What is transactional leadership?

Introduction

Max Weber first described the transactional leadership style in 1947, followed by Bernard Bass in 1981. As its name implies, transactional leadership is a “transactional” process involving two people, the leader and the follower, who must interact in order to achieve certain goals.

Transactional leadership appeals to the self-interest of each team member in order to motivate them to perform well in exchange for perks or rewards.

But how do you know if it’s right for your team? In this article, we’ll discuss the pros and cons of transactional leadership and how to know whether or not it’s the right style for your company.

What is transactional leadership?

Transactional leadership is a style of leadership that focuses on order, structure, and goal-oriented planning. A transactional leader will directly tell their team what to do—as a result, this leadership style prioritises maintaining the status quo rather than challenging it.

According to this framework, leaders maintain strict hierarchical authority over their followers, who are expected to respect them and carry out their commands without questioning or challenging the leader’s authority.

Characteristics of transactional leadership

In organisations where structure is essential, transactional leadership excels. However, transactional leadership is inappropriate for organisations that encourage initiative.

Here are some of the characteristics of transactional leadership.

Extrinsic motivation: transactional leaders motivate employees externally to achieve organisational goals. They reward employees for meeting goals and behaving well. The manager will punish an employee who doesn’t behave or meet expectations.

Discourage innovation: transactional leadership hinders innovation. Employees must follow rules and procedures. They don’t encourage innovative ideas to improve the process.

Directive: transactional leadership excludes employees from decision-making. They believe all decisions should be made by the company’s management, and employees should follow its decisions and procedures.

Interest in a hierarchy: transactional leaders prioritise organisational hierarchy. They treat employees based on their hierarchy. They prioritise creating a business structure.

Emphasis on self-achievement: transactional leaders encourage employees to reach personal goals. They don’t encourage teamwork or success. If an employee meets a goal, the leader will reward them; if not, they’ll be punished.

Pros and cons of transactional leadership

Much of transactional leadership’s benefits go to the employer, not the employee. Transactional leadership benefits companies more than individuals or teams. This leadership style prioritises short-term gains and the present over building happy, healthy, reliable, and intrinsically inspired teams.

In the last decade, transactional leadership has declined. With more millennials in the workforce, more industries are focusing on work-life balance and employee fulfillment, which aren’t priorities under transactional leadership.

The key takeaways

Transactional leadership is a style of leadership that focuses on order, structure, and goal-oriented planning.

A transactional leader prioritises maintaining the status quo rather than challenging it. In organisations where structure is essential, transactional leadership excels, but it’s inappropriate for organisations that encourage initiative.

In the last decade, transactional leadership has declined. With more millennials in the workforce, more industries are focusing on work-life balance and employee fulfillment.

Transactional leadership prioritises short-term gains and the present over building happy, healthy, reliable, and intrinsically inspired teams.