From Paychecks to Purpose: Exploring Transactional and Transformational Leadership

Organizations often confront both logical and emotional challenges when introducing new initiatives. Real success depends on more than simply implementing change; it requires building genuine buy-in. Leaders who establish this sense of commitment often tap into the power of charismatic leadership, which arises when followers connect with a leader’s personality and vision. However, it is important to remember that while transformational leaders are typically charismatic, not every charismatic leader is truly transformational (Hughes et al., 2022).

James MacGregor Burns’ framework outlines two contrasting approaches: transactional leadership and transformational leadership. Transactional leadership is straightforward: leaders offer something tangible, such as higher pay or incentives, in exchange for meeting specific goals. This method can boost short-term productivity by setting clear expectations and rewards. Yet, because it tends to focus on external motivators rather than deeper aspirations, transactional leadership may struggle to inspire lasting commitment.

Transformational leadership, on the other hand, speaks directly to people’s values and sense of purpose. By appealing to deeper motivations, transformational leaders can ignite meaningful engagement and foster genuine change. However, this approach is rarely simple. Pushing individuals out of their comfort zones is often met with resistance, and leaders who propose sweeping changes can face strong opposition. Transformational leadership also draws controversy because dismantling familiar routines triggers diverse reactions (Hughes et al., 2022).

When transformational leadership works, it can accelerate progress and elevate organizational culture. One critical challenge, however, is ensuring this momentum does not fade once the central driving force—the transformational leader—moves on. Maintaining forward movement often hinges on preparing others to adopt similar leadership behaviors. Without deliberate efforts to develop new transformational leaders or embed these values into daily practices, improvements risk losing momentum over time. A helpful approach to address this challenge is the utilization of transformational agility, which emphasizes intentional awareness, clear alignment, personal accountability, and purposeful movement (Bridwell, 2020, 2022). By focusing on these factors, organizations can sustain progress well beyond the tenure of a single leader.

Ultimately, transactional and transformational leadership styles serve different purposes. Transactional methods keep teams aligned through clear agreements, while transformational leaders aim to unite followers around a broader vision. Many effective leaders blend both approaches by using transactional structures to meet immediate targets and transformational techniques to inspire lasting engagement. Recognizing the strengths and limitations of each style and planning carefully for leadership continuity can help organizations move closer to sustained, meaningful change.

Ready to develop transformational leaders? Our team can help. Encompass clients, please reach out to your Human Capital Consultant or Client Experience Manager. Non-Encompass Clients, we’d love to connect with you – please reach out to us here to discuss further.

Written by Robert Rich, SPHR, SHRM-SCP, VP of Transformational Consulting at The Encompass Group

References

Bridwell, T. (2020). Saturday Morning Tea: The power of story to change everything. B2B Books.

Bridwell, T. (2022). The Do Over: A story about writing your new story. B2B Books.

Hughes, R. L., Ginnett, R. C., & Curphy, G. J. (2022). Leadership: Enhancing the lessons of experience (10th ed.). McGraw Hill.