Transactional leadership

Within the context of Maslow's hierarchy of needs, transactional leadership works at the basic levels of need satisfaction, where transformational leaders focus on the lower levels of the hierarchy. Transactional leaders use an exchange model, with rewards being given for good work or positive outcomes. Conversely, people with this leadership style also can punish poor work or negative outcomes, until the problem is corrected.[2] One way that transactional leadership focuses on lower level needs is by stressing specific task performance.[3] Transactional leaders are effective in getting specific tasks completed by managing each portion individually.

Transactional leaders are concerned with processes rather than forward-thinking ideas. Transactional leaders are generally split into three dimensions: contingent reward, management-by-exception: active, and management-by-exception: passive.[4] The type of leader who focuses on contingent reward, also known as contingent positive reinforcement, give rewards when the set goals are accomplished on-time, ahead of time, or to keep subordinates working at a good pace at different times throughout completion. Contingent rewards are also given when the employee engages in any desired behavior. [5] Often, contingent punishments are handed down on a management-by-exception basis, in which the exception is something going wrong.[6] Within management-by-exception, there are active and passive routes. Management-by-exception: active means that the leader continually monitors each subordinate's performance and takes immediate corrective action when something goes wrong.[7] Management-by-exception: passive leaders do not monitor employee performance and wait for serious issues to come up before taking any corrective actions.[8] In addition to the three dimensions of leadership above, another form of transactional leadership is recognized, the laissez-faire dimension. Laissez-faire leadership indicates a lack of leadership and a complete hands-off approach with employees.[9]

With transactional leadership being applied to the lower-level needs and being more managerial in style, it is a foundation for transformational leadership which applies to higher-level needs.[6]

Rewards and punishments are fundamental tools of transactional leadership. Consequently, transactional leaders are not as concerned with the well-being of their people as compared to transformational leadership. They are more willing to accept goals, structure, and the culture of the existing organization than to attempt to implement change.[10] Transactional leaders tend to be directive and action-oriented, as opposed to Transformational leaders, who aim for their followers to achieve intrinsic motivation and job fulfillment.

Transactional leaders are more willing to work within existing systems and negotiate to attain goals of the organization. They tend to think inside the box when solving problems, and adopt passive behaviors when articulating solutions. The characteristic most associated with this type of leadership is the establishment of criteria for rewarding followers and maintaining the status quo.[11]

Transactional management emphasizes practical and directive action, with a preference for following precedent. Through transactional management, an explicit measure of success is articulated and shared with subordinates to focus the groups' attention on the extrinsic motivators that are intended to guide their work behavior in an organization.

Within transactional leadership, there are two primary factors: contingent reward and management-by-exception. Contingent reward provides rewards for effort and recognizes good performance. Management-by-exception maintains the status quo, intervenes when subordinates do not meet acceptable performance levels, and initiates corrective action to improve performance.[11]

The benefits of transactional leadership favor specific, short-term circumstances, though its benefits will not be realized in all situations. Some of the advantages include:

• Rewards individuals who are self-motivated and follow instructions
• Quickly achieves short-term goals/gratifications
• Clearly defines rewards and penalties, with an emphasis on productivity
• Streamlined structure--ideal for work environments where structure and systems need to be reproduced (e.g., high volume manufacturing), and align ideals in large organizations

Disadvantages to transactional leadership include:

• Only rewards workers with tangible benefits
• No other real motivators are used
• Does not reward individuals who innovate/demonstrate initiative
• Impersonal work environment
• Creativity by employees is limited or non-existent
• Little to no room for flexibility with goals and objectives

Transactional and transformational are the two modes of leadership that tend to be compared the most. James MacGregor Burns distinguished between transactional leaders and transformational by explaining that: transactional leaders are leaders who exchange tangible rewards for the work and loyalty of followers. Transactional leaders tend to be more passive as transformational leaders demonstrate active behaviors that include providing a sense of mission. Transformational leaders are leaders who engage with followers, focus on higher order intrinsic needs, and raise consciousness about the significance of specific outcomes and new ways in which those outcomes might be achieved. Transformational leadership focuses on behavior; leadership is a charismatic interaction. "Transformational leaders do more with colleagues and followers than set up simple exchanges or agreements. They behave in ways to achieve superior results by employing one or more of the four core components of transformational leadership." Bass, Bernard M. (2014). Transformational Leadership Second Edition. Routledge. p. 5. ISBN 978-0-8058-4762-8. Transactional leadership focuses on supervision and performance; leadership is a task-oriented transaction. Transactional can be active or passive. Active refers to leaders who actively monitor performance and take corrective actions when needed. Passive refers to leaders who do not actively monitor follower behavior and only take corrective action when serious problems arise. The two theories are said to be on the opposite ends of this spectrum. It turns out that transactional leadership does a better job with predicting the job itself, as opposed to transformational being best for the organization behavior (Afsar, B., Badir, Y.F., Saeed, B. B.,& Hafeez, S., 2017).

The four core components of transformational leadership are Idealized Influence, Inspirational Motivation, Intellectual Stimulation, and Individualized Consideration. Bass, Bernard M. (2014). Transformational Leadership Second Edition. Routledge. pp. 6, 7. ISBN 978-0-8058-4762-8.

Coaches of athletic teams provide one example of transactional leadership. These leaders motivate their followers by promoting the reward of winning the game.[13] They instil such a high level of commitment that their followers are willing to risk pain and injury to obtain the results that the leader is asking for.

Another example of transactional leadership is former US Senator from Wisconsin, Joseph McCarthy, and his ruthless style of accusing people of being Soviet spies during the Cold War. By punishing for deviation from the rules and rewarding followers for bringing him accused communist infiltrators, McCarthy promoted results among followers. This leadership style is especially effective in crisis situations, and another example of this type of leadership was Charles de Gaulle. Through this type of reward and punishment he was able to become the leader of the free French in a crisis situation.

• Management style – Methods of maintaining order in a work environment