PERSONAL GROWTH FOR LEADERS

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Transactional leadership

Transactional leadership: Leading with Rewards and Consequences

Leading with rewards and consequences is a key aspect of transactional leadership, a leadership style that focuses on achieving specific goals and objectives through clear communication and direction, and the use of rewards and consequences to motivate and direct followers.

Transactional leaders hold individuals accountable for their actions and results, and use rewards such as bonuses, promotions, and recognition, as well as consequences such as demotions, disciplinary actions, or termination, to motivate their employees to work harder and achieve better outcomes.

 

5 benefits of transactional leadership

  1. Clear communication and direction: Transactional leaders provide clear instructions and expectations, which helps to reduce confusion and increase productivity.
  2. Accountability: Transactional leaders hold individuals accountable for their actions and results, which can motivate employees to work harder and achieve better outcomes.
  3. Efficiency: Transactional leadership is focused on achieving specific goals and objectives, which can lead to a more efficient and productive work environment.
  4. Reward for performance: Transactional leaders often use rewards and incentives to motivate employees to meet or exceed performance expectations.
  5. Stability: Transactional leadership can provide a sense of stability and predictability in the workplace, which can help to reduce stress and anxiety among employees.

 

What is transactional leadership?

Transactional leadership theory was first introduced by James V. Downton in 1973 in his book “Rebel Leadership: Commitment and Charisma in the Revolutionary Process.”

However, the concept of “the leader as manager” was first described by management theorist Max Weber in 1947.

In 1978, management scholars James G. Hunt and Lars L. Larson expanded on Downton’s work, developing the concept of “transactional leadership” in their article “Leadership: A New Perspective.”

They defined transactional leadership as “a system of leadership in which leaders promote compliance by followers through both rewards and punishment in return for achieving goals.” 

In the 1980s, management theorist Bernard Bass further developed the concept of transactional leadership, and introduced the idea of “transformational leadership,” which focuses on inspiring and motivating followers to achieve not just their goals but also a greater sense of purpose.

 

Characteristics of transactional leadership

Transactional leadership is a type of leadership style in which leaders establish clear expectations and objectives, and then use rewards and consequences to motivate and direct followers to meet those expectations. The leader’s primary focus is on maintaining the status quo and achieving specific goals and objectives (source).

Some characteristics of transactional leadership include:

  • Clear communication and direction: Transactional leaders provide clear instructions and expectations, which helps to reduce confusion and increase productivity.
  • Accountability: Transactional leaders hold individuals accountable for their actions and results, which can motivate employees to work harder and achieve better outcomes.
  • Reward for performance: Transactional leaders often use rewards and incentives to motivate employees to meet or exceed performance expectations.
  • Control: Transactional leaders tend to be directive and controlling, setting specific guidelines and procedures for employees to follow.
  • Emphasis on rules and regulations: Transactional leaders tend to focus on maintaining order and consistency within an organization, placing a strong emphasis on following rules and regulations.
  • Emphasis on stability: Transactional leadership can provide a sense of stability and predictability in the workplace, which can help to reduce stress and anxiety among employees.

What are the downsides of transactional leadership

Although I can see the benefits of this leadership style, it is not one of my favorites. This is because I find the downsides to be significant:

  • Limited creativity and innovation: Transactional leaders tend to focus on maintaining the status quo and achieving specific goals and objectives, which can stifle creativity and innovation among employees.
  • Lack of emotional connection: Transactional leaders tend to be more task-oriented than relationship-oriented, which can lead to a lack of emotional connection between leaders and followers.
  • Dependence on rewards and punishment: Transactional leaders rely heavily on rewards and punishment as motivators, which can lead to a lack of intrinsic motivation among employees and a sense of manipulation.
  • Short-term focus: Transactional leaders tend to focus on achieving short-term goals and objectives, which may not be conducive to long-term success.
  • High turnover rate: Transactional leaders tend to be more controlling, which can lead to employee dissatisfaction and a high turnover rate.
  • Decrease in employee engagement: Transactional leadership can lead to a decrease in employee engagement, as employees may feel uninspired or unsupported by their leaders.
  • Limited development opportunities: Transactional leaders may not provide opportunities for employees to grow and develop their skills, which can lead to stagnation in the workforce.

 

In What Types Of Organizations Is Transactional Leadership Most Appropriate

Transactional leadership

A lot of teachers use transactional leadership in their classrooms. This makes it easy to define the type of organizations in which this type of leadership is most appropriate:

  1. There is a clear hierarchy: Transactional leadership is well suited for organizations with a clear chain of command and a defined hierarchy, as it emphasizes clear communication and direction from leaders to followers.
  2. The focus is on achieving specific goals and objectives: Transactional leadership is appropriate for organizations where the focus is on achieving specific goals and objectives, such as in a production line or a customer service center where efficiency and productivity are key.
  3. The work is routine and predictable: Transactional leadership is well suited for organizations where the work is routine and predictable, such as in a manufacturing or assembly line setting, as it emphasizes stability and control.
  4. The employees are entry-level or new to their roles: Transactional leadership is appropriate for organizations where employees are entry-level or new to their roles, as it provides clear direction and guidance, and rewards for meeting specific expectations.
  5. The work environment is fast-paced and high-stress: Transactional leadership is well suited for organizations where the work environment is fast-paced and high-stress, as it provides a sense of stability and predictability.

Which skills should one develop to become a transactional leader?

In my opinion, transactional leadership should only be used in combination with other leadership styles, such as transformational leadership. On the other hand, leaders with a transactional or visionary style might want to develop some of this transactional style to bring about a balance and achieve the best results for the organization. 

This is what they could do:

  1. Develop communication skills: Transactional leaders need to be able to communicate effectively and clearly to provide direction and guidance to their employees. Developing your communication skills will help you to be able to provide clear instructions and give feedback effectively.
  2. Learn to set goals and objectives: Transactional leaders need to be able to set specific goals and objectives for their employees, and then provide the resources and support to help them achieve those goals.
  3. Learn how to hold people accountable: Transactional leaders need to be able to hold people accountable for their actions, and to use rewards and consequences to motivate employees to meet expectations.
  4. Develop organizational skills: Transactional leaders need to be able to manage resources, time and people effectively, to be able to provide stability and predictability in the organization.
  5. Learn to give positive and negative feedback: Transactional leaders need to be able to give both positive and negative feedback in a constructive way, this will help to maintain good relationships with employees and motivate them to achieve their goals.
  6. Lead by example: Transactional leaders need to be a good role model for their employees and lead by example. This means following the same rules and procedures that you expect your employees to follow, and showing a strong work ethic.

 

recommended book

“Transactional to Transformational: How Banks Innovate” by Christer Holloman.
This book invites you to explore the stories of success behind a variety of innovations in the banking industry through a series of case studies. 

“The Bass Handbook of Leadership: Theory, Research, and Managerial Applications” by Bernard M. Bass

“A Casebook of Transformational and Transactional Leadership” by Fil J. Arenas 

If you’d like to compare transactional leadership with other styles of leadership, you can read this post:  Leadership Styles, Why and When They Matter.

 

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