Transactional leadership means just what it says. It is a quid per quo type of relationship between the follower and leader – a carrot on the stick approach. Two prominent scholars by the names of Antonio Marturano and Jonathan Gosling in the University of Rome and the University of Exeter believe that the effectiveness of this leadership style is dependent on two conditions: one being that the current differences in organizational hierarchies and structures are totally accepted by subordinates and the second being that all the employees are able to work towards a mutual exchange of benefits in which they are rewarded for achieving determined goals.
It is somewhat reactive, however, because a benefit can be held back or taken away if the follower did not achieve the determined goals. Scholars look at it as a passing fancy, a myth, or a schematic diagram that has not been tried and true. Unfortunately for scholars, this is not true. Millions of managers were trained in transactional leadership and it has advanced into an organization’s success-both from a performance and management level.
There is a plethora of leadership theories and models that attempt to consider leadership as an enabler of firm performance. There’s an increased emphasis on the important role of leaders when interacting with followers and stakeholders. Transactional leadership involves determining the tasks, rewarding goal achievement, and punishing failure in attaining goals. Transactional leadership style is a new performance paradigm evident in organizations today. Understanding this dimension from a transactional leadership and performance paradigm may provide a significant realization bridging this important field of leadership and management.
Some scholars such as James MacGregor Burns, Edwin Hollander, and Arthur Jue illustrate that transactional leadership is successful in developing mutual exchange between leaders and employees in organizations. This leadership form actually assumes impersonal interactions in a reality where leaders do not consider higher humanistic desires or relationships between leaders and followers. This form of leadership is still based on the grounded theory that does not explore a desired probable situation. While it has its limitations, it is still widely used in organizations. This leadership style is very popular among practicing managers today. Transactional leadership is linked with organizational effectiveness, particularly in terms of achieving goals. The key is for managers to use it sparingly, on occasion, when new details and tasks are assigned but not as the main type of leadership.
Another aspect of the transactional leadership style is that managers using this style are passive by exception or laissez-faire when applying leadership. Laissez-faire is characterized by managing the situation where a problem has occurred, and leaders take a reactive approach to correct mistakes or to overcome problems. This was uncovered by Robert Blake and Jane Mouton in the management grid research and still has importance in clarifying the type of transactional leader in some instances. Transactional leadership style has been critiqued by scholars as a leadership approach that is not concerned with proactively identifying or preventing problems. Transactional leaders do advocate for knowledge sharing and joint problem solving with subordinates.
Laissez-faire leaders do not possess high commitment in seeking the proposed solutions jointly with their subordinates. When such leaders assume the responsibility or intervention to solve problems, they rarely consider the empowerment of their employees to assist in problem-solving and goal setting. To overcome this obstacle, a scholar at the University of Aalborg by the name of Josef Frischer suggests that leaders today should empower followers to engage in problem-solving.
Therefore, transactional leadership can be used to review the tasks, goals, and requirements of subordinates. Leaders would begin using transactional leadership to set goals and determine tasks and then, when time allows, move toward more transformational leadership and place more emphasis to engage followers. This supports the approach for leadership to generate two sides of an X and Y-axis. On one side is the concept of leadership that creates change through taking a process-oriented (transformational leadership) and the other as more of a relationship-oriented approach (transactional leadership).
Thus, transactional leadership does affect organizational performance by achieving business goals. And four scholars by the names of Timothy Obiwuru, Andy Okwu, Victoria Akpa, and Idowu Nwankwere affirm this relationship. They shed light on the critical role of transactional leaders in enhancing non-financial performances, particularly in terms of improving organizational commitment. Transformational leadership provides a frank appellation of the importance when beginning a leader-follower relationship, downsizing, upsizing, onboarding, and making significant changes to the structure and organizational improvements, but leaders must be aware of its limitations.
Just as leaders need to be both autocratic and democratic at times they also need to be both transactional and transformational at times also. Knowing both styles and when is best to use them is an important concern here and will defunct the myth of transactional leadership as being an adequate style of leading in and of itself.
Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.