Transformational Leadership and Transaction Leadership are the two most important types of leadership that play a significant role in senior management roles.
In case you are also keen to understand both of these leaderships and their key differences, so you can opt for the one that is best suited for you then this post is personalized to you.
In this article, we will be covering both Transformational Leadership and Transactional Leadership separately, and then we will help you in understanding when you should opt for a particular kind of leadership via our Transformational Leadership vs. Transactional Leadership analysis.
So, without any further ado, let us get started with Transformational Leadership-
- What is Transformation Leadership?
- Transactional Leadership
- Transformational Leadership and Transactional Leadership: The Difference
- Transformational Leadership ensures better Employee Engagement
- Differences between Both the Leaderships- Transformational Leadership Vs Transactional Leadership
- Key Characteristics of Transformational and Transactional Leaders
- Wrapping it up!
What is Transformation Leadership?
Transformational leadership is the type of leadership that works on building the confidence of employees. As from its name, “transform” can be observed. It is about new ideas and creativity in leadership. In this leadership, the followers or employees follow a path of their leader- as to focus on the values and vision of their leader.
Transformational leadership contains those leaders who are looking at the weaknesses of their employees. They pay attention to what is needed by their followers. To acquire their goals, employees seek the help of leaders. Mentors inspire their group to do more and achieve more.
Transformational leaders enhance innovation and creativity in their employees. Even the employees grow connections which are interpersonal with the leader. Development is encouraged, and so is their personal growth.
This ultimately leads to followers wanting to put more effort. As the leader always encourages the employees. The employees began to have a high psyche of purpose. This leadership is about an organization that focuses on change.
Here, four characteristics are the pillars of transformational leadership-
They are idealized influence, inspirational motivation, individual consideration, and intellectual stimulation. Those leaders who follow these ideas are inspiring, daring, creative thinkers, risk-takers and visionary.
Similarly, they want their employees or followers to think in a creative way to solve any problems which arrive at any instance. They encourage followers to take risky and new ideas to fight any difficulty. It broadens their vision and imagination as well.
Advantages of Transformational Leadership
- The leader of this leadership inspires the employees by motivating them. Here, optimism and enthusiasm are displayed.
- They encourage creative and new ideas. They inspire their work to be innovative.
- The leader is trusted and admired by the workers. Also, he is followed as a role-model by the employees.
- As per talent, each employee is considered. The leader recognizes and appreciated them with rewards. Also, it helps those workers who fail to achieve their goals.
Disadvantages of Transformational Leadership
- At times, this leadership can have an adverse effect. If the leader doesn’t think much before taking a decision, this can be risky.
- Because this leadership is inclined towards optimism, it can overlook the reality sometimes.
- It promotes unidirectional influence.
- When the leader isn’t good enough or inspiring, it won’t lead you to the expected result of achieving goals.
Now, as you have understood about Transformational Leadership, let us now have a look upon the transactional leadership-
Max Weber, in 1947, described this leadership. Then, Bernand Bass further explained it in 1981.
This leadership is a type that maintains an agreement with the norms of the organization. They look towards the performance of their employees. They reward and punish based on their performance. They set goals and give guidance about what they expect as an organization.
They follow the exact routine instead of making changes in their attribute. They work according to it only. There is no focus on change. Instead, they focus on establishing practices that will enhance the production and efficiency of the organization.
From the expected outcomes, they respond towards deviation. Also, for the improvement of performance, they recognize mutual results. Here, motivation is based on the achievement of employees. Be it good or bad.
The leaders here focus on checking daily assignments and tasks. They are adamant about short-term success like one has to complete today’s mission today, anyhow. They tend to be inflexible.
The transactional leader holds the control and power of his employees. It can work better in a situation where the troubles are clear-cut and straightforward. Also, one of the significant dilemmas with this leadership is that it doesn’t motivate the worker to go for a new idea to tackle any problem. When there arrives excellent difficulty, one has to deal with it applying any current solution instead of innovative treatments.
Advantages of Transactional Leadership
- In this leadership, short-term tasks and goals are achieved quickly.
- The performance of the worker defines whether they will receive a reward or punishment.
- For large organizations, it is better than other leaderships. This leadership is about the constant environment without any suspicion of a sudden change.
- Those employees who work efficiently and are motivated continuously, they receive awards accordingly.
Disadvantages of Transactional Leadership
- As we know, goals and tasks are already set; there is no chance of being creative.
- Personal initiative isn’t appreciated.
- It opposes any change in the culture of the organization.
Transformational Leadership and Transactional Leadership: The Difference
Each style of management needs leadership according to their need.
When we talk about any sales manager or CEOs type of control, then their transformational leadership is effective. It is because we have already learned that transformational leaders are more into communication. They discuss new ideas and creativity.
As we know, strategies and designing are crucial in sales management are related businesses. It’s better to opt for transformational leaders.
Now, on the other hand, let’s think of transactional leadership. Do you know Bill Gates?
Of course, you know, almost everybody does. He is the best example of a transactional leader. In large international companies and the military which have high-level members will also come under this category.
When any project needs specific and linear processes, they go for choosing transactional leadership as this leadership is probable to achieve success in the time of despair.
So it depends on what type of organization you own. Above mentioned are the descriptions, advantages, and disadvantages of both the leaderships. You can peep into both their features and opt from any one of them according to your needs.
Transformational Leadership ensures better Employee Engagement
An employee who is engaged and devoted to his work always outshines other employees in every capacity. The number one booster, by far has been the behavior of the manager or leader. A leader’s behavior impacts the working environment immensely. It even results in double-digit increases from the engagement viewpoint.
Transformational leaders care a little too much about employee engagement. It shows a rise in task delivery efficiency and an enhanced workplace atmosphere. As the behavior of a manager affects the surroundings greatly; thus, an employee and manager’s work go hand in hand. Even the benefits they get are in close connection or sometimes totally cascaded.
Below is a quick view of how these two work experience levels i.e. a manager and an employee, benefit from each other:
- The behavior of a leader allows or makes people more engaged and focused on their work.
- Employee engagement is best described as “a heightened emotional bond that an employee feels concerning his or her organization, that, in turn, influences, instead, encourage him/her to apply additional unrestricted effort to his/her work. It results in raising employee engagement levels.
- Because of the commitments and loyalties, high performers and people with great potential continue to be a part of the organization instead of leaving for higher and better opportunities. With this, there is a significant reduction in recruitments, hiring, and expenses, etc.
- Furthermore, with increased efforts and dedication, productivity also increases. The organization can produce more products in less time. As a result, the target is achieved before time, and new targets can be set, thus, increasing efficiency.
- The overtime costs also significantly reduce as the employees become more engaged. Correspondingly, the revenues shoot up too.
- There is improved employee satisfaction and retention, which in turn increases and speeds up the productivity results leading to improved customer satisfaction.
- With both revenue increase and expense reduction, double-digit profit growth can be seen in companies with higher and enhanced rates of employee engagement.
Employee engagement is not possible if it does not take into consideration the emotional aspect as well. Some can neglect it and end up in a messy business. But it is majorly through emotions that lead a manager to reach, engage, mobilize and inspire his or her employees.
If you are willing to turn around the statistics of your organization and want to reach more and more desired goals, then you must respect the personal preferences of your employees as well. It makes them feel that they are valued, and their needs are respected.
Besides, engaging more and more with the employees keeps you up to date about the logistics and any conflicts that might be lingering around, creating tension at the workplace. The word “Transformational” is apt, according to the scenario. A leader who can involve all these things under his command is transforming for good and betterment of the organization.
Differences between Both the Leaderships- Transformational Leadership Vs Transactional Leadership
- Transformational leadership intensifies creativity and new ideas, whereas transactional leadership functions with already present organizational rules and culture.
- Transformational leaders see success as broadened competence and morale of employees; the development capacity of the team, whereas transactional sees the output rate, profits, goals achievement, programs, and saving as their success.
- Transformational leadership style is about inspiring and emotionally engaging the employees to achieve their goals, whereas in transactional, it is about control and command; they work on getting timely results.
- Transactional leaders spend their time developing, listening, encouraging, coaching and giving feedback to the individuals. In contrast, transactional work on monitoring reports and metrics, attending meetings, also checking it daily.
- Transformational leaders share their imagination for the future, which includes all members of the team, whereas transformational leaders talk about measurable goals, best practices, job performance, and KPIs.
- Transformational leaders bid to group interests, also, the belief of success for the organization, whereas transactional leadership interest the employees in self-interest who strive for rewards for themselves.
Key Characteristics of Transformational and Transactional Leaders
1. The leader should be purposeful and intentional in their leadership
It means that a leader should always know the purpose of their leadership. The direction and path should be obvious to the leader.
Whatever steps he is going to take next, which shouldn’t harm the organization in any sense? Sometimes the leadership isn’t even known to the leader. If the leader isn’t aware that he already has followers who are willing to walk on his path, it is accidental leadership. And the leader who moves towards their goal by tackling the challenges and struggles is effective.
2. Practices of an effective Transformational and Transactional leader
No requirement of any particular skill or trait describes an efficient leader, but a leader who has a certain level of charisma in their behavior. It is natural in every sense. A person can never pretend their behavior; they have it natural. Therefore, a leader who is practical and has those abilities to be productive and inspiring is an effective one.
3. Forward-looking Transformational and Transactional Leaders
A leader who is competent, inspiring, honest, motivating and forward-looking is always followed by their teams. Everyone loves a leader who would be available to inspire their followers- That leader who will lead them to a path of success and achieving goals.
Key Tips to attain Exemplary Transformational and Transactional Leadership
Leadership is a choice. There are certain traits and characteristics exhibited by leaders who stand out as more effective leaders than the rest.
These leaders demonstrate these qualities more often, according to Jim Kouzes and Barry Posner’s research. Their research revolved around more than five million participants from all over the world.
As these practices are part of anybody’s behavior, anyone who wishes to lead can inculcate these in their lifestyle. A person with a specific set of skills or traits doesn’t need to be eligible for qualifying. Visibly, some of these traits can come naturally to one person or another as part of their personality. However, everyone can practice and adapt relevant habits to demonstrate these behaviors more frequently.
Best of all, these qualities are neither theoretical nor complex. They can be easily implemented in day to day life since they are practical and easily accessible. One of the most widely used traits by effective leaders is to “paint a bigger picture”. This way, they are prepared for the future, the goals, and what to expect. In addition to this, based on these goals, they decide how to complete the task in the given timeline and succeed. With this mantra, they have been able to work efficiently and grow continually.
Wrapping it up!
The transformational leaders express their aim clearly so that the workers can work efficiently without an iota of doubt. Leaders articulate confidence in the employees; they insist on values with actions. The leader just not limits their employees for company growth, but their individual development also.
In transformational leadership, the leader creates a powerful influence over the employees. This leadership can be found at several levels. Be it level of the team, division, department, or an entire organization as they work on team-building, collaboration with workers, at various levels to achieve transition for a better tomorrow.
Meanwhile, in transactional leadership, it forms a cycle of punishments and rewards to compel the workers of organizations. Here, if they meet the expectations of the leader and achieve their goals, they are rewarded for their excellent work. Similarly, if they violate the expectations and fail to achieve the goals set up by the mentor, they are punished.
Also, in transactional leadership, leaders’ function in their existing office structures and work as per their culture of the organization. They respond to divergences from wanted outcomes. They identify remedial actions for improvement.
Now, we hope you would have understood the theories associated with Transformational Leadership and Transactional Leadership. Which one according to you is the right one for your business? Share your thoughts with us in the comments below.
Pinky is an MBA in Marketing from the University of Mumbai. She loves helping people out in learning Marketing and sharing latest ideas and tactics for growing businesses.