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:

  1. 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.
  2. Active management by exception – transactional leaders actively monitor subordinate teams, anticipate problems, and employ corrective actions when required.
  3. 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 and first responder organizations that regularly deal with crises.
  • The coaching of professional sports teams, where coaches motivate players with the reward of winning a game.
  • Projects requiring linear and specific processes. These are typically seen in manufacturing and other highly regulated industries.
  • 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, 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.

  • Hierarchical – 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.
  • Laissez-faire – 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.
  • Practicality – 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.

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