Transactional Leaders

Who leads us and how they do it affects us tremendously as we move forward in life. Every leader has their own way of leading their team. This also depends on the type of position and career they are in. Some people need to be monitored and told what to do to be able to perform and produce results. Others need their own space to bring out the best in them. What kind of environment do you think will help you thrive? Not sure? Read along to learn about transactional leaders, how they are, and if such managers would be a good fit for you.

Transactional Leaders Transactional Leaders

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Table of contents

    Transactional Leaders Definition

    Some leaders guide us, and some inspire us. Transactional leaders guide and motivate their subordinates or followers. They rely on rewards and punishment to achieve better outcomes. This leadership style is also known as managerial leadership. Productivity is more important than creativity.

    Leaders that motivate and guide their followers and use rewards and punishment to achieve better outcomes are known as transactional leaders.

    Management by exception: active, management by exception: passive, and contingent reward are the different types of transactional leadership.

    Management by exception: active - leaders following this type of transactional leadership are very controlling. They monitor all the employee activities. The leaders help the team members when they face an issue and take steps to solve it. They also do what is necessary to prevent any further problems.

    Management by exception: passive - this is the type of transactional leadership where the manager gets involved in a problem only if the team members cannot tackle it. Only high-priority issues are brought to the manager's attention. This way, higher-ranking employees can concentrate their focus on more important problems.

    Contingent reward - the use of rewards and recognition to motivate employees by their leaders is known as the contingent reward leadership system. Transactional leaders identify employees who accomplish their tasks well, before or on the given deadline, and reward them. This will instill a feeling of accomplishment and recognition in the employee. The others will perform better to be the receiver of the reward the next time.

    Characteristics of Transactional Leaders

    Let's look at the characteristics of transactional leaders that will help us differentiate them from others. The main characteristics include

    • Performance-oriented,

    • Extrinsic motivation,

    • Resistant to change,

    • Practical in nature, and

    • Short-term goals.

    Performance-oriented - Transactional leaders are very conscious of the team's performance and outcome. They evaluate employees based on their performance and reward or punish them according to their performance.

    Extrinsic motivation - Motivation using money, praise, and recognition is a common practice for transactional leaders. They hope to improve job outcomes through these measures.

    Resistant to change - Transactional leaders rely on their traditional way of doing things and are hesitant to think of another method or implement a new action plan.

    Practical in nature - They have a sensible and realistic approach toward their tasks. They consider all hindrances and challenges they might have to overcome to accomplish the task.

    Authoritative - Transactional leaders have authoritarian power and make decisions for the team. They pass on instructions for their team to follow.

    Short-term goals - They do not proactively seek to solve a problem but choose to solve them as they arise.

    Transactional vs. Transformational Leaders

    Transformational leaders are proactive leaders that motivate and inspire their followers. In this type of leadership, creativity is given more focus than productivity. Let's take a look at the other differences between transactional and transformational Leaders.

    TransactionalCriteriaTransformational
    Low priorityCreativityHigh priority
    High priorityProductivityLow priority
    EvaluationFocusDevelopment
    Followers' behaviorArea of change Followers' attitudes and values
    Shorter-termTime spanLonger-term
    ComplianceFollowers' actionCommitment
    Rank or positionLeader's power sourceCompetence

    Table 1 - Difference between transactional and transformational leaders

    It is important to remember that transactional and transformational leadership styles are not different but complementary. Knowledge of both styles is necessary to become a successful leader.

    Pros and Cons of Transactional Leadership

    By now, you may have understood that transactional leadership has its fair share of advantages and disadvantages. Let's take a look at them in more detail.

    The pros of transactional leadership are as follows:

    Motivates employees and maximizes productivity - The reward system is beneficial in continuously motivating employees. This will, in turn, help in improving the employees' productivity. Leaders should know how their employees like to be rewarded. They should also set parameters defining the goal to help them attain the reward. Also, the element of constant supervision may encourage them to do better.

    Clear definition of tasks - Employees that are part of a transactional leadership team know their roles and tasks outlined for them. They know their expectations and where they fall in the organizational hierarchy. This also helps with communication within the team.

    Easy to implement - Transactional leadership is a process that can be easily implemented. The leaders must be able to enforce rules. Their leadership style is not ruled by emotional intelligence. It is also a direct and simple process to implement.

    Low cost - Transactional leaders focus on implementing cost-saving methods while working. They figure out ways to reduce costs.

    The cons of transactional leadership are as follows:

    No individuality - the team members do not experience any individuality while working under a transactional leader. There is little to no room for creativity. Disobeying the leader or failing to follow instructions can be unfavorable for the employee.

    Does not inspire leadership - followers of the transactional leader do not acquire leadership qualities as they are trained in taking orders and implementing them. As a result, they fail to acquire any leadership skills. They lack the qualities to take over the leadership position if ever needed.

    Leadership abilities are not questioned - if team members fail to accomplish a task by the deadline, they are held responsible for the failure. The leader is not questioned. It can be problematic if the failure to accomplish tasks results from managerial incompetence.

    Transactional Leaders Examples

    Transactional leaders follow orders set in place and give importance to structure. They manage large corporations and military operations. Examples of some famous transactional leaders include:

    Bill Gates - the co-founder of Microsoft was very focused on producing results and observed a strict hierarchy, making him a transactional leader.

    Elon Musk - the richest man in the world (as of 2022), is also a transactional leader.

    Sports coaches are often also transactional leaders.

    So, what do you think? Can you work in an environment that is led by a transactional leader?

    Transactional Leaders - Key takeaways

    • Leaders that motivate and guide their followers and use rewards and punishments to achieve better outcomes are known as transactional leaders.
    • Management by exception: active, management by exception: passive, and contingent reward are the different types of transactional leadership.
    • The main characteristics of a transactional leader include the following:
      • Performance-oriented,
      • Extrinsic motivation,
      • Resistant to change,
      • Practical in nature, and
      • Short-term goals.
    • The pros of transactional leadership are as follows:
      • Motivates employees and maximizes productivity,
      • Clear definition of tasks,
      • Easy to implement, and
      • Low cost.
    • The cons of transactional leadership are as follows:
      • No individuality,
      • Does not inspire leadership, and
      • Leadership abilities are not questioned.
    Frequently Asked Questions about Transactional Leaders

    What is a transactional leadership style? 

    Leaders that motivate and guide their followers and use rewards and punishments to achieve better outcomes are known as transactional leaders.

    What is the difference between transactional leaders and transformational leaders? 

    The difference between transactional and transformational leaders is summarized in the table below.

    TransactionalCriteriaTransformational
    Low priorityCreativityHigh priority
    High priorityProductivityLow priority
    EvaluationFocusDevelopment
    Followers' behaviorArea of change occursFollowers' attitudes and values
    Shorter-termTime spanLonger-term
    ComplianceFollowers' actionCommitment
    Rank or positionLeader's power sourceCompetence

    What are the key characteristics of transactional leaders? 

    The main characteristics of a transactional leader include 

    • Performance-oriented,
    • Extrinsic motivation,
    • Resistant to change,
    • Practical in nature, and
    • Short-term goals.

    Who is an example of a transactional leader? 

    Examples of some famous transactional leaders include: 


    Bill Gates - the co-founder of Microsoft, was very focused on producing results and observed a strict hierarchy, making him a transactional leader.   


    Elon Musk - the richest man in the world (as of 2022), is also a transactional leader. 

    Is transactional leadership effective? 

    The effectiveness of transactional leadership depends on the type of work and team members. It cannot work for all work environments, as some demand creativity, and transactional leadership curtails it. Also, not all team members can thrive under this leadership technique.

    Test your knowledge with multiple choice flashcards

    Leaders following ________ type of transactional leadership are very controlling and monitor all employee activities.

    The type of transactional leadership where the manager gets involved in a problem, only if it can not be tackled by the team members:

    Transactional leadership focuses on development rather than evaluation.

    Next
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