Transactional leadership, also known as managerial leadership, is a leadership style where the executive relies on rewards and punishments to achieve optimal job performance from his or her subordinates.
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As such, transactional leadership is based on an exchange, or transaction: The leader rewards workers who perform their tasks to the specified levels and punishes workers who do not perform to those set standards.
This relationship between leader and subordinates is based on theories that assume individuals are not self-motivated to do their tasks and need structure, instruction and supervision to accomplish their jobs. The theory also postulates that workers will perform their tasks as the transactional leader wants them to do in exchange for the leader's offering something that the workers want, such as pay.
Transactional leadership characteristics
A transactional leadership style works best in a structured environment where there are established processes as well as defined roles with specific tasks to accomplish.
According to transactional leadership theory, transactional leaders work within an organization's existing structure. He or she seeks to have subordinates deliver specific results that are well articulated and measurable.
A transactional leader evaluates subordinates on whether or not they meet defined requirements and expected results. Thus, transactional leaders appeal to the self-interest of their subordinates in order to keep them on track.
Transactional vs. transformational leadership
A transactional leader upholds the status quo. Because of this, a transactional leader does not generally fit well in entrepreneurial environments and similar settings where creativity and innovation are required.
Transactional leadership is frequently contrasted with transformational leadership, a style in which leaders seek to motivate and inspire workers. Transactional leadership has been called a "telling" managerial style, while transformational leadership is considered a "selling" style.
A transactional leader is focused on achieving short-term goals and performing tasks correctly and to specifications; this type of leader does not drive change but, rather, follows established protocols and procedures.
Advantages and disadvantages of transactional leadership
The benefits of this leadership style include the ability to achieve short-term goals quickly; to deliver consistent results; to maintain established procedures and protocols even across large and/or dispersed organizations; and to establish clear expectations for workers in regards to their responsibilities.
On the other hand, this leadership style has have been faulted for its inability to inspire and foster creativity. Similarly, transactional leadership theory has been criticized for its focus on maintaining established procedures at the expense of innovation.
Brief history of transactional leadership
German sociologist Max Weber in the mid-20th century established the idea of different leadership styles, one of which became known as transactional leadership. Political scientist, historian and presidential biographer James MacGregor Burns, a pioneer in the field of leadership studies, advanced transactional leadership theory. His 1978 book titled Leadership laid out the elements of transactional leadership and transformational leadership. Researcher Bernard M. Bass furthered the understanding of transactional leadership in his scholarly work in the early 1980s.
The transactional leadership style was prevalent in post-World War II United States. Many modern businesses, with their heightened focus on innovation and change, prefer other supervisory styles, such as transformational leadership. However, transactional leaders remain valued in certain organizations and work environments. And, in fact, transactional leaders are still commonly found in the military and large corporations where rules and regulations dominate.