Difference Between Transformational & Transactional Leadership

Written by helen akers | 13/05/2017
Difference Between Transformational & Transactional Leadership
Transformational leaders seek to motivate employees by their example. (Jupiterimages/Comstock/Getty Images)

Transactional and transformational leadership are two distinct managerial styles that either seek to maintain or change the organisation. Transactional leadership is largely characterised by a desire to maintain the company's existing culture, policies, and procedures. It uses a reward-and-punishment based system to compel employees to perform certain behaviours. In contrast, the transformational leadership style seeks to provoke change in the way the company operates. Leaders who exhibit transformational leadership are often characterised as charismatic, inspiring, and motivating.

Goals of Transactional Leadership

The primary goal of transactional leadership is to promote stability in the organisation by creating a give-and-take type of exchange between managers and employees. Specific performance objectives are determined and communicated to employees. They are then responsible for meeting those performance objectives, but either receive a reward or punishment depending upon the outcome. Rewards are based upon meeting certain criteria, such as achieving a sales quota. Mistakes are either actively or passively observed by managers and dealt with accordingly. In active management by exception, leaders take swift corrective action against performance deviations and actively look for mistakes.

Transactional Leadership Characteristics

The relationships between transactional leaders and their employees tends to be focused on the successful completion of short-term tasks. Relations between the two groups are somewhat impersonal and temporary. Quantitative results are emphasised and employees are expected to follow the goals and directions of the leaders. The relationship is largely based on exchanges that satisfy two separate sets of objectives. For example, an employee shows up to work to receive a paycheck in order to maintain a certain standard of living. The manager wants the employee to show up to work to perform job tasks that he does not want to do himself.

Goals of Transformational Leadership

The main goal of transformational leadership is to inspire change in an organisation by exceeding prior standards and expectations. It does not rely on accomplishing objectives through certain types of exchanges or a reward-and-punishment system. Transformational leadership motivates employees to work towards a common objective, rather than seek out the fulfilment of individual goals. It tends to take a more individualised perspective towards employees, capitalising on individual strengths and talents. Transformational leadership fosters an environment of thinking, teamwork, and mutual admiration.

Transformational Leadership Characteristics

Transformational leaders seek to gain the trust of their employees. The relationship is built upon the idea of establishing a long-term bond that encompasses more than just the company's performance objectives. Leaders who exhibit a transformational style of leadership tend to empower their employees to make decisions and contribute to the company's strategies. Values, personal meaning, personal power, and ethics are emphasised. A long-term perspective is one of the primary characteristics of the transformational leadership style. It fosters creativity, challenge, and individual employee development.

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