What is the Difference Between Transactional vs Transformational Leadership? Advantages and Disadvan

The Transactional and Transformational styles of leadership are the two most common styles we hear about in the workplace today. Transactional leadership also referred to as managerial style leadership,  is based on process, systems, and authority. Transformational leadership is rooted in the leader’s ability to inspire, motivate and establish meaningful relations that empower those around them to reach their potential both within and beyond a specific project. 

So what are the specific elements that, when applied, differentiates these styles and which one should you use in your workplace? We are going to compare  7 benefits and 4 drawbacks of each style. The benefits we will look at are Empowerment, Success, Structure, Focus, Goals, Process, and Priority. The drawbacks that will be covered include Effort, Rewards, Success, and Process. Some of these terms are repeated between both benefits and drawbacks, as it is important to highlight the two paths these elements can take.

Transformational vs Transactional Leadership Video

Benefits

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1. Empowerment

With transformational leadership, a large focus is on empowering the people. These leaders empowering others by discovering what drives each person to come to work each day. By building upon the passions of their team and understanding what motivates each individual, these leaders draw their intrinsic motivation from the difference they are able to make.

Transactional leaders look at the process. These leaders are empowered by making sure that processes are clear, concise, and well documented. For them, they are empowered by ensuring that all the people within their sphere of influence know exactly what’s expected of them.

2. Success

Transformational leadership is about engagement! If their staff or team are engaged, if people are buying into their vision and the mission everyone becomes motivated to work together.  The continued effort and persistence as a team towards the common vision is how these leaders measure their success. As long as they continue moving forward, even through failures and setbacks, these leaders can still see this as a success as long as learning is applied and build upon.

Transactional leadership success is measurable by specific documentation and benchmarks. This process ensures you never have to guess when you are successful. Tracking out and placing specific outcomes on what success will look like removes subjective perception. With these measures, you will know if you are successful based upon how many widgets you produced, what your sales were for the month, how many successful calls were made. How successful of a leader you is dependant on your team’s ability to achieve each of the required metrics. By having documented measurable factors,  the leadership knows where each individual stands at the end of the day.

3. Structure

Structure within transformational leadership is far more flexible than in transactional leadership. These leaders have a very individual approach to each person on their team, ensuring that each person is able to function to their highest potential within the given workday.

Transactional leaders have very strict boundaries that they determine and set out. These leaders ensure people know what their expectations are and how far the individual can stretch outside those boundaries. Beyond these set limitations, they are willing to have a discussion but, based upon their decision, the action is either allowed to proceed under supervision or completely stopped.

4. Focus

The future is the focus of transformational leadership.  These leasers are known for looking out into with a vision and seeing, not only what is the future of the company, but also what each individual they have been entrusted with aspires to be. Their focus can take many forms depending on the audience they have. Often these leaders are able to express a big picture approach, often years or generations into the future, while also understanding the impact they have on an individual person.

Transactional leaders look at the current day. What’s happening today, what’s in the present, how are you as a salesperson today, how are you as the athlete today? Rewards are all based upon these current, tangible, and visible metrics. These leaders look at current day status and current day happenings, driven to deal with today as the future is often viewed as unknown or unpredictable.

5. Goal

The goal of transformational leadership it’s to inspire. Inspire people to find their passions, to find their callings, to seek a higher purpose both as an individual, team, and company. By stretching to achieve something bigger than what they are today, going after a vision, they inspire those around them to jump on board and follow them to a bigger and brighter tomorrow.

Transactional leaders are going for the reward. Most often these rewards are instant or short-term objectives that you can assign a specific date or time from to. With these leaders, you know currently what the goal is, whether it’s financial reward, conventions, learning, promotions, or that corner office.

Transformational leadership is geared towards intrinsic motivation whereas Transactional tends towards extrinsic motivators. 

6. Process

With transformational leadership, the processes are open and changing. These changes are based upon where the leadership wants to go and what is important to the people within the organization as it aligns with the larger vision. These changes require staff to buy into the change in order to make these new processes happen quickly and achieve success. These leaders are quicker to pivot if something isn’t working.  They are so focused on achieving the big vision, that these pivots seem almost insignificant to them as waiting and drawing process changes out is a setback in time and energy.

In stark contrast, transactional leadership takes their time and ensures an evaluative process. Stability and clarity are key, if a change is made it is for a good reason and there must be a fundamental flaw with the original process. Often many people are involved in making these decisions, there will be documentation as to why processes are being discarded or revamped and there will often be people put in charge of evaluating the outcome of these new processes.

7. Priority

Transformational leadership places their team, their group, their people at the heart of their organization. They fundamentally understand and believe that without the people their organization doesn’t exist. Those team members they are entrusted with, how they feel, their thoughts and aspirations are at the core of what helps these leaders gain and establish their status. These leaders prioritizing the makeup of their team. By creating a culture for success, based upon a common vision, these leaders are able to create organizations that are different and special, sets apart from every other organization because they understand their people are what make them unique.

Transactional leadership prioritizes individual outcomes. This is most evident as these leaders and their organizations reward the individual. By allowing people to take a more individualistic approach they are able to push each person to be accountable for themselves.  This can be extremely powerful for some people as they don’t have to be caught up in what the whole team is doing. Their effort, skill, and energy can show a direct correlation to their outcome.  By not having to pull the weight of someone else, with rewarded based upon your own individual specific successes,  it sets this style of leadership up to prioritize the individual and the outcomes they can produce.


Drawbacks

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Unfortunately, there are pitfalls with every style of leadership. By understanding what the drawbacks are for each style of leadership, you will be able to better foresee what these could be for your team, and put measures in place to try and mitigate some of the potential fallout.

1. Effort

Transformational leadership focuses on team effort. Each person is viewed as part of the team, as such, your behaviors and efforts are a reflection of the group and you are all expected to working together, no matter the personality types. If someone is not pulling their weight, or if someone does not buy into the vision, it’s going to take a lot of work and a lot of effort to still achieve what you set out to as a team. Because this style focuses on the future vision, you are expected to lift each other up and push through even in the face of great adversity with minimal tangible reward or celebration of your efforts, which can become extremely challenging, especially when you are expected to take on more than your share of the work. Staffs efforts are expected to align with the leader’s vision, and employees use their time to work on counterproductive or opposing activities, these can be viewed as personal attacks against the group, the leader, and/or the organization.

Within transactional leadership, the effort is laid directly upon the individual’s shoulders. Ultimately, whether you’re going through something personally, coming up against impossible or near impossible expectations, or have another reason, be it illness, injury, etc; your rewards are all based on your individual efforts and ability to meet the designated criteria. This can cause extreme pressure, sometimes leading to further illness, injury, stress, illness, or injury.

2. Rewards

Rewards can become very unclear within transformational leadership. Oftentimes, the staff doesn’t know when they have achieved a success that is worth celebrating. When these leaders have an extremely future-focused big vision of what success looks like, it can be demoralizing when faced with complex obstacles. Without a clear picture of the smaller milestone markers, it can become unclear as to how to know if the correct steps are being taken to get there. These leaders need the ability to drill down and look at a more molecular view of their vision, without this, it can become very unclear as to if they are any closer to achieving their vision.

Looking at the reward structure for transactional leadership is can actually become demotivating. Even though many people think, how could being rewarded be demotivating statistically, you are only able to extrinsically motivate people to a certain extent.

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers – a prize for the best Halloween costume, grades in school, gold stars – and on up through the university. On the job people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by Objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable. W. Edwards Deming – Author, Out of the Crisis


3. Success

Within transformational leadership, success is often more based upon perception than a tangible product or event. Even though you might feel or you might see somebody on your team and think Wow! They’re super successful, look at all of the things that they have done personally and for the company, they might not feel the same way; Instead, they see how far there is to go. The lack of specific benchmarks on achieved success can make it uncertain to know if you are successful or not. It can become increasingly distorted as it is left to the individual’s perception to determine their level and output to be classified as successful, often not aligning with that of the leadership.  For someone new, or looking to progress through the company it can be extremely confusing and frustrating.

Some drawbacks for transactional success include having limitations placed upon your ability by a specific benchmark. If there is a maximum reward or a large amount of red tape to navigate, it can slow your ability to attain the level of success you desire. If staff are seeing that different outcomes or system cheats are being rewarded the same as their efforts they may feel their potential is of capped

4. Process

The process within transformational leadership can become extremely unclear and unfocused. When looking at the ways leaders choose to do something, especially if the staff like knowing an a to z approach/process, when these processes or steps change, it can become extremely frustrating for staff and actually slow performance. People are required to learn new skill sets which takes them from feeling competent to a state of incompetence. Depending on the personality types within the team, if there are people who struggle with embracing the ebb and flow, just go with it mentality, they may really struggle with this form of leadership.

Transactional leaders look at making a change when changes change is deemed completely necessary. Due to this, they are not looking on a daily basis to change the process, change the number count, change the way they do business. Only when something happens that creates a negative impact on the company do they look at what needs to change. Until they can quantify that the benefits outweigh the cost do they choose to do something different. We most dramatically see this done due to a change in the world’s circumstances forcing the change. People within the business are not ready for change, the structure has not yet been built for the change and those within the company don’t yet have the mindset for change. Often these changes move so slowly that major companies can sometimes be taken out of the competition. At times, employees become so frustrated about the red tape to navigate and the slow pace of decisions that they will move on to a new company, taking their experience and expertise elsewhere.

The Great Leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things. – Ronald Reagan, 40th president of the United States

Each style of leadership has its place within the workplace and varies in its effectiveness based upon the purpose and stage of leadership each individual is at.

If you are looking for leadership tools and techniques, we encourage you to look at our Korero Solutions YouTube channel to help answer more of your specific questions.

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