Chapter-3

Transactional, Transformational and

Charismatic Leadership

Power and Influence

 Transactional Leadership
• A transactional leader is someone who values order and
structure.
 
• It emphasizes results, stays within the existing structure
of an organization and measures success according to
that organization’s system of rewards and penalties.

• They hold the formal authority and positions of

responsibility in an organization.

• They responsible for maintaining routine by managing

individual performance and facilitating group
performance.
 Transactional Leadership (Contd…)
• Transactional leadership is a style of leadership in which
leaders promote compliance by followers through both
rewards and punishments.

• Transactional leadership styles are more concerned with

maintaining the normal flow of operations.

• Transactional leaders use disciplinary power and an

array of incentives to motivate employees to perform at
their best.

• Ex- Couches of athletics team, Joseph McCarthy (former

US senator)
 Characteristics of Transactional Leadership
• Contingent Rewards

• Management by Exception (Active): Watches and searches for

deviation from rules and standards and take corrective action)

• Management by Exception (Passive): Intervenes only if

standards are not met.

• Lassiez Faire

• Focuses on maintaining status quo.

• Extrinsic motivators
 Transformational Leadership
• Transformational leadership inspires people to achieve
unexpected or remarkable results. It gives workers
autonomy over specific jobs, as well as the authority to
make decisions once they have been trained.

• It is a theory of leadership where a leader works with

teams to identify needed change, creating a vision to
guide the change through inspiration, and executing the
change in tandem with committed members of a group.

• Their style tends to use rapport, inspiration, or empathy

to engage followers. They are known to possess courage,
confidence, and the willingness to make sacrifices for the
greater good. (Ex- Bill Gates)
 Characteristics of Transformational Leadership

• Idealized Influence

• Inspirational Motivation

• Intellectual Stimulation

• Individualized Consideration

• Team-oriented

• Engenders respect through rapport and personal influnce

 Charismatic Leadership

Max Weber, a sociologist, defined

charisma as “a certain quality of an
individual personality, by virtue of which
he or she is set apart from ordinary people
and treated as endowed with supernatural,
superhuman, or at least specifically
exceptional powers or qualities. These are
not accessible to the ordinary person and
are regarded as of divine origin, and on the
basis of them the individual concerned is
treated as a leader.”
 Charismatic Leadership (Contd…)

• The first researcher to consider charismatic

leadership in terms of OB was Robert House.

• According to House’s charismatic leadership

theory, followers attribute heroic or
extraordinary leadership abilities when they
observe certain behaviors.

• They are driven by their convictions and

commitment to the cause.
 Charismatic Leadership (Contd…)

• Charismatic leaders are often identified in times

of crisis and exhibit exceptional devotion to and
expertise in their fields.

• More than other leadership styles, charismatic

leadership depends on the personality and actions
of the leader- not the process or structure.

• Ex- Mahatma Gandi, Steve Jobs, Martin Luther

King Jr.
 Characteristics of Charismatic Leadership
• Vision and articulation

• Personal risk

• Sensitivity to follower needs

• Unconventional behavior (novel and counter to norms)

• Extraordinary communication skill

• Compassion (kindness, integrity and honesty)

• Confident
 Power

• Power refers to a capacity that A has to influence

the behavior of B so B acts in accordance with A
’s wishes.

• It is capacity to influence the behavior of others.

• It is control of resources that others require.

• It is essential for smooth running of the

organization that power is delegated to
employees according to their rank/ position
(Clegg, Courpasson, & Phillip, 2006).
 Bases/Sources of Power
Formal Power
It is based on an individual’s position in an organization.

• Coercive power A power base that is dependent on fear

of the negative results from failing to comply.

• Reward power Compliance achieved based on the

ability to distribute rewards that others view as valuable
like pay rise, benefits, bonus, promotion etc.

• Legitimate Power It represents the formal authority to

control and use organizational resources based on
structural position in the organization.
 Bases/Sources of Power (Contd…)

Personal Power
It is the influence derived from an individual’s
characteristics.

• Expert power It is influence based on result of

expertise, special skills or knowledge.

• Referent Power It is based on identification with

a person who has desirable resources or personal
traits.
 Example
Nike CEO Mark Parker has expert power. Since joining
Nike in 1979 as a footwear designer, Parker has been
involved in many of Nike’s most significant design
innovations. His primary responsibilities and leadership
positions at Nike have been in product research, design,
and development. Nike depends on Parker’s expertise in
leading the company’s innovation initiatives and in
setting corporate strategy to achieve the growth of its
global business portfolio that includes Converse, Nike
Golf, and Cole Haan. Parker is shown here introducing
Nike’s Considered Design during a news conference
about the company’s latest products that combine
sustainability and innovation.
 Dependency
• The most important aspect of power is that it is a
function of dependence.

• Power is also a relational concept, such that the power of

A is dependent on B. The exercise of power is an
exchange of resources and so A needs B—is dependent
on B—in order to exercise power. 

• The greater B’s dependence on A, the more power A has

over B. When you possess anything others require that
you alone control, you make them dependent on you, and
therefore you gain power over them
 What creates Dependence?
• Importance If nobody wants what you have, it’s
not going to create dependence. Individuals must
have certain important resources that helps to
avoid uncertainty of organization to increase
dependence.

• Scarcity If we possess the scare resource or

skills, it increases organization’s dependence on
us.

• Non-substitutability The fewer viable

substitutes for a resource, the more power control
over that resource provides.
 Relation of Scarcity and Power
Ferruccio Lamborghini, who created the exotic
supercars that still carry his name, understood the
importance of scarcity and used it to his
advantage during World War II. Lamborghini
was in Rhodes with the Italian army. His
superiors were impressed with his mechanical
skills, as he demonstrated an almost uncanny
ability to repair tanks and cars no one else could
fix. After the war, he admitted his ability was
largely due to his having been the first person on
the island to receive the repair manuals, which he
memorized and then destroyed so as to become
indispensable.
 Influence Tactics
● Legitimacy. Relying on your authority position or saying a
request accords with organizational policies or rules.

● Rational persuasion. Presenting logical arguments and

factual evidence to demonstrate a request is reasonable.

● Inspirational appeals. Developing emotional commitment

by appealing to a target’s values, needs, hopes, and
aspirations.

● Consultation. Increasing the target’s support by involving

him or her in deciding how you will accomplish your
plan.
 Influence Tactics (Contd…)
● Exchange. Rewarding the target with benefits or favors in
exchange for following a request.

● Personal appeals. Asking for compliance based on

friendship or loyalty.

● Ingratiation. Using flattery, praise, or friendly behavior

prior to making a request.

● Pressure. Using warnings, repeated demands, and threats.

● Coalitions. Enlisting the aid or support of others to

persuade the target to agree.