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.
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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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.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
