What is “Transactional Leadership”?

If you study the subject of leadership or read a college textbook on the topic, you will soon come across the phrase “transactional leadership” theory.

What is this type of leadership behavior and how does it apply to you? In the 1970’s, researcher James McGregor Burns wrote a significant book entitled, Leadership.

He sought to define the processes or behaviors used by leaders to motivate or influence followers.

Burns described leadership behavior as falling within two broad categories of influence. One category is called transformational leadership. This behavior is founded on the belief that leaders and followers can raise each other to higher levels of motivation and morality.

In contrast, transactional leadership seeks to motivate followers by appealing to their own self-interest. Its principles are to motivate by the exchange process. For example, business owners exchange status and wages for the work effort of the employee.

In the political environment, politicians may exchange favors or government jobs for votes. Transactional behavior focuses on the accomplishment of tasks and good worker relationships in exchange for desirable rewards.

Transactional leadership may encourage the leader to adapt their style and behavior to meet the perceived expectations of the followers. Some researchers added to Burns original theory and it is thought by many today that transactional leadership can encompass four types of behavior.

1. Contingent Reward – To influence behavior, the leader clarifies the work needed to be accomplished. The leader uses rewards or incentives to achieve results when expectations are met.

2. Passive Management by Exception - To influence behavior, the leader uses correction or punishment as a response to unacceptable performance or deviation from the accepted standards.

3. Active Management by Exception - To influence behavior, the leader actively monitors the work performed and uses corrective methods to ensure the work is completed to meet accepted standards.

4. Laissez-Faire Leadership – The leader is indifferent and has a “hands-off” approach toward the workers and their performance. This leader ignores the needs of others, does not respond to problems or does not monitor performance.

Transactional leadership behavior is used to one degree or another by most leaders. However, as the old saying goes, “if the only tool in your workbox is a hammer…you will perceive every problem as a nail”.

A leader should not exclusively or primarily practice transactional leadership behavior to influence others!

Here are a few common problems of those who do so. Some use transactional leadership behavior as a tool to manipulate others for selfish personal gain.

It can place too much emphasis on the “bottom line” and by its very nature is short-term oriented with the goal of simply maximizing efficiency and profits.

The leader can pressure others to engage in unethical or amoral practices by offering strong rewards or punishments.

Transactional leadership seeks to influence others by exchanging work for wages, but it does not build on the worker’s need for meaningful work or tap into their creativity.

If utilized as the primary behavior by a leader it can lead to an environment permeated by position, power, perks and politics. The most effective and beneficial leadership behavior to achieve long-term success and improved performance is transformational leadership.

Food of thought: Peter Drucker, who once said, "So much of what we call management consists in making it difficult for people to work."