Transformational vs. Transactional Leadership

Bernard Bass (1987) claimed that leadership is either transactional or transformational. Transactional leadership is characterized by a mutually agreed upon effort and reward arrangement (Humphreys, 2001). A transactional relationship is based on an employee agreeing to perform a specified task in return for a specified reward, usually a paycheck. There is no action implied beyond the scope of the agreed upon action and reward. Management by exception principles are used when progress toward the agreed upon action is deviating from plan. Otherwise, management usually does refrains from a leader-follower interaction (Humphreys, 2001). Bass (1993, p. 112) stated, “Transactional leaders work within their organizational cultures following existing rules, procedures, and norms.”

Opposed to transactional leaders, transformational leaders are motivated by enhancing the abilities and development of their subordinates. Transformational leaders motivate followers to perform beyond the actions of self-interest and act for the betterment of the collective. Bass and Avolio (1993) suggest that transformational leader’s first attempt to understand the organizational culture. Transformational leaders change this culture by identifying existing norms and values and then champion new norms and values to replace them. Transformational leaders attempt to change the organizational culture to introduce innovation and a new vision for the organization. Many organizational leaders are seen as charismatic individuals. Such individuals are able to influence followers by developing personal relationships with subordinates, building a level of trust, and performing acts which are sometimes at great risk to the leader. Denning (2005, p. 11) claimed that transformational leaders champion innovation by “going to war with all the elements inside an organization that benefit from the status quo.”

Transactional leadership is satisfied with maintaining a distance between the leader and the subordinate. Transactional leadership is characterized by a priority to accomplish a task and nothing more. In contrast, transformational leadership tends to develop subordinates. Transformational leaders strive to motivate subordinates to new levels of performance. Humphreys (2001, p. 151) claimed that leaders do this by “promoting intelligence, rationality, logic, and careful problem solving.”

Bass (1993) suggested that leaders and followers share common interests and interdependence. The fates of both are intertwined and one can not function without the other.

Most leaders are not completely transactional or transformational, but move from one style to the other depending on relationships and contextual basis. Traditional U.S. companies are based on a transactional relationship as productivity and profit are basic objectives. However, the organizational culture is changing. The next generation of employees, aided an increased awareness of the world, is requiring a change in corporate culture. This change requires a new emphasis on values and norms. A move from transactional leadership to transformational leadership sets the stage for the introduction of these values and norms in the organizational environment.

References

Bass, B. M. (1987). Transformational leadership and the falling dominoes effect. Group & Organization Studies, 12(1), 73-87.

Bass, B. M., & Avolio, B. J. (1993). Transformational leadership and organizational culture. Public Administration Quarterly, 17(1), 112-121.

Denning, S. (2005). Transformational innovation. Strategy & Leadership, 33(3), 11-16.

Humphreys, J. H. (2001). Transformational and transactional leader behavior. Journal of Management Research, 1(3), 149-159.