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Transactional Leadership Style: A Detailed Analysis


Task: Provide a brief report on transactional leadership style.


As per the observation of Kuhnert and Lewis in the year 1987, the transactional leadership could be defined as the cost-benefit transaction between the leaders and their followers. The term transaction not only suggest the mere exchange of money, but also the exchange of the values by the leader to his followers in return for their assistance. In this form of leadership, the leaders should have a clear idea of the working environment since they are required to distinguish a clear-cut goal before the employees. By the implication of transactional leadership, better communication could be ascertained in between the leaders and their followers that would help the institute in achieving very high targets. The cooperation of the leaders with their followers is a very crucial factor in the transactional leadership style. The leader should ensure that the employees are aware of the disparity in the hierarchical setup and thus should develop a proper method to work efficiently in the existing system. The concept of transactional leadership style relies on the vital theory that the presence of a clear chain of orders would increase the efficiency of the employed human resources. The transactional leadership style also suggests that the implication of carrot and stick policy would facilitate a better engagement between the leaders and the employees. Though the transactional leadership style is criticized by the researchers and scholars for its limitations, it is presently the most followed leadership style in the corporate world. It is the high adaptability of the transactional leadership style in the managerial environment that sustains its popularity and relevancy in the present world.

As per the observation made by James MacGregor Burns in his publications in 1978, the transactional leadership style is the oldest form of relation between followers and their leaders. The concepts of transactional leadership style are in contradiction with the concepts of transforming leadership. The transactional leadership style suits a lot of the leaders since most of them approach the employees with the intention of transacting one thing for another. Burns, as in his works defines that the transaction between the leader and his followers doesn’t need to be monetary in nature, it could be the transaction of the factors which are political or psychological in nature. It is based on the transaction or the bargaining process that the entire relationship between the leaders and their followers is sustained. Any small discrepancy in the bargaining process would risk the entire relationship between the leaders and their followers. The same issue is being highlighted by Burns in his works which lead to the emergence of the popular notion that the transactional leadership style would lead to an unhealthy environment at the workplace since it limits the relationship between the leader and the followers up to only a bargaining level.

This argument of Burns was further analyzed by many scholars and researchers. Bernard M. Bass in one of his commendable work related to the argument of Burns has added further notions and concepts to the topic of transactional leadership style. He had stated in his study that the transactional leadership style and transformational leadership are not quite opposite to each other. These two are just different streams of leadership, a combination of which could make a leader much more effective in his working environment. In the due course of time, the concept of transactional leadership style had evolved a lot and thus paved the way for different variants like laissez-faire/ non-leadership style, three-dimensional transactional leadership style, etc. The earlier version of the transactional leadership had only considered factors like inspirational motivation, idealized influence, individualized consideration, and charisma. In the evolved version of the transactional leadership style, further three dimensions were added to it.

A contingent reward is one of the factors that was first added to the concept of transactional leadership style. It is the level to which the leader carries out the business with his followers. In this instance, the leader is expected to take a very apparent stance and should make aware of the employees of his expectations regarding the assigned task. The clarity regarding the reward for meeting the expected target should also be provided by the leader. In the remaining changes of dimensions in the transactional leadership style, the implication of management by exception theory is done. The term management by exception just signifies the instance in which the higher officials or the managerial body intervene in the undergoing process if any sort of discrepancy takes place. The dimension of passive management and active management are classified under the theory of management by exception. Both the active management and passive management are described by relying on the instance when the management system intervenes. In the active management, the activities and the interaction of the employee are brought under surveillance and it is on this basis that the original problem is being identified. The required actions are taken even before the problematic behavior of the follower escalates to a worse level. Despite it, the needed action is taken only after the employee had committed any nuisance or problematic behavior in the ideology of passive management. The leader only intervenes if the problem is quite evident in this scenario.

The difference between the transactional leadership style and the transformational leadership style is being discussed and explored heavily in the academic field. You could observe that most of the peer-reviewed journals and other publications on the academic platform are regarding the transformational leadership and its variants. Though it should be noted that, it is the transactional leadership style that constitutes to be the foundation for conducting transformational leadership style research. In the concept of transformational leadership, the employees are motivated by stressing on the personal goals and thus helping the institute to reach its target by simultaneously fulfilling the personal interest. Whereas, in the transactional leadership style the employees are encouraged to contribute to the well-being of the company by maintaining a bargaining relationship with the leader. The transactional leadership style limits the performance of the employees since their targets are outlined on an initial basis and they are required to achieve it by following the framework provided by the company. Though there are no predefined goals in the transformational leadership style. This motivates the employees to surpass their personal limitations and deliver a very high level of outcome. This type of leadership style coerces the employees to go beyond their self-interest creating a higher degree of motivation among themselves.

There are not many studies or researches conducted on the topic of differences between the laissez-faire leadership style and transactional leadership style. As per the concept of laissez-faire, the official environment would utterly lack the presence of any leadership or intervention. The management takes the hands-off approach and thus doesn’t intervene in the activities of the employees. There would be no system or parameter to measure the performance or address the problems of the employees in the working system. The approach is pretty much unconventional if compared with that of the transactional leadership style. This approach could be a little problematic since there is an utter absence of the intervention from the management even when the critical decision is required to be taken. If done an in-depth observation, it could be said that there are similarities between the ideologies of laissez-faire and passive management. It has been opined by the majority of the researchers that the concept of laissez-faire would not go along with the ideologies of transactional leadership style since it defies the majority of its hypotheses like the presence of management and its intervention.

If the institute has adopted or installed the transactional leadership style in its system, the management is expected to conduct strong interventions to ascertain the delivery of expected performance. This process should be done by following the framework and hierarchical differences in the business process. The management is required to put forward the ability to provide relevant and efficient strategic plans whereas the employees should be trained to work within the limitations and restrictions demarked in the business process. The leader who is working in an environment that has installed the transactional leadership style should possess the skills in bargaining and negotiating. These skills are mandatory since the contract between the leaders and their followers retains a very crucial role in the transactional leadership style. Excellence in communication skills is required by the leader to undertake the process of bargaining and negotiation, otherwise, the company would plunge to a disaster because of the leader’s inefficiency. If the workers are not made aware of the expectation or the targets, better productivity could not be attained in the transactional leadership style. Below are listed down some of the qualities which a leader should possess to imply the transactional leadership style.

  1. Should have the ability to put forward the message in a commanding manner since the leader is expected to describe the exact expectation from each employee.
  2. Should have the ability to communicate in a crystal clear and amicable way since the leader is required to describe how the mentioned target could be attained.
  3. Should have the capability of the quantitative and qualitative data since the leader is expected to evaluate the performance of the workers.
  4. The ability to convince the workers in the instance when the current performance is not observed to be sufficient.
  5. Ability to acknowledge and reward the person if the expected target is being achieved.

The approach of the transactional leadership style is a leader-oriented one. Thus, it majorly discusses the relation between the leader and the follower. The scope of the transactional leadership style would increase in the area of fellowship and leadership if the studies are conducted on behalf of the social exchange. The whole relation between the leader and the follower relies on the satisfaction obtained by both parties in the bargaining process. It has been observed in the studies conducted by the researchers that the bargaining relationship between the leaders and workers could make a positive impact on the performance of the whole business. To claim himself an effective leader in the field of transactional leadership style, the person should play the role of a better communicator, strategy maker, and analyst in the institute. The process of influencing the employees and deducing the feedback of them would influence both the leader and follower in the institute. George Grean has published a study in the year 1977 which stated that if the workers would be provided with a little freedom, their performance would increase substantially, evidently resulting in attaining the common goal of the business. Thus the employee satisfaction and higher level of profit could be attained by using the same and easier strategy itself.

The ideology of the transactional leadership style in the corporate world has brought a lot of transparency to the business processes. Better clarity over the relationship between the leader and the follower has been attained by the Implication of transactional leadership style. The company which implies the system of transactional leadership styles in its system would pose no confusion in assigning proper rewards, noting down the expectation of entrepreneur from the workers, and the marking down of the business process structure to be followed in company processes. It could be said that the transformational style of leadership is another dimension of the transactional leadership style which has adopted a bit of sales approach. Though the pure form of transactional leadership style could be mentioned as a narrating style. As mentioned in the earlier section of this article, it is the transactional leadership style which is preferred more by the entrepreneurs rather than the transformational leadership style. But in recent years it has been observed that an amalgamation of both the transformational and transactional leadership styles is in trend because of its high implacability and outcome. The whole ideology and principles in the system of transactional leadership style would rely on the quality of the exchange process between the leader and his respective supporters or employees.

The core hypothesis that the major motive of any person is to attain monetary or financial wellness contributes to being a major drawback or the restriction of the transactional leadership style. This hypothesis is a very restricted one since a person could be motivated by many psychological and other accessory parameters that would encourage the person to deliver maximum performance. The approach of transactional leadership deems the human mind to be a very predictable and streamlined one. The approach avoids all the complex thought processes and the influential factors on behalf of the human mind. The interpersonal relationship and the human thought process should be considered while implementing the leadership style in the business process of an institute. The success rate of the transactional leadership style would only be higher if the personality of both the leader and his subordinates are in harmony with each other. Though the issue would arise if the one side possesses the task-oriented personality and the other one the person-oriented personality. Since the motive and the factor of inspiration for both parties would be different and poles apart, the conflict is bound to happen between the parties. The transactional leadership style is motivated by the demand-supply instance in the majority of the institutes and the same factor would increase the chances of success for the respective companies. The situation would change if the production increases to a higher level and there is a high availability of the product than the required demand. No matter how innovative the leaders are, they must have to imply the principles of transactional leadership style in some instances. The use of the transactional leadership style should not be done in its purest way and should be amalgamated with other leadership styles to attain higher performance in the business processes.

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