Is it beneficial for the company to abuse transactional and transformational leadership?

Discover how and when to apply leadership based on rewards and sanctions or focus on intrinsic motivation.

Career development

Leadership is a fascinating and multifaceted topic that, at an organizational level, has been the subject of study since the Industrial Revolution. As the business network has grown and taken on a certain degree of complexity and, as workers have acquired rights, leaders or bosses have been forced to update themselves and investigate new methods with which to obtain the best from their staff.

Throughout history, we have seen a variety of leadership styles: from authoritarian leaders to those who lead with empathy and understanding. In this post, we will explore transactional and transformational leadership, what they consist of, how they can impact a team or an organization and in which cases it is best to apply each one.

Whether you are already in a leadership position or aspire to be, this post will provide you with valuable insight into what it takes to be an effective leader. Join us on this journey of discovery and learning about the art and science of leadership!

What is called transactional leadership and what are its characteristics?

As its name suggests, transactional leadership is the type of business leadership that tries to motivate employees through rewards. The leader encourages work performance of tasks, implementing a system of rewards and punishments, and directly dictating to the work team what to do to achieve said benefits.

The main characteristics of transactional leadership are the following:

  • It is highly effective in emergencies and/or business crises.
  • Employees have determined the activities to be carried out.
  • The leader is in charge of monitoring and controlling the development of the operations carried out by the employees, and in turn, rewarding or punishing them according to their performance.
  • It is usually used in specific projects.
  • Workers’ efforts are rewarded with rewards and incentives.
  • The employee who does not comply with the established plan is punished.
  • Stimulates the effectiveness of operations in an organization.
  • If done well, and in a controlled manner, it can improve the working relationship between leader and subordinates.

Pros and cons of transactional leadership

Transactional leadership is a powerful instant motivation tool that works very well when the organization needs extra effort, but, on the contrary, if abused, it can be counterproductive. Let’s see below some advantages and disadvantages of this type of leadership.

5 Advantages of Transactional Leadership

  • Structure and clarity: Provide structure and a clear set of expectations, making it easier for team members to understand their roles and responsibilities. This reduces ambiguity and improves efficiency in the execution of tasks and projects.
  • Rewards and recognition: Transactional leaders reward positive performance and recognize team members’ achievements. This can motivate employees to work more productively and achieve specific goals.
  • Focus on results: This leadership style focuses on achieving predefined objectives and goals. Transactional leaders are effective at achieving concrete results and directing projects that require detailed follow-up.
  • Predictable performance: Employees know what to expect in terms of rewards and sanctions, which can provide a predictable and stable work environment. This can be especially useful in environments where security and consistency are crucial.
  • Risk control: Transactional leadership tends to minimize risks and errors, as it focuses on compliance with established rules and procedures. This is beneficial in situations where error can have serious consequences.

5 Disadvantages of Transactional Leadership

Lack of intrinsic motivation: This leadership approach relies on external rewards and sanctions, which can lead to team members working primarily for material incentives, rather than being intrinsically motivated by their work.

Limiting creativity and innovation: Transactional leadership tends to focus on compliance with predefined rules and procedures, which can stifle creativity and employees’ ability to come up with new ideas or approaches.

Lack of adaptation to change: This leadership style is less flexible and may have difficulty adapting to changing situations or constantly evolving business environments.

Possible team resentment: Excessive use of sanctions or penalties can lead to resentment in employees, affecting morale and job satisfaction.

Focus on short-term tasks: Transactional leadership focuses on short-term tasks and goals, which can neglect the long-term vision and strategic planning of an organization.

What is Transformational Leadership and what characterizes it?

Transformational leadership is a leadership style characterized by inspiring and motivating employees to achieve higher levels of performance and achieve significant change in themselves and the organization. This approach is based on the idea that a leader can positively influence others by promoting a shared vision and encouraging innovation and personal and professional growth.

These would be some of the main characteristics of transformational leadership:

  • Inspiring Vision: Transformational leaders have a clear, inspiring vision of the future and can communicate this vision persuasively, inspiring others to follow that direction.
  • Personal inspiration: They set a high standard for ethical behaviour and performance. Your behaviour and personal values ​​positively influence others.
  • Intrinsic motivation: Intrinsic motivation is encouraged in the workforce, meaning that people are driven by a sense of purpose, self-discovery and personal development, rather than relying solely on external rewards.
  • Empowerment and development: Transformational leaders provide team members with the autonomy and responsibility to make decisions and take an active role in achieving goals. They also focus on the development of individual skills and abilities.
  • Effective Communication: They use effective communication to convey the vision, provide constructive feedback, and create an environment of openness and trust.
  • Fostering innovation: Transformational leaders encourage creativity and innovation, promoting a safe environment to propose new ideas and approaches.

Pros and cons of Transformational Leadership

Transformational leadership offers numerous advantages in an organizational setting as it focuses on inspiring, motivating and guiding the team. However, you must know the best way to apply it so that it is effective and does not lead to confusion or lack of direction.

5 Advantages of Transformational Leadership

  • High employee engagement: Transformational leaders create an environment where employees feel engaged and motivated to push their limits and contribute to the success of the organization.
  • Performance Improvement: This leadership style promotes greater team performance and effectiveness as employees strive to achieve established standards of excellence.
  • Leadership development: Transformational managers often help in the development of future leaders, thus inspiring team members to continually improve themselves.
  • Culture of innovation: an environment conducive to innovation and creativity is fostered.
  • Employee loyalty: Employees who experience transformational leadership tend to be more satisfied in their jobs and have greater retention in the organization.

5 Disadvantages of Transformational Leadership

  • Overdependence: Workers may become overly dependent on the transformational leader for decision-making and problem-solving, which may limit their independence and ability to act on their own.
  • Lack of focus on efficiency: Since transformational leadership focuses on inspiration and motivation, it can sometimes neglect the importance of efficiency and process management, which can lead to delays or inefficiencies.
  • Possible lack of control: In a transformational leadership environment, leaders often provide followers with autonomy and responsibility, which can lead to a lack of control.
  • Not suitable for all situations: Transformational leadership may not be the most appropriate choice in crises or in environments where more directive and task-oriented leadership is required.
  • Rejection by some employees: Some team members may not respond positively to transformational leadership, preferring a more rigid and directive structure. This can lead to resistance to change and a lack of acceptance of the transformational leader.

Transactional Leadership vs Transformational Leadership

To finish this post on transactional leadership, we do not want to say goodbye without mentioning the difference with transformational leadership, since, sometimes, they can be confused.

Thus, while transactional leadership focuses on using rewards and sanctions to motivate employees and ensure desired performance; Transformational leadership is based on compliance with predefined rules, norms and objectives, emphasizing the management and supervision of specific tasks.

Do you want to know more about good leadership, how to develop it, its new methodologies and more disruptive changes? Stay reading the Educa.Pro blog with us!

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