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Transactional Leadership by google, also known as managerial leadership, focuses on the role of
supervision, organization, and group performance;transactional leadership is a style of leadership in which
the leaderpromotes compliance of his/her followers through both rewards and punishments.
Transactional Leadership
Transactional leadership styles are more concerned with maintaining the normal flow of operations.
Transactional leadership can be described as "keeping the ship afloat." Transactional leaders use disciplinary
power and an array of incentives to motivate employees to perform at their best. The term "transactional" refers
to the fact that this type of leader essentially motivates subordinates by exchanging rewards for performance.A
transactional leader generally does not look ahead in strategically guiding an organization to a position of
market leadership; instead, these managers are solely concerned with making sure everything flows smoothly
(written by dr naveed yazdani)
The study of leadership has progressed from a simple description of traits to examining complexities of
interaction between leaders and followers and since 1940s, the main approach in studying leadership focuses on
leadership styles (Athanasaw, 2003).
Hambrick and Pettigrew (2001) note two distinctions between the terms leadership and strategic leadership;
first, leadership theory refers to leaders at any level in the organization, whereas the strategic leadership theory
refers to the study of people at the top of the organization, second, in contrast to the micro focus of leadership
research on relationship between leaders and followers, strategic leadership research focuses on executive work,
not only as a relational activity but also as a strategic activity and a symbolic activity. One branch of leadership
research which has proven useful to the study of CEO-level management is the framework of
transactional/transformational leadership (Vera and Crossan, 2004). This framework stems from the visionary or
charismatic school of leadership theory, which along with other five main schools, trait school, behavioral or
style school, contingency school, emotional intelligence school and, competency school, formulate the six main
themes or schools of leadership theories over the past 70 years or so (Dulewicz & higgs, 2003; Handy, 1982;
Partington, 2003). Recent work has suggested that the positive relationship between charismatic leadership and
performance found in earlier studies also holds true at the strategic (CEO) level (Waldman et al., 2004).
Transactional leadership, primarily task-focused (Turner & Muller), motivates individuals primarily through
contingent-reward exchanges. These leaders set goals, articulate explicit agreements regarding what the leader
expects from organizational members and how they will be rewarded for their efforts and commitment, and
provide constructive feedback to keep everyone on task (Howell & Hall-Merenda, 1999; Jung and Avolio,
1999). Operating within an existing system, transactional leaders seek to strengthen an organizations culture,
strategy, and structure and hence is similar in nature to the cultural maintenance for of leadership described by
Trice and Beyer (1993) They clarify the performance criteria for followers and also explain to them what they
would receive in return (Hartog, Muijen and Koopman, 1997; Waldman et al., 2001).
Transformational leadership, primarily people-focused (Turner & Muller, 2005) in contrast, is charismatic,
inspirational, intellectually stimulating, and individually considerate (Avolio et al., 1999; Carless, 1998; Hartog
et al., 2004). Some researchers have treated charisma and transformational leadership as distinct concepts but
others mention transformational leaders talking of articulating a vision, which creates considerable loyalty and
trust among the followers (Tichy and DeVanna, 1986) which sounds very similar to charisma. Similarly, some
researchers use the term empowering leadership to capture five themes of this type of leadership, the themes are
leading by example, participative decision making, coaching, informing and showing concern for team
members (Srivastava, Bartol and Locke, 2006). These five themes of empowering leadership are no different
than the definition of charismatic/transformational leadership. In this paper, therefore, the terms

transformational and charismatic leadership are used interchangeably. Similarly, House and Shamir (1993)
propose that charisma is the central concept in the theories of charismatic, transformational or visionary
leadership. Transformational/charismatic leaders help individuals transcend their self-interest for the sake of the
larger vision of the firm. They inspire others with their vision, create excitement through their enthusiasm, and
have everybody do the same. These leaders seek to raise the consciousness of followers by appealing to higher
ideals and moral values such as liberty, justice, equality, peace, and humanitarian, and not to basic emotions
such as fear, greed, jealousy, or hatred. Transformational leadership has been specified as an important
mechanism for introducing organizational change in the recent research literature (Masood, Dani, Burns and
Backhouse, 2006).
Based on these research findings, following is the second proposition formulated in this paper:
Proposition 2: Organizational democracy would be implemented more successfully in organizations with an
organic structure and where the strategic leadership style is that of empowering or
transformational/charismatic type.

Organizational Democracy, Structures, Strategic Leadership and Turbulent Environment

The relationship between organizations and environment is perhaps the most popular and conceptually
appealing aspect of the structural-contingency model (Hrebiniak and Snow, 1980). Present day theorists view
the interaction between the organization and the environment as the critical variable in determining the nature
of internal strategies and processes and point to the need to develop appropriate systems of differentiation and
Environment and Strategic Leadership Link
While developing a theoretical model of the impact of CEO and top management leadership styles and
practices on organizational learning, Vera and Crossan (2004) argue that, in times of change, these
(organizational learning) processes make evident the need to alter a firms institutionalized learning a task
best suited to transformational times of stability, organizational learning processes serve to
refresh, reinforce, and refine current learning a task best suited to transactional leadership.
Howell and Higgins (1990) suggest that champions of innovation have characteristics of transformational
leaders. These leaders rely on innovation and risk taking more than non-champions. Pinto and Slevin (1989)
found that aspects of transformational leadership, such as mission awareness, predicted the success of R&D
projects. Similarly, Kellers (1992) work found that transformational leadership of project leaders in R&D
organizations predicted performance at two times, concurrently and a year after leadership was measured. Thite
(2000) notes that transactional leadership also predicts project success but to a lesser extent than
transformational leadership (Berson and Linton, 2005).
Organizations exhibit three types of inertial forces; cognitive inertia, motivational inertia and obligation inertia
(Gersick, 1991). During changing environments, overcoming these organizational inertial forces is viewed as
an important condition for improving organizational performance (Tichy & DeVanna, 1990). Charismatic
leaders overcome cognitive inertia (inability to think beyond ones own schema) because their strong values
shape choices concerning strategy as they can create exciting visions of future and promote unconventional
problem-solving approaches. Motivational inertia (desire to avoid change) can be overcome through a leaders
ability to provide followers with confidence that changes can be positive. Finally, obligation inertia
(commitment to constituencies) can be overcome through leaders ability to change current contractual
relationships with various stakeholders (Agle et al., 2006).
Transformational leaders, in unstable, shaky, risky, or crisis situations take on greater symbolic importance as
the followers feel the need for direction and guidance under these conditions, and therefore, willingness to a
follow a leader may be more pronounced in unstable and turbulent environments (Agle et al., 2006). Studies
also suggest that crisis and the associated stress and uncertainty may foster the emergence of charismatic
leadership and Waldmans (2001) study empirically prove that charismatic leadership of CEO is highly related

to an organizations performance when the environment is perceived to be uncertain and volatile, and the same
link between charismatic leadership and performance, does not come strongly in the face of certain and stable
Transactional leadership, also known as managerial leadership, focuses on the role of supervision, organization,
and group performance. Leaders who implement this style focus on specific tasks and use rewards and
punishments to motivate followers.
This theory of leadership was first described in by sociologist Max Weber and further explored by Bernard M.
Bass in the early 1980s.
Basic Assumptions of Transactional Leadership

People perform their best when the chain of command is definite and clear.
Rewards and punishments motivate workers.

Obeying the instructions and commands of the leader is the primary goal of the followers.

Subordinates need to be carefully monitored to ensure that expectations are met.

This theory takes a behavioral approach to leadership by basing it on a system of rewards and punishments.
Transactional leadership is often used in business; when employees are successful, they are rewarded; when
they fail, they are reprimanded or punished.
Athletic teams also rely heavily on transactional leadership. Players are expected to conform to the teams rules
and expectations and are rewarded or punished based on their performance.

6 Fascinating Facts About Personality Winning a game might mean accolades and bonuses while losing might
lead to rejection and verbal castigation. Players often become highly motivated to do well, even if it means
suffering pain and injury.
Unlike transformational leaders who tend to be forward-looking, transactional leaders are interested in merely
maintaining the status quo. Transformational leaders try to sell their ideas and vision to followers.
Transactional leaders, on the other hand, tell group members what to do and when to do it.
How Transactional Leadership Works
In transactional leadership, rewards and punishments are contingent upon the performance of the followers. The
leader views the relationship between managers and subordinates as an exchange - you give me something for
something in return. When subordinates perform well, they receive a reward. When they perform poorly, they
will be punished in some way.
Rules, procedures, and standards are essential in transactional leadership.
Transactional leaders monitor followers carefully to enforce rules, reward success and punish failure.

Leadership Style
What Is Psychology
Organizational Leadership
Leadership and Management
Organizational Psychology
They do not, however, act as catalysts for growth and change within an organization. Instead, they are focused
on maintaining this as they are and enforcing current rules and expectations.
These leaders do tend to be good at setting expectations and standards that maximize the efficiency and
productivity of an organization. They tend to give constructive feedback regarding follower performance that
allows group members to improve their output to obtain better feedback and reinforcement.
Followers are not encouraged to be creative or to find new solutions to problems. Research has found that
transactional leadership tends to be most effective in situations where problems are simple and clearly defined.
It can also work well in crisis situations where the focus needs to be on accomplishing certain tasks. By
assigning clearly defined duties to particular individuals, leaders can ensure that those things get done. In times
of crisis, transactional leaders can help maintain the status quo and keep the ship afloat, so to speak.
Transactional leaders focus on the maintenance of the structure of the group. They are tasked with letting group
members know exactly what is expected, articulating the rewards of performing tasks well, explaining the
consequences of failure, and offering feedback designed to keep workers on task.
While transactional leadership can be useful in some situations, it is considered insufficient in many cases and
may prevent both leaders and followers from achieving their full potential.
The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in
1981. This style is most often used by the managers. It focuses on the basic management process of controlling,
organizing, and short-term planning. The famous examples of leaders who have used transactional technique
include McCarthy and de Gaulle.
Transactional leadership involves motivating and directing followers primarily through appealing to
their own self-interest. The power of transactional leaders comes from their formal authority and responsibility
in the organization. The main goal of the follower is to obey the instructions of the leader. The style can also be
mentioned as a telling style.
The leader believes in motivating through a system of rewards and punishment. If a subordinate does what is
desired, a reward will follow, and if he does not go as per the wishes of the leader, a punishment will follow.
Here, the exchange between leader and follower takes place to achieve routine performance goals.
These exchanges involve four dimensions:
Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations, provide
necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for successful
performance. They set SMART (specific, measurable, attainable, realistic, and timely) goals for their

Active Management by Exception: Transactional leaders actively monitor the work of their subordinates,
watch for deviations from rules and standards and taking corrective action to prevent mistakes.
Passive Management by Exception: Transactional leaders intervene only when standards are not met or
when the performance is not as per the expectations. They may even use punishment as a response to
unacceptable performance.
Laissez-faire: The leader provides an environment where the subordinates get many opportunities to make
decisions. The leader himself abdicates responsibilities and avoids making decisions and therefore the
group often lacks direction.
Assumptions of Transactional Theory

Employees are motivated by reward and punishment.

The subordinates have to obey the orders of the superior.

The subordinates are not self-motivated. They have to be closely monitored and controlled to get the
work done from them.

Implications of Transactional Theory

The transactional leaders overemphasize detailed and short-term goals, and standard rules and procedures. They
do not make an effort to enhance followers creativity and generation of new ideas. This kind of a leadership
style may work well where the organizational problems are simple and clearly defined. Such leaders tend to not
reward or ignore ideas that do not fit with existing plans and goals.
The transactional leaders are found to be quite effective in guiding efficiency decisions which are aimed at
cutting costs and improving productivity. The transactional leaders tend to be highly directive and action
oriented and their relationship with the followers tends to be transitory and not based on emotional bonds.
The theory assumes that subordinates can be motivated by simple rewards. The only transaction between the
leader and the followers is the money which the followers receive for their compliance and effort.
Difference between Transactional and Transformational Leaders
Transactional leadership

Transformational Leadership

Leadership is responsive

Leadership is proactive

Works within the organizational culture

Work to change the organizational culture by implementing

new ideas

Transactional leaders make employees achieve Transformational leaders motivate and empower employees to
organizational objectives through rewards and achieve companys objectives by appealing to higher ideals


and moral values

Motivates followers by appealing to their own Motivates followers by encouraging them to transcend their
own interests for those of the group or unit
The transactional style of leadership is viewed as insufficient, but not bad, in developing the maximum
leadership potential. It forms as the basis for more mature interactions but care should be taken by leaders not to
practice it exclusively, otherwise it will lead to the creation of an environment permeated by position, power,
perks, and politics.

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Transactional Leadership, also known as managerial leadership, focuses on the role of supervision,
organization, and group performance; transactional leadership is a style of leadership in which the leader
promotes compliance of his/her followers through both rewards and punishments. Unlike Transformational
leadership, leaders using the transactional approach are not looking to change the future, they are looking to
merely keep things the same. Leaders using transactional leadership as a model pay attention to followers' work
in order to find faults and deviations. This type of leadership is effective in crisis and emergency situations, as
well as for projects that need to be carried out in a specific way
"Adhering to the path-goal theory, transactional leaders are expected to do the following:

"Set goals, articulate explicit agreements regarding what the leader expects from organizational
members and how they will be rewarded for their efforts and commitment, and provide constructive
feedback to keep everybody on task" (Vera & Crossan, 2004, p. 224).

Transactional leaders focus on increasing the efficiency of established routines and procedures and are
more concerned with following existing rules than with making changes to the structure of the

Thus, they operate most effectively in organizations that have evolved beyond the chaotic, no-rules stage
of entrepreneurial development that characterizes so many new companies.

Transactional leadership establishes and standardizes practices that will help the organization reach
maturity, emphasizing setting of goals, efficiency of operation, and increase of productivity. "