Transactional leadership is a kind of leadership which focuses on results, conforms to the existing structure and measures success according to the organisation’s system of rewards.
Transactional leader maintains routine by managing individual performance and facilitate group performance. He/she has the formal authority and responsibility in an organisation. Transactional leaders set criteria for workers according to the already defined requirements. They work best with the employees who are aware of their jobs and are motivated by the reward-punishment system.
History of transactional leadership theory
A 20th-century German sociologist Max Weber did an extensive study on different leadership styles and divided into three main categories: traditional, charismatic, and rational-legal. Max Weber then described rational-legal – the style that is now known as transactional leadership- as “the exercise of control on the basis of knowledge.”
Transactional leadership theory is based on the concept that managers give employees something if they want something in return. It focuses on the point that workers are not self-motivated and require instruction, structure, and monitoring to complete tasks on time with accuracy.
This leadership style was widely used after World War II in the United States of America. This happened because there was a need to build a high level of structure and to maintain national stability.
According to Burns model, transactional leaders espouse fairness, responsibility, honesty, and honoring commitments.
Dimensions of transactional leadership are:
- Contingent reward – It a process of setting expectations from workers and rewarding for meeting them.
- Active management by exception – It is a process where managers anticipate the problems, monitors the progress and take corrective measures whenever required.
- Passive management by exception – It is a process where manager does not interfere with the ongoing work until and unless an issue arises.
Characteristics of transactional leadership style:
- Thrive on following rules and doing things correctly.
- Opposed and reluctant to change.
- Tend to be inflexible.
- Focuses on short-term goals.
- Favours structured policies and procedures.
Advantages of transactional leadership style:
- It provides an unambiguous structure for large organisations.
- It helps in achieving short term goals quickly and efficiently.
- Rewards and punishments are clearly defined.
- It provides rewards who are motivated by self-interest to follow instructions.
Disadvantages of transactional leadership style:
- It does not promote creativity as goals and objectives are already set.
- It does not reward personal initiative.
- Only provide financial rewards.
Multinational corporations is the place where transactional leadership can be of best use because not all the workers speak the same language. Once the structure is in place and requirements are learned, it is easy for workers to complete the tasks. Transactional leadership doesn’t require extensive training. It brings consistency across the organisation. This will work best during the time of crisissituation when it is important for everyone to know exactly what it is required and how the tasks need to be done under pressure.
Those people for ehich money and perks act as powerful motivator eill adjust well in the transactional leadership.
Some of the famous transactional leaders areHoward Schultz, Bill Gates,Vince Lombardi, Norman Schwarzkopf, etc.