Transactional Leadership Definition

Also called managerial leadership, transactional leadership is a management style that mainly concentrates on group performance, supervision and organization. Sociologist Max Weber is credited with initially describing the transactional leadership theory and Bernard M. Bass further explored the theory early in the 1980s. In essence, the transactional leadership style involves a leader who promotes conformity of his or her team members through a system that uses both punishments and rewards.

The Transactional Relationship Style at Work

Transactional leaders primarily function through the creation of clear structures that explicitly outlines what is expected of each member of the team. The structures will highlight the rewards that are attached to fulfilling various roles throughout the process. The punishments that are meted out are not necessarily outlined in these structures; however, it is usually a known fact among members of the group that there are formal systems of discipline in place to deal with non-performing group members.

The initial stage of transactional leadership involves the negotiation of a contract in which the salary and other benefits that the team member will receive are outlined. The contact will also highlight the fact that the company, via its management representatives, will have authority over the team member.

When the team member has been allocated duties by the transactional leader, the member is considered to be completely responsible for those duties. If things go awry, the team member will be at fault personally and punishment will be assigned accordingly. When the result is successful, the member will be accordingly rewarded.

Often, transactional leaders use management by exception, operating on the premise that if something is functioning to expected or defined performance, no attention would be necessary. However, exceptions to what is expected call for reward and praise for going above and beyond the expectation, while corrective action will be applied to those who perform below what is expected of them.

Basic Transactional Leadership Assumptions

• Individuals perform optimally when a clear and definite chain of command is in place.
• Team members are encouraged by punishments and rewards.
• Being obedient to the commands and instructions of the leader is the most important goal of the group members.
• Group members need to be monitored carefully to make sure that expectations are satisfied.

Transactional Leadership Examples

A good example of transactional leadership is embodied in athletic coaches. These leaders encourage their team members by highlighting the rewards associated with winning their games. The leaders implant such high levels of commitment that the members of their teams are ready to risk injury or pain to achieve the desired results. Here are some more examples about transactional leadership and the details:

Situation of Transactional Leadership	Why it is considered as Transactional Leadership	Advantages	Disadvantages
1. Setting Clear Performance Goals for Athletes	The coach sets specific performance targets for each athlete. This is transactional leadership as it involves clear expectations and rewards or penalties based on performance.	Provides clear direction and motivation to athletes, can improve performance.	May lead to excessive pressure and stress, may not consider individual athletes’ abilities or personal circumstances.
2. Implementing Strict Training Regimens	The coach creates and enforces rigorous training schedules, expecting full compliance from athletes. This is transactional leadership as it involves clear rules and the expectation of obedience.	Ensures disciplined and consistent training, can enhance athletes’ skills and performance.	May lead to burnout or injuries, may not consider individual athletes’ health or personal circumstances.
3. Enforcing Team Rules and Policies	The coach establishes clear rules and policies for the team, with penalties for non-compliance. This is a typical transactional leadership approach, emphasizing discipline and conformity.	Maintains order and discipline, creates a unified team culture.	May stifle individuality, can create a rigid team environment.
4. Conducting Regular Performance Reviews	The coach regularly evaluates each athlete’s performance, providing feedback and adjusting training plans accordingly. This is transactional leadership as it directly ties feedback and consequences to performance.	Encourages continuous improvement, provides valuable feedback to athletes.	Can be stressful, may lead to short-term thinking.
4. Conducting Regular Performance Reviews	The coach regularly evaluates each athlete’s performance, providing feedback and adjusting training plans accordingly. This is transactional leadership as it directly ties feedback and consequences to performance.	Encourages continuous improvement, provides valuable feedback to athletes.	Can be stressful, may lead to short-term thinking.
5. Using a Hierarchical Team Structure	In this situation, the coach establishes a clear hierarchy within the team, with defined roles for each athlete. This is transactional leadership as it values order and structure.	Provides clarity, improves coordination and teamwork.	May limit communication, can create divisions within the team.
6. Making Top-Down Decisions	The coach makes strategic decisions for the team and expects athletes to execute them without questioning. This is transactional leadership as it values obedience and compliance over input and creativity.	Speeds up decision-making, provides clear direction.	May ignore valuable input from athletes, can lead to low morale.
7. Dealing with a Critical Match or Competition	The coach takes charge in a critical game situation, issuing clear instructions and expecting compliance. This is transactional leadership as it involves direct control and command.	Provides clear direction in high-pressure situations, can quickly resolve issues.	May ignore input from athletes, can create dependency on the coach.
8. Implementing a Performance-Based Reward System	The coach introduces a system where athletes are rewarded based on their performance. This is a classic example of transactional leadership as it’s based on the exchange principle: rewards for good performance and penalties for poor performance.	Motivates athletes to perform better, fosters a results-oriented culture.	May lead to unhealthy competition, neglects the importance of intrinsic motivation.
9. Addressing an Athlete’s Performance Issue	Here, the coach addresses an issue where an athlete isn’t meeting their performance targets. The coach clearly communicates the expectations and the consequences of not meeting them. This is transactional leadership as it involves clear instructions and consequences.	Provides clarity, can improve performance.	May create stress, can lead to a blame culture if not handled carefully.
10. Strict Adherence to Sports Rules and Regulations	The coach strictly enforces adherence to sports rules and regulations, with penalties for non-compliance. This is a typical transactional leadership approach, emphasizing obedience and rule-following.	Ensures fair play, maintains the team’s reputation.	May stifle creativity, can create a rigid team environment.

Joseph McCarthy, the former state senator of Wisconsin, is another good transitional leadership example. He was renowned for his style of accusing individuals of being spies for the Soviet Union during the Cold War. He used a system of rewarding his followers for bringing in accused communist infiltrators and punishing followers who deviated from the rules. This motivated results among his followers.

This style of leadership is particularly effective in situations of crisis. Through this kind of punishment and reward system, leaders are able to achieve their desired results, even in crisis situations.

Transactional and Transformational Leadership

Transactional and transformational leadership are the two leadership modes that are compared and contrasted the most. A good distinction between transactional and transformational leadership is made by James MacGregor Burns, who explains that transactional leaders exchange tangible rewards to get results and loyalty from team members. Conversely, transformational leaders engage with team members to raise awareness regarding the significance of particular outcomes and innovative ways in which the outcomes can be achieved. The transformational leaders also concentrate on higher order fundamental needs. Transactional leaders have a tendency to be more passive, while transformational leaders exhibit active behaviors that provide a sense of mission.

In contrast to transformational leadership, the transactional leadership style is not looking to modify the future; these leaders are looking to maintain the status quo. Transactional leaders pay attention to the work of team members to find deviations and faults. This leadership style is effective in emergency and crisis situations and for projects that have to be carried out in a particular manner.

Characteristics of Transactional Leaders

• Rewards and punishments are used by transactional leaders to gain compliance from team members. They accept the culture, goals and structure of the organization as it exists. Transactional leaders are typically action oriented and directive.
• Transactional leaders are prepared to work within systems that are already in place and negotiate to achieve the organizational goals. Transactional leadership is largely passive. Maintaining the status quo and establishing criteria for reward and punishment are the behaviors most connected to transactional leadership.
• There are two factors within transactional leadership – management by exception and contingent reward. The latter recognizes good performance and provides rewards for efforts. Management by exception preserves the status quo, gets involved when acceptable performance levels are unmet and applies corrective measure to improve performance.

In Summary

Transactional leadership is applied to the lower-level, fundamental needs and its style is more managerial in nature. It forms a basis for transformational leadership, which caters to the higher-level needs. Based in contingency, transactional leadership rewards or punishes based on performance.

In spite of many studies highlighting its limitations, transactional leadership remains an acceptable approach with a lot of managers. In the range of leadership versus management, transaction leadership is towards the management side of the scale.

Its main limitation is the theory of the ‘rational man,’ which is an individual who is chiefly motivated by simple reward and money; hence, having predictable behavior. Behaviorism is the fundamental psychology, including Skinner’s Operant Conditioning and Pavlov’s Classical Conditioning. These theories are based largely on controlled experiments in a laboratory and disregard social values and complex emotional factors.

There is a lot of truth in Behaviorism to uphold transactional approaches. It is emphasized by the supply and demand circumstances of many employment situations, along with the impact of deeper needs. When the supply is outstripped by the demand for a skill, transactional leadership is typically insufficient and more effective approaches are required.