Leadership Studies

On Transactional and Transformational Leadership

Learning to Share the Vision

Mouad Aazi

20 min read

May 22, 2021

Outside the context of leadership, a person might imagine leaders as an individuals guiding a group of followers who obey orders. How exactly can this individual make them do what he wants? The story, recounted in the beginning of the article, of Captain Scott and the merchant navy officer Shackleton, illustrate how it often used to be through coercive power: either by physical force using violence or by legitimate power. Of course, this is a very superficial, shallow definition that mistakes leadership with other things. The Leader has been defined as an individual who fulfills at least three criteria: having a vision, communicating it to followers, and motivating them into the achievement of this vision. Based on this definition, different individuals have been called ‘leaders’ though they were very distinct from each other in terms of their leadership style, relationship with followers, and personal characteristics. It is noteworthy that though leadership have existed in all times, in every places, and in countless contexts, the article by B. Bass specifically focuses on organizational leadership and identifies the two approaches—or styles as some call them—of leadership; namely, transformational and transactional. Still, these two approaches can also be generalized to other contexts to better understand the difference between task-oriented leaders and people-then-task-oriented ones.

Bass noticed that, inside organizations, most relationships between supervisors and their employees depend mainly on ‘transactions’; hence the name transactional (or managerial) leadership. These transactional leaders are task-oriented managers who get things done using rewards and punishments. The contingent rewards are used to extrinsically motivate employees and bring their compliance. They are given for good performance, when the set goals or assigned-tasks are accomplished; and they can be financial, such as praises, pay increases, promotions, bonuses, office perks…, or non-financial using other incentives, such as promises of recognition...etc. On the other hand, contingent punishments are used as forms of discipline to penalize employees when performance quality or quantity falls below production standards or when goals and tasks are not met at the expected level. These can range from simple verbal warnings and pay decreases to suspensions or threats of termination.

These traditional managers usually rely on one of the two routes/paths of the management by exception style (MBE). The first one—Active MBE is when the managers constantly check each employee’s performance, continually make changes to their work to make corrections throughout the process, proactive in assisting with issues, and actively participate and direct followers to prevent mistakes. By contrast, passive MBE—the second style—is when the managers only intervene after something goes unexpectedly, when standards are not being met. Managers adopting this style wait for issues to come up before fixing them. Besides these two MBE styles, Bass says that these managers can also be laissez-faire managers, i.e., abdicating their responsibilities, delegating all the work to employees without interfering, and avoiding decision-making. Still, regardless of their style, these managers have little to no concern for the well-being of their subordinates and their prime focus is to plan, direct, organize, supervise, and maintain the status quo and organizational culture under which they function.

Bass, based on his research with colleagues, argues that though transactional leadership can be effective in some situations and with some employees, especially in the achievement of short-term goals, it is not the ‘optimum’ approach to leadership for many reasons: the contingent punishments, for instance, can be ineffective and counterproductive (in the long run); and the contingent rewards require the leader/manager to be in control of such rewards. He considers the most effective (superior in his words) leadership performance to be of the people-oriented leaders who create and stimulate a positive change (transformation) in their followers, broaden and elevate their interests, and motivate them to work beyond their self-interests; hence the name transformational leadership. The transformational leader focuses on the growth and prosperity of followers and aims to enhance their motivation, morale, values, and performance. These leaders usually make fundamental changes in their followers as well as in the organizational culture; they draw followers’ attention to superior needs (the fourth and fifth higher needs in Maslow’s hierarchy of needs); convert their followers’ self-interest into a collective-interest for the benefit of the group, the organization, and society by generating awareness and acceptance of the vision; trigger passion and loyalty among their followers; and relate to them on a deep emotional level.

According to Bass, transformational leadership makes more of a contribution to organizations—and other contexts as well—than its counterpart transactional leadership based on several things. First, transformational leaders are considered more effective by their colleagues, supervisors, and employees (they meet their implicit leadership theories more than transactional leaders). He concluded this based on his study as well as other reports from different organizations across different countries (e.g., USA, Japan, Canada…) which indicate a high correlation between transformational behavior and high ratings. Second, employees also assert that they work harder and exert more effort for these leaders as opposed to transactional ones, particularly the ones who adopt passive management by exception style. This claim is supported by the results of his mentioned study, in which the efforts employees from a large engineering firm are measured in correlation with transformational and transactional leaders.

Though transformational leaders vary widely in their personal styles (some are spiritual, some are not…), Bass identifies four essential behaviors/components/dimensions/elements that characterize them: Individualized consideration, Intellectual stimulation, Idealized influence, and Inspirational motivation. The first element—Individualized consideration indicates that transformational leaders establish strong connections and relationships with each of their followers. They listen to their (followers’) personal and professional concerns and needs, appreciate their interests, and give personal attention to each employee individually. They support followers, advise and support them, and allocate their time to coach, guide, and mentor whoever is in need of training. The second—Intellectual stimulation, refers to the fact that transformational leaders are not only concerned with relating with and helping their followers, they also aim to increase their cognitive and affective abilities and capabilities, promote their intelligence, rationality, and critical thinking skills, empower and encourage them to challenge assumptions, take risks, address and solve problems on their own, and maximize their potential to achieve their personal goals along with the organizational vision.

The third element—Idealized influence—signifies the charismatic aspect of transformational leaders. It denotes that these leaders are highly admired and deeply trusted and respected by their followers not because of the power position they hold but because of who they are. Because they usually set themselves as exemplary role models, working harder than most followers and having high pride-instilling ethical and moral values, followers often try to identify with these leaders and attempt to emulate them. The final element—Inspirational motivation points to the visionary aspect of these leaders. They are able to successfully articulate their clear vision to their followers, and manage to intrinsically motivate them towards achieving the vision by triggering emotional influences, showing optimism and enthusiasm, and providing a sense of meaning for the tasks at hand and purpose for the general vision of the organization.

For all the aforementioned characteristics and behaviors of such leaders, transformational leadership can lead to several outcomes and benefits. Within organizational settings, knowing that a certain company is led by transformational leaders conveys good messages about the nature of the company, how employees and their supervisors treat and communicate with each other, and generally improve the company image in the eyes of its own personnel as well as to the outside world. This also results in recruitment as candidates are most likely attracted to such companies which view the development of its employees as one of its priorities. This latter alone, in fact, can have a tremendous impact on the development of the overall development of the company. Bass suggests that companies should identify, select, promote and transfer these types of leaders, and also work on training its managers to learn to be transformational. Some of the strategies or approaches to learning so include being aware of the employees’ view on the leader’s performance, working individually with a counselor or participating in a workshop in which the behavior of other transformational leaders is observed and emulated. Other implications include incorporating this approach into leadership education to raise awareness towards it and taking it into account -particularly the individualized consideration and intellectual stimulation- when designing and assigning jobs and tasks to employees.

Having said that, Bass asserts that though transformational leadership is generally more effective than its counterpart transactional leadership, especially in a turbulent market when problems, rapid changes, and uncertainties call for a flexible organization with determined leaders who can inspire employees to participate enthusiastically in team efforts and share in organizational goals (Bass, 1990), transactional leadership can also be effective in certain situations, particularly in stable markets. Later on, he has also suggested –unlike M. Burns- that a leader can simultaneously adopt both transformational and (mostly the contingent reward and rarely the contingent punishment of) transactional leadership.

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