By Nguyen Thi Thuong
The success of an organization is a reflection of how it is run, and the leadership style being used. Companies like Virgin Atlantic, Netflix, Target and Starbucks are examples of entities led by transformational leadership (TFL) (Miller 2019). Bill Gates, Jack Ma and Victor Lombardi are known to have used transactional leadership (TNL) style to run their companies (Ansary 2019). Figure 1 below depicts how these two leadership styles use different methods to achieve desired results. This blog will focus on traits and characteristics of TNL and TFL as well as reflections on how these styles affect a learning journey.
TRAITS AND CHARACTERISTICS OF TRANSFORMATIONAL AND TRANSACTIONAL LEADERSHIP
Transactional leaders are practical, resistant to change, they use rewards or penalties to ensure their employees perform and they sometimes micromanage (What are characteristics of Transactional leadership – PloPdo, 2019). These traits can often be seen in the military where there are strict rules and regulations in place that everyone is required to adhere to. In schools, teachers use the reward system for best performing students as a way of motivation so that they keep performing. Companies like Alibaba have had little innovation over the years as the CEO has maintained the same policies since it was started. Bill Gates was known to be keen on ensuring that a strict chain of command was followed and that his employees did exactly as was needed and he was always monitoring what happened in the company (Miller, 2020).
On the other hand, TFL are visionary, risk taking, collaborative, motivating and are goals and scales focused. A good example is Steve Jobs, whose vision for Apple changed the tech industry by introducing devices that were ahead of their time and turning around a company that was on the verge of collapsing. Google Inc is run by TFL who encourage their employees to be creative and come up with innovative ways which has made the company have the number 1 search engine in the world. Starbucks’ CEO came up with the idea of a coffee shop integrated with the community and forever changed the coffee industry because now one could enjoy their favorite cup of coffee while enjoying company from peers and family. (Johnston, 2021)
HOW TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP CONTRIBUTES TO CHANGE IN AN ORGANIZATION.
Transactional leadership follows a management theory style, while transformational theory mostly makes use of a communication style. Both have different impacts in change management:
- TFL encourages innovation and collaboration among employees, who will be able to contribute with different ideas to drive the company forward. Transactional leadership forces employees to stick to workflows, processes and procedures to ensure that everyone works to the same standard.
- TNL deal with issues as they come up while transformational leaders deal with an arising issue before it becomes a problem (Ramesh and Hegde, 2017).
- TNL tend to look out for their own self-interest which drives their employees to do their job and meet expectations for the reward. Transformational leaders seek collaboration ensuring that not only do they grow but that their employees grow with the company as well (Ramesh and Hegde, 2017).
- TFL encourages employees to set their own goals and grow which cultivates new leaders in the company who are not driven by self-interest. Transactional leadership focuses on evident data and short- term goals that are realistic and achievable.
In Figure, 2 below, the differences between the two leadership styles are clearly outlined (Gray, 2016).
Organizational leaders need to continuously change, improve, and re-invent the business. Many startup companies cultivate transformational leaders due to the agility and adaptability to the volatile business model as the company tries to define and establish its market share.
Leaders creating start-ups will identify TNL or TFL to sell or optimize their delivery of their product to the market. TNL is conventional and time restricted, hence would be most suitable for company’s optimizing its offerings. Companies with innovation challenges, transformational leadership seems better suited.
Leadership provides the direction for the company and the team. Change is inevitable and it encourages innovation and creativity. I do see it in education systems where some educators will be transactional as they reward well performing students with trophies and other accolades. At higher levels, some educators can be transformational and encourages innovation and self-thinking among students.
In my education journey I have experienced both types of leaderships. While transactional leadership helped me to be the best in order to earn a trophy or other gifts from my teachers, I responded better to teachers and lectures who used transformational leadership, as it ensured I was motivated, and free to share my ideas in class.
Ansary, A., 2019. 10 Transactional Leadership – Characteristics | Examples | Style – Career Cliff. [online] Career Cliff. Available at: <https://www.careercliff.com/transactional-leader-and-leadership/> [Accessed 31 March 2021].
Gray, B., 2016. Transactional vs Transformational Leaders. [online] Linkedin.com. Available at: <https://www.linkedin.com/pulse/transactional-vs-transformational-leaders-byron-gray> [Accessed 31 March 2021].
Johnston, K., 2021. Examples of Transformational Organizations. [online] Small Business – Chron.com. Available at: <https://smallbusiness.chron.com/examples-transformational-organizations-23313.html> [Accessed 30 March 2021].
Miller, K., 2019. 21 Famous Transformational Leadership Examples. [online] FutureofWorking.com. Available at: <https://futureofworking.com/21-famous-transformational-leadership-examples/> [Accessed 31 March 2021].
Miller, M., 2020. Transactional Leadership Theory. [online] Communication Theory. Available at: <https://www.communicationtheory.org/transactional-leadership-theory/> [Accessed 31 March 2021].
PloPdo. 2019. What are characteristics of Transactional leadership – PloPdo. [online] Available at: <https://plopdo.com/2019/01/07/what-are-characteristics-of-transactional-leadership/> [Accessed 31 March 2021].
Totally agreed with your reflection that leadership is important both for self and for an organization as it gives a sense of direction. Well done Tina. Thanks for sharing.
Thank you so much for your commenting.
Thanks for sharing, Tina! Agree that leadership is important both for self and for an organization as it gives a sense of direction, and change is a very important part of society and without change it is difficult to be innovative and learn new ways.
Well identified on the different approach between transformational and transactional leader on different context during organizational change. Thanks for sharing.
Very clear comparison on both leadership style in point and table form. Easy to comprehend.
very clear and helpful info. Good job Tina.
Intestingly pointed out transformational leadership style is more forward looking and transactional is more short term looking. I do feel the same too depending on the situation.
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