Transformational vs Transactional Leadership

Leadership takes many forms. No two leaders look exactly alike, and yet, radically different styles can produce impressive results.

While a wide variety of qualities set modern leaders apart, most ultimately fall under one of two main categories: transactional and transformational. Identified in James MacGregor Burns’s book entitled Leadership, these influential styles were initially regarded as mutually exclusive.

A transactional leader is someone who follows a routine or set of rules. They focus more on sticking to the procedure to achieve results, rather than trying new ideas or innovating. The term “transactional” comes from the fact that these types of leaders are looking to motivate by exchanging performance for rewards or discipline. A transactional leader will set a list of criteria for their employees or team members to meet, then judge them based on how well they meet those criteria.

Transformational leaders are more focused on the future and embrace creativity. A transformational leader will encourage their subordinates to innovate and try new things, with the ultimate goal of creating future success for the organization. With this style of leadership, you are less focused on the day-to-day operations and short-term goals, but rather on long-term success.

Whereas a transactional leader may micro-manage the work of an employee, transformational leaders will give them more room to operate. This allows employees to take on larger responsibilities and use more of their creativity. In turn, the employee feels like they have a larger stake within the organization.

A transformational leader wants each team member to be their best so that they can ultimately help the organization improve. They do this by motivating the team member not through money or punishments, but by getting them to see themselves as a part of something bigger.

It’s tempting to debate which style of leadership is better, but that misses the point. Both styles are valid, and what matters is context. Different management styles are suited to different situations. Some organizations need rigidity and a clear chain of command. Others work best in a fluid environment where leadership sets an example and establishes goals. Leadership styles that work for Google won’t work for the military — and vice versa.

In fact, both types of leadership styles might be needed in the same organization to counterbalance each other and help achieve growth and development goals. Transactional leaders make sure the team is running smoothly and producing results today, while transformational leaders spur innovation and look toward tomorrow. In either case education and training can be an effective tool in advancing one’s abilities as a leader.

What leadership style does your company need?