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Transactional and Transformational Leadership: How Do They Differ?

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Leadership is an essential quality in any person who seeks to motivate groups of people into achieving a greater good. Many often ask, “What makes an outstanding leader?”

It’s difficult to pinpoint exactly what makes a leader great. However, perhaps one of the most important characteristics many leaders have in common is their ability to direct people successfully. Thus begging the question about which style of leadership ensures they reach their goal.

The Basics of Leadership

Leadership comes from the Latin word “dux,” which means “chief.” It is an ancient concept that has been around since the beginning of history.

Leadership is a relationship between a single individual with other individuals, as well as with groups or organizations. This relationship involves influencing individuals and groups toward a common goal, and the process comprises creating an environment where the leader and other people can work together to achieve a goal.

The Different Types of Leaders

There are two primary types of leaders, and each type performs his duties differently. We provide the two leadership roles below to help distinguish the different leadership types:

1. The Boss

A boss is a leader who has authority over others. This person usually feels he is in an “employee-boss” relationship, and his power comes from the superior position he holds in an organization. The boss assigns various tasks to his employees or peers, delegating and coordinating work efforts, and providing feedback on work performance.

2. The Coach

A coach is a leader who motivates and encourages others. When an employee or peer has a problem, the coach focuses on helping subordinates develop their skills and abilities. He provides feedback to help people improve their performance. He helps overcome the difficulty to become successful.

Leadership Styles

There are two different categories of leadership styles that are very common among many leaders. The first type is the transactional leadership style, and the second form is the transformational leadership style.

Transactional Leadership

Transactional leadership is a type of leadership style where the leader focuses on the task at hand and seeks to maximize task efficiency. This is more of a traditional hierarchical approach, where there are clear roles and responsibilities for the team members. You can typically find this type of leadership in formal organizational structures.

The Concept of Rewards and Punishments

Transactional leaders focus on rewards and punishments to ensure their team members complete the tasks given to them. This means that transactional leaders reward and punish their followers based on whether they follow orders and procedures.

These rewards and punishments typically come because of positive (rewards) or negative (punishment) feedback from the transactional leaders.

Management by Exception

Aside from the concept of positive rewards and negative punishments, management by exception focuses on dealing with individual situations as they arise. They do so by identifying each situation and identifying the most effective way to deal with it. After doing so, transactional leaders will take action on that specific situation and then moves on to the next one.

Management by exception is a common form of transactional leadership because it allows particular situations to be handled effectively. The principal reason is that it focuses on following detailed procedures based on individual situations instead of following set procedures for every situation.

Management by Objectives

Management by objectives focuses on setting specific goals and then designing a plan of action to implement them. Leaders often use this style when people are being trained or when new employees are being hired. They also use this style for goal setting within the organization or team.

Management by objectives is considered transactional because it focuses on achieving specific goals and following the steps laid out to reach those goals. It does not allow for much room to be taken for creativity or trying something new. The goals must be achieved for any reward, so this leadership form does not encourage followers’ participation.

Management by Walking Around

Management by walking around is a leader’s way of ensuring that everyone is doing their job effectively. This is accomplished through the use of frequent interaction with employees.

Management by walking around is considered a transactional style because it allows the leader to control each person’s actions in the organization or team. Therefore, allowing him to follow procedures as they are laid out.

Although this style can be very effective, it can become tedious and frustrating for both leaders and followers because there is no opportunity for creativity or participation.

Transformational Leadership

Transformational leadership is a type of leadership style where the leader focuses on developing a cohesive vision for the group or organization, developing individual strengths, creating an atmosphere conducive to innovation and creativity, and focusing on follower development as much as task completion.

This type of leadership encourages group member involvement in decision making, which can sometimes lead to conflicts and disagreements between group members, including the leader.

Transformational leaders are less concerned with tasks being completed than empowering people, encouraging innovation, contributing to job satisfaction, and encouraging a positive work environment. Typically used in informal organizational structures, transformational leadership is notably how billionaire Elon Musk runs his empire. You can also read about Jeff Bezos leadership style in another post.

Transformational and Transformative

A little different from transformational leadership, transformative leadership is a leadership style that changes followers’ identity by increasing their level of motivation and commitment to transformational leaders and the organization or cause.

This form of leadership has been used throughout history to change people’s beliefs, thoughts, and behaviors to achieve a particular outcome.

What is the Difference Between Transformational and Transformative?

In the last 50 years, both transformational and transformative leadership have become extremely popular within organizations worldwide. Transformational leaders focus on getting tasks done and motivating their followers. However, it is essential to consider that a transformative leader may also change people’s perceptions to achieve a certain goal.

What are the 4 I’s of Transformational Leadership?

Transformational leadership is a much more complex form of leadership than a transactional one. It involves creating an atmosphere of trust, transparency, and respect between the subordinates and transformational leaders.

Bernard Bass, a prominent figure in the leadership theory field, was the first to identify the four “I’s” of transformational leadership. This is a framework that describes the core characteristics of transformational leadership.

The four “I’s” of transformational leadership are:

1. Idealized influence

Idealized influence occurs when followers develop a sense of admiration or even idolization towards their transformational leader. They see the leader as an ideal person who is above what they see in themselves and will strive to become more like them.

2. Inspirational motivation

Inspirational motivation keeps followers excited, happy, and eager to take part in tasks. Followers feel like they are part of something bigger than themselves. Followers also firmly believe their contributions are making a difference and have meaning.

3. Individualized consideration

Individualized consideration is similar to how transactional leaders because it treats all followers equally and fairly. The leader will personally recognize each individual for their contributions or actions wbithin the organization or group during meetings or other communication forms.

4. Intellectual stimulation

Intellectual stimulation is when the followers learn and grow from the leader’s ideas, tactics, strategies, and experiences. The leader helps employees expand their minds, which allows them to become more innovative.

Therefore, intellectual stimulation is the tactic that the leader will use to help improve performance. These leaders know how the human mind plays into the mindset of his team and therefore takes advantage of intellectual stimulation.

What is the Difference Between Transactional Leadership and Transformational Leadership?

Although the transactional and transformational leadership styles can be very similar in many situations, there are some key differences between them.

The most obvious difference between transactional and transformational leadership is that a transactional leader focuses on completing tasks by following procedures and policies. Whereas transformational leaders focus on motivating their followers with a sense of belonging to an elite organization or group.

Another key difference between the two is that a transactional leader treats everyone equally, while a transformational leader values individual performance and opinion when making decisions.

Transactional and Transformational Leadership in Conversation

We can also note the difference between transactional and transformational leadership in how leaders talk to their followers. Transactional leaders talk about tasks that need to be accomplished and how they should complete them. In contrast, transformational leaders talk more about their followers and how they feel.

Examples of the Difference Between Transactional and Transformational Conversations

There is a clear difference between transactional and transformational leadership when we look at how individuals in a team engage in conversations. Here are some examples:

Transactional Leadership:

“We need to go over the procedure for this task again today so we can make sure everyone is on board with what needs to be done.”

“I want you guys to make sure you stay focused on what needs to be done today so we can get out of here on time.”

“I know it is very important for you guys to get everything done correctly, so I will not allow any distractions during this meeting.”

Transformational Leadership:

“Let’s think about how we can make this project more enjoyable for everyone involved.”

“Let’s figure out what we can do to make everyone feel more included in this organization.”

“Let’s think about different ways that we can get this done faster and more efficiently.”

Transactional vs. Transformational Leadership

In deciding which one is the better form of leadership style, it is important to look at how you can use transactional and transformational leadership in different situations. It is also important to look at the reason leaders created transactional and transformational leadership styles.

For a long time, transactional leadership has been the preferred form of leadership. This is because leaders in the past needed to have complete control over their followers. If you look at transactional leadership to follow the rules, it can be effective for short-term use.

With that being said, transformational leadership is the preferred form of leadership today. This is because transformational leaders need to control a large group of people and need to motivate them.

You will find that transformational leadership is more effective in long-term use because it allows for a better sense of belonging for the followers and encourages participation and creativity.

Another Leadership Theory

Alderfer’s ERG theory (Existence, Relatedness, and Growth) is another leadership style that is commonly used in the business world. This style focuses on the fact that all individuals have different needs and want to be satisfied with their business. The theory is based on three distinct categories of motivation.

Existence level needs are the basic human necessities required for survival, such as food, water, and shelter. When these needs are met, people feel secure and safe, which allows them to focus on the next level of motivation to complete their tasks.

Relatedness level needs focus on the social aspect of the business workplace, such as teamwork, friendship, and loyalty. These relationships allow people to increase their productivity. Some examples of relatedness level needs include the opportunity for advancement, support from subordinates or co-workers, and co-workers’ recognition.

Growth level needs focus on the individual’s desire to reach their full potential. A leader satisfies this need when individuals are given a chance to learn new skills, perform new tasks, and make decisions. Some examples of growth level needs include recognition from superiors, promotion opportunities, and a challenging job.

A Final Thought

As a leader, it is essential that you adapt your leadership styles to your situation. You must consider using both transactional and transformational leadership in different situations, while also considering the aspects of the ERG theory.

If you need to have clear expectations, transactional leadership can be very effective. On the other hand, if you need your followers to contribute ideas to reach goals or tasks, then transformational leadership can be very effective for your business.

The business world is its very own kind of battlefield, consider reading through these quotes from Sun Tzu or Abraham Lincoln to win the war waged against your competitors.

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