What Is Transactional Leadership? Transactional Leadership In A Nutshell

Transactional leadership is a theory of leadership first described by German sociologist Max Weber, who originally referred to it as rational-legal leadership. The style saw heavy use in the United States after World War II as the government rebuilt the country and used a high degree of structure to maintain national stability. Transactional leadership is a leadership style focusing on supervision, organization, and performance. Compliance in subordinates is attained through reward or punishment.

Understanding transactional leadership

Weber’s theory is based on a few key assumptions:

  • Subordinates are motivated by rewards and punishments. 
  • Subordinate performance is maximized when the chain of command is definite and clear.
  • Adherence to leader instruction is the primary goal of subordinates, and
  • Subordinates must be monitored to ensure performance standards are met.

Ultimately, transactional leaders view the manager-employer dyad as an exchange.

Employees who perform well are duly rewarded, while those who perform poorly are punished.

This two-exchange process gives transactional leadership its name.

The three major dimensions of transactional leadership

During the 1990s, researchers including James McGregor Burns, Bernard M. Bass, Jane Howell, and Bruce Avolio advanced Weber’s original theory.

In so doing, they defined three major dimensions:

Contingent rewards

Transactional leaders link goals with rewards.

They clarify expectations, provide the necessary resources, and establish mutually agreed-upon objectives based on the SMART goal-setting framework.

A SMART goal is any goal with a carefully planned, concise, and trackable objective. To be such a goal needs to be specific, measurable, achievable, relevant, and time-based. Bringing structure and trackability to goal setting increases the chances goals will be achieved, and it helps align the organization around those goals.

Active management by exception

Transactional leaders actively monitor subordinate teams, anticipate problems, and employ corrective actions when required.

Passive management by exception

Lastly, transactional leaders prefer not to micromanage their teams.

They only feel the need to intervene when performance standards do not meet expectations.

Real-world examples of transactional leadership

Transactional leadership is successfully employed in many contexts, including:

Policing agencies

Policing agencies and first responder organizations that regularly deal with crises.

Coaching professional sports teams

The coaching of professional sports teams, where coaches motivate players with the reward of winning a game.

Business process management

Projects requiring linear and specific processes. These are typically seen in manufacturing and other highly regulated industries.

Organizational design

Organizations with well-defined problems and universally understood rules and regulations. 

Organizations with a preference for middle management where most activities and operations are fixed.

Sales performance

Sales, where employees are motivated to perform by meeting aggressive quotas.

Military and politics. U.S. Republican senator Joseph McCarthy and French army officer and later president Charles de Gaulle are two prime examples.

Traits of a transactional leadership

Below are some of the general traits or characteristics that describe transactional leadership

While many of these traits may be seen as undesirable by the subordinate, they are effective when applied to the appropriate situation.


Transactional leaders go through proper channels and processes when discussing new strategies or initiatives.

Failure to bring these initiatives to the attention of upper management is seen as insubordination.


Transactional leadership is characterized by maintaining the status quo.

They prefer a relatively passive management style and avoid changing internal processes or systems unless they are forced.


These leaders also make pragmatic decisions based on current constraints and the information at hand.

They very rarely employ creative or innovative thinking.

Motivated self-interest

When the transactional leader and their followers earn rewards for hitting quotas or meeting objectives, a collaborative team atmosphere is sacrificed or at the very least, underappreciated.

In many cases, subordinates are more concerned with beating their colleagues and being promoted to upper management.

Key takeaways

  • Transactional leadership is a leadership style focusing on supervision, organization, and performance. It was first described by German sociologist Max Weber after the Second World War.
  • Transactional leadership is characterized by an exchange in the manager-subordinate dyad. Subordinates are rewarded if they perform well and punished if they perform poorly.
  • Transactional leadership is present in many contexts. It is perhaps most suited to the professional sports industry, where coaches use the prospect of winning to motivate players. The style is also common in policing, emergency response, politics, sales, and manufacturing.

Key Highlights

  • Transactional Leadership Theory: Transactional Leadership is a leadership theory first outlined by Max Weber, a German sociologist. Originally known as rational-legal leadership, it gained prominence after World War II during the United States’ post-war reconstruction efforts.
  • Key Assumptions of Transactional Leadership:
    1. Motivation by Rewards and Punishments: Subordinates are motivated by the promise of rewards for good performance and punishments for poor performance.
    2. Clear Chain of Command: Well-defined hierarchy and structure maximize subordinate performance.
    3. Adherence to Instructions: Subordinates’ primary goal is to follow the leader’s instructions.
    4. Performance Monitoring: Regular monitoring of subordinates is necessary to ensure performance standards are met.
  • Exchange-based Approach: Transactional leaders view leadership as an exchange where employees who perform well are rewarded, and those who perform poorly face punishment. This two-way process forms the basis of transactional leadership.
  • Three Dimensions of Transactional Leadership:
    1. Contingent Rewards: Leaders link objectives with rewards, setting clear expectations, providing resources, and defining objectives using the SMART goal-setting framework.
    2. Active Management by Exception: Leaders actively monitor subordinates, anticipate issues, and intervene when performance deviates from expectations.
    3. Passive Management by Exception: Leaders only intervene when performance falls below established standards.
  • Applications of Transactional Leadership:
    • Emergency Response and Policing Agencies: Transactional leadership suits organizations dealing with crises and requiring structured responses.
    • Professional Sports Coaching: The reward of victory motivates players to perform at their best.
    • Business Process Management: Industries like manufacturing that rely on specific processes and regulations.
    • Organizational Design: Organizations with well-defined rules and a preference for middle management.
    • Sales Performance: Sales teams motivated by meeting sales quotas.
    • Military and Politics: Figures like U.S. Senator Joseph McCarthy and French President Charles de Gaulle.
  • Traits of Transactional Leadership:
    • Hierarchical Approach: Leaders follow proper channels and seek approval for new strategies.
    • Laissez-Faire Management Style: Preferring passive management and maintaining the status quo.
    • Pragmatic Decision-Making: Practical decisions based on current constraints, rather than innovative thinking.
    • Motivated Self-Interest: Subordinates’ focus on individual rewards can undermine teamwork and collaboration.
  • Key Takeaways:
    • Transactional leadership emphasizes supervision, organization, and performance.
    • Subordinates are motivated through an exchange of rewards for good performance and punishments for poor performance.
    • This leadership style is present in various industries, including professional sports, emergency response, and sales.

Connected Leadership Concepts

Agile Leadership

Agile leadership is the embodiment of agile manifesto principles by a manager or management team. Agile leadership impacts two important levels of a business. The structural level defines the roles, responsibilities, and key performance indicators. The behavioral level describes the actions leaders exhibit to others based on agile principles. 

Adaptive Leadership

Adaptive leadership is a model used by leaders to help individuals adapt to complex or rapidly changing environments. Adaptive leadership is defined by three core components (precious or expendable, experimentation and smart risks, disciplined assessment). Growth occurs when an organization discards ineffective ways of operating. Then, active leaders implement new initiatives and monitor their impact.

Delegative Leadership

Developed by business consultants Kenneth Blanchard and Paul Hersey in the 1960s, delegative leadership is a leadership style where authority figures empower subordinates to exercise autonomy. For this reason, it is also called laissez-faire leadership. In some cases, this type of leadership can lead to increases in work quality and decision-making. In a few other cases, this type of leadership needs to be balanced out to prevent a lack of direction and cohesiveness of the team.

Distributed Leadership

Distributed leadership is based on the premise that leadership responsibilities and accountability are shared by those with the relevant skills or expertise so that the shared responsibility and accountability of multiple individuals within a workplace, bulds up as a fluid and emergent property (not controlled or held by one individual). Distributed leadership is based on eight hallmarks, or principles: shared responsibility, shared power, synergy, leadership capacity, organizational learning, equitable and ethical climate, democratic and investigative culture, and macro-community engagement.


Micromanagement is about tightly controlling or observing employees’ work. Although in some cases, this management style might be understood, especially for small-scale projects, generally speaking, micromanagement has a negative connotation mainly because it shows a lack of trust and freedom in the workplace, which leads to adverse outcomes.

RASCI Matrix

A RASCI matrix is used to assign and then display the various roles and responsibilities in a project, service, or process. It is sometimes called a RASCI Responsibility Matrix. The RASCI matrix is essentially a project management tool that provides important clarification for organizations involved in complex projects.

Organizational Structure

An organizational structure allows companies to shape their business model according to several criteria (like products, segments, geography and so on) that would enable information to flow through the organizational layers for better decision-making, cultural development, and goals alignment across employees, managers, and executives. 

Tactical Management

Tactical management involves choosing an appropriate course of action to achieve a strategic plan or objective. Therefore, tactical management comprises the set of daily operations that support long strategy delivery. It may involve risk management, regular meetings, conflict resolution, and problem-solving.

High-Performance Management

High-performance management involves the implementation of HR practices that are internally consistent and aligned with organizational strategy. Importantly, high-performance management is a continual process where several different but integrated activities create a performance management cycle. It is not a process that should be performed once a year and then hidden in a filing cabinet.

Scientific Management

Scientific Management Theory was created by Frederick Winslow Taylor in 1911 as a means of encouraging industrial companies to switch to mass production. With a background in mechanical engineering, he applied engineering principles to workplace productivity on the factory floor. Scientific Management Theory seeks to find the most efficient way of performing a job in the workplace.

Change Management


TQM Framework

The Total Quality Management (TQM) framework is a technique based on the premise that employees continuously work on their ability to provide value to customers. Importantly, the word “total” means that all employees are involved in the process – regardless of whether they work in development, production, or fulfillment.

Agile Project Management

Agile Management
Agile Project Management (AgilePM) seeks to bring order to chaotic corporate environments using several tools, techniques, and elements of the project lifecycle. Fundamentally, agile project management aims to deliver maximum value according to specific business priorities in the time and budget allocated. AgilePM is particularly useful in situations where the drive to deliver is greater than the perceived risk.

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