to work hard and following orders. They rarely offer praise or criticism. Instead, they reward success and punish failure. In contrast, transformational leaders inspire people to think outside the box and ignore rules. Transformational leaders provide guidance and support to help others grow and develop.
When Is Transactional Leadership the Most Effective?
Transactional leadership is often seen as a necessary evil. However, it doesn’t have to be. When used correctly, transactional leadership can help you build stronger relationships, improve productivity and increase loyalty among your team members.
The key to effective transactional leadership lies in understanding how people work best. This type of leadership focuses on ensuring that people follow directions and complete assigned tasks. It is most appropriate when there is little room for creative thinking and when employees must adhere to strict rules. Employees appreciate being treated like adults and having clear expectations set out for them. They also value knowing what is expected of them.
However, transactional leadership does not encourage people to think outside the box; rather, it tends to discourage innovation and creativity. It also discourages employees from taking pride in their work. Instead, transactional leaders focus on making sure that everyone follows the same procedures and adheres to the same standards. This approach is useful when there is no room for individualism or flexibility.
In addition, people who feel undervalued may lose motivation. To avoid this, make sure employees know their work is appreciated, and keep rewards fair and consistent.
As a business owner, you need to make sure your team is constantly performing and reaching their targets and goals, and one way to keep good track of this is through the DigiWorks platform. DigiWorks connects business owners with talent from emerging countries. The upside to this is that the pre-vetted and assessed talent is not only super qualified and capable but also available at a fraction of the cost of the US minimum wage. The different time zones also allow them to work flexible hours and they are able to cover whatever peak times your business and team need coverage. DigiWorks won’t just connect you with the talent but will also handle the entire hiring, onboarding, and payroll process! They will also conduct weekly check-ins and consistent performance reviews with your team members to make sure they’re helping to reach your business goals!
Ready to build your remote team?
Use the DigiWorks platform to hire, manage, and pay remote talent from all over the world.
Conclusion
Leading others requires courage, confidence, and conviction—all qualities that come naturally to some people while being foreign to others. In fact, there are many different ways to lead, depending on one’s personality type. Some leaders like to take charge, while others prefer to follow behind. Whatever style you try, make sure you keep your entire team and company objectives in mind!
Related Articles
About DigiWorks
DigiWorks is an easy-to-use platform that helps small businesses and start ups hire amazing remote talent from around the world. DigiWorks offers a way for you to hire, manage and pay people from all countries. If you find an amazing virtual assistant from Philippines, a content writer from Nigeria, or operations manager from South Africa – manage and pay your entire team from one platform with no hassle.
If you’re looking for a more affordable and sustainable option you might consider making use of a hiring platform like DigiWorks. Virtual assistant companies or platforms like DigiWorks are amazing as they not only match you with pre-vetted and assessed remote workers that can take care of all your business needs but they will also handle all onboarding and payroll needs as well.