Have you ever wondered whether your leadership style truly inspires your team or simply gets the job done?
Leadership styles can significantly impact a team's success, morale, and productivity. Among the most discussed approaches are transactional and transformational leadership. While both leadership styles offer unique benefits, determining which one is best for your team depends largely on your specific goals and circumstances.
Currently, transactional leadership is less popular, as many organisations achieve greater success by focusing on intrinsic methods like training, teamwork, and collaboration to boost employee motivation and performance.
That said, transactional leadership still plays an important role in the right situations.
There’s a rising demand for strong leadership in today’s professional world. According to data from our latest findcourses.co.uk's Course Trends Report, the Leadership & Management category saw a notable jump over the past year, moving from the fifth to the second most viewed category. This shift highlights the growing interest in leadership development as professionals seek to tackle evolving business challenges.
In this article, we’ll explore the key traits of transactional and transformational leadership, share insights from top leaders and experts, and guide you in choosing the approach that can best elevate your team’s performance. Let’s begin!
What is Transactional Leadership?
Transactional leadership focuses on structure, organisation, and achieving specific goals through a system of rewards and corrective measures. This approach is often associated with environments where clear roles and responsibilities are critical to success.
At its core, transactional leadership relies on a reward-and-correct framework. Rewards, such as bonuses or recognition, are straightforward motivators. However, "punishment" is not about punitive measures; rather, it involves constructive feedback to guide team members through their mistakes and help them learn and improve.
Media magnate, Rupert Murdoch, exemplifies leading through a results-driven, transactional, approach prioritising efficiency, profitability, and accountability. Similarly, Microsoft co-founder, Bill Gates, exemplified transactional leadership early in his career by emphasising clear structures, goal setting, and a system of rewards and penalties to drive performance.
“The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”
Rupert Murdoch in an Interview with Fox Business Network in 2016
Key Traits of Transactional Leaders:
- Goal-Oriented Focus: Transactional leaders are skilled at setting and achieving short-term goals. They break tasks into clear, actionable steps and create incentives for hitting milestones quickly, ensuring teams stay focused and results-driven.
- Short-Term Objectives: Transactional leaders excel at setting and achieving goals. They prioritise immediate tasks and create incentives for reaching milestones quickly and effectively.
- Defined Structures and Roles: This style emphasises clear hierarchies and responsibilities. Team members understand their duties and how they contribute to overall success, making transactional leadership scalable for teams of any size.
- Inspiration Through Clarity: Effective transactional leaders keep their teams motivated by providing well-defined goals and actionable plans. They communicate expectations clearly, ensuring every team member understands the path to success.
When to Use Transactional Leadership
Although this style is sometimes described as “old fashioned,” it’s particularly beneficial for teams working on projects with specific, measurable goals, such as product launches or sales targets. Medium-sized teams often thrive under transactional leadership because of the balance it provides between structure and accountability.
Disadvantages of Using Transactional Leadership
While transactional leadership has its strengths, it also presents notable drawbacks.
One key limitation is its stifling effect on innovation. By focusing heavily on established processes and adherence to rules, this style may discourage team members from proposing creative ideas or exploring alternative approaches.
Additionally, transactional leadership’s short-term focus prioritises immediate goals through a system of rewards and consequences. While effective for achieving quick results, it can detract from long-term strategic planning, leaving organisations less prepared to adapt to changing circumstances.
Furthermore, transactional leadership often fails to address deeper aspects of employee satisfaction. Although external rewards can motivate, they may not fulfil team members’ desires for personal growth, meaningful work, and a sense of purpose, potentially leading to disengagement and dissatisfaction over time.
While transactional leadership focuses on structure and performs better with short-term objectives, transformational leadership takes a more long-term, holistic approach to team development.
What is Transformational Leadership?
Transformational leadership focuses on long-term goals and developing the potential of team members. It thrives in environments that prioritise creativity, collaboration, and innovation.
These leaders inspire their teams by actively involving them in goal setting, creating a space where team members can contribute ideas and take ownership of their roles. This approach is particularly effective in dynamic, forward-thinking teams.
As Christine McGuire, expert in leadership and management consulting and Director of Consulting at Talent Plus, Inc. explains, "To inspire, be convincing, and move people to action, you need a positive, optimistic outlook—a 'can-do' attitude that believes there's nothing we can't do or fix together."
Key Traits of Transformational Leaders:
- Team-Centred Approach: Transformational leaders prioritise collaboration, ensuring that everyone understands their role in achieving the bigger picture.
- Personalised Development: They tailor tasks to team members' strengths and promote skill-building, offering opportunities for professional growth.
- Emotional Intelligence: These leaders know their teams inside and out, building strong relationships based on trust and understanding.
- Leading by Example: Transparent leadership, where leaders openly share their own challenges and growth, fosters a culture of continuous improvement.
- Open Communication: Effective communication is key to this style, with an emphasis on coaching, feedback, and mentorship.
Transformational leadership is exemplified by leaders like Richard Branson, the founder of the Virgin Group, and Steve Jobs, co-founder of Apple, who inspired innovation and creativity by fostering cultures of collaboration and long-term vision. Similarly, Oprah Winfrey has demonstrated transformational leadership by empowering her team, encouraging personal growth, and promoting a shared sense of purpose.
"Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients."
Richard Branson, founder of the Virgin Group
When to Use Transformational Leadership
This style shines in creative or dynamic environments, such as startups or innovation-driven teams. It’s also ideal for teams with younger members or those in need of mentoring and professional development.
Disadvantages of Using Transformational Leadership
While transformational leadership offers numerous benefits, it is not without its challenges.
One potential drawback is the time-intensive nature of this style. Transformational leaders often invest significant effort in mentoring, coaching, and fostering collaboration, which can slow decision-making processes in fast-paced environments.
Additionally, the emphasis on emotional engagement and long-term vision may lead to over-reliance on the leader’s inspiration. Teams might struggle to maintain momentum or direction without consistent input from the leader.
Finally, this approach can sometimes overlook immediate operational needs as it prioritises future growth and innovation, which might not align with all organisational priorities or contexts.
Recognising these limitations is key to understanding when and how to effectively implement transformational leadership.
Effects of Transactional Leadership on Employee Performance
Overall, transactional leadership’s shortcomings may outweigh its positive aspects. While it can drive short-term performance, research indicates it often falls short in promoting long-term success.
One study found it boosted short-term goals but had no lasting impact on performance. Additionally, transactional leadership is associated with lower job satisfaction and higher turnover, which can negatively affect employee well-being and retention.
If prioritising team well-being over immediate results is important to you, the transactional approach may not be the best fit.
Which Leadership Style is Best for Your Team?
Research published in Frontiers in Psychology revealed that transactional leadership encourages employees to view the culture as more focused on achieving goals rather than fostering innovation. In contrast, transformational leadership promotes a perception of the organisation as innovative, with employees feeling supported in their professional growth and skill development.
Determining the right leadership style depends on your team’s composition, goals, and the challenges you face. Consider these questions:
- What are your team’s strengths?
- Where do they need support or development?
- What type of goals are you aiming to achieve – short-term or long-term?
- How do you, as a leader, want to grow and contribute to your team’s success?
By answering these questions, you can identify whether a transactional or transformational approach aligns better with your objectives. Keep in mind that the most effective leaders are often adaptable, blending elements of both styles to meet their team’s evolving needs.
Conclusion
Ultimately, the choice between transactional and transformational leadership depends on your team’s unique needs. By understanding these needs, you can select the most appropriate leadership style or blend both to foster a culture of growth and success. Whether you focus on structure and short-term goals or inspiration and long-term growth, training can help you empower your team to thrive.
