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Transformational and Transactional Leadership

TOPICTransformational and transactional leadership theory

This Article is focused on criticism of the transformational leadership theory, which is compared to the transactional leadership theory.

Transformational leadership is a means by which to inspire people and redirect them to solve problems and actively work on objectives. Research demonstrates that transformational leaders‘ stimulate and inspire followers to both achieve extraordinary outcomes and, in the process, develop their own leadership capacity’ (Bassand Riggio, 2006, P.3). So, transformational leadership is focused on inspiration and commitment, rather than on rewarding workers.

The objective of the present work is to examine workers’ wishes and desires, and interests. The results of this theory are also measured with regards to inspiration and commitment, when it is not obviously so. The evaluation of the suggested theory shows that it does not provide enough evidence to improve effectiveness and the team efforts of the workers, while transactional leadership theory, on the other hand, shows excellent results in practice (see below). It might be proposed that authors have made their conclusions based on the personal approaches of some workers following this rule. In any company we can find the kind of worker that is easily inspired by top-management, and thus less by reward than by collective purpose or vision. Thus, we can say that Bass did not examine a sufficient amount of evidence to prove that transformational leadership is better than transactional leadership.

The main weakness of this theory is that it assumes too idealistic an image of companies and teams. Therefore, Bass uses a theory which might be applicable in some types of companies, such as the Big Four companies, where culture allows it. For instance, working at Deloitte, I had a department leader who motivated us and inspired us to work more and work harder. This approach worked for the first couple of months. Then each of us came to understand how the company used us, our knowledge, and our skills, by applying the Fordist notion of the ‘conveyor belt’ (Ford, 1923).  Moreover, Bass’ works were published in the late 1980s, a period that is too different from our current environment. Therefore, this theory is not applicable in modern corporations with great goals, such as the construction industry or the oil and gas industries.

A significant critical alternative solution to the problem

In contrast to this, and despite the fact, that a lot of authors positively support the transformational leadership theory, in our company, as in most serious companies in the developed world, the theory of transactional leadership is actively applied.

Epitropaki, O. and Martin, R. compare these two theories, and wrote transactional leaders ‘rely more on positional power to exercise influence and transformational leaders to motivate followers mostly via referent and personal power’. (Atwater and Yammarino, 1996, cited in Epitropaki and Martin, 2012, p. 302). In our company our Lead Project Manager always motivates us with positional rather than personal power. This has a sufficiently positive impact on workers, their motivation, corporate behaviour and productivity. So, the transactional theory seems more powerful and significant nowadays in business than the transformational theory.

Transactional leadership has significant differences to transformational leadership. As opposed to the transformational leadership model, where bosses have ‘to inspire and redirect staff to solve problems and attain ambitious objectives’ (Knights and Willmott, 2012, p. 321), ‘transactional business leaders offer financial rewards for productivity or deny rewards for lack of productivity’(Bass and Riggio, 2006,P. 3). Transactional leadership is based on reward and ‘aversive influence (management-by-exception)’(Antonakis and House, 2014, p. 26). In our company, only the reward-punishment system works because workers know what to do and how to achieve financial benefits, and workers have clear goals. Thus, there is a clear advantage to the transactional leadership, based on reward and punishment, rather than transformational leadership based on inspiration of workers.

One of the arguments for transactional leadership is that transactional leadership has three key features that positively impact on work and productivity. These features are‘ contingent rewards, active management by exception, and passive management by exception’ (Hargis and Wyatt and Piotrowski, 2011, p. 54). Both kinds of management are intended to discipline the behaviour of subordinates (Hargis and Wyatt and Piotrowski, 2011, P. 54). Active Management by exception might be characterized by the leader’s control of subordinates to ensure that agreed standards are met (Antonakis et al, 2003 cited in Hargis and Wyatt and Piotrowski, 2011, P. 55). ‘Passive Management by exception only intervene when mistakes have already occurred’(Antonakis, 2003 cited in Hargis and Wyatt and Piotrowski, 2011, P. 55). In our company all three points work clearly because all of us know our corporate goals and responsibilities. We are disciplined and controlled well, and we understand when we are liable to be punished. In summary, there are three important points in the transactional leadership theory that positively impact workers.

A good example of the positives of the transactional leadership theory is illustrated by Joyce Osland, who analysed the impact of the transactional theory on workers in Taiwan and the People’s Republic of China (PRC).Evidence demonstrates that contingent reward and punishment have significant positive impact on Chinese  employees (Osland, Bird and Oddou, 2001. P. 102). It maybe concluded that ‘contingent reward\punishment behaviours are more performance oriented than the two non-contingent reward\punishment behaviours’ (Osland, Bird and Oddou, 2012, p. 109). So, there are more positives in contingent reward and punishment.

There is a clear and significant positive impact of the transactional leadership style in our company. We can see the same results in our company, where contingent reward positively effects on  commitment and job satisfaction, rather than non-contingent punishment. Specifically, all rewards and punishments are clearly specified in our policies and in practice. For example, our Lead Project Manager was once punished missing a deadline, but he learned from the experience and thereafter worked more actively and more productively. So, transactional leadership theory is more practical and applicable in modern economies than transformational leadership theory.

Another argument in favour of transactional leadership is that it is based on the relationship of leader and follower. Hollander defines transactional leadership as a  ‘two-way influence: a social exchange in which both the leader and follower give something and get something in return’ (Hollander, 1978b cited in Furtner, Baldegger and Rauthmann, 2013, p. 14). In contrast to this, transformational leadership gives  more to top-management rather than workers, who only receive moral satisfaction with this approach. Perfect examples of this approach are the Big-Four companies, in which culture is developed toa very high level, but there are no rewards or punishments. However, there are a lot of problems in top-management in the Big-Four companies and workers often leave their work places and change jobs. So, we can see that clearly the transformational leadership theory is not applicable in modern companies.

In contrast to the transformational leadership theory, transactional leadership includes more exchange between leaders and followers. ‘Transactional leadership involves exchanges between leaders and followers designed to provide benefits to both’ (McCleskey, 2014, p. 14). ‘Leaders influence followers through contingent rewards and negative feedback or corrective coaching’ (McCleskey,2014, p. 14). In our company there is a great collaboration between leaders and workers based on the benefits of the transactional leadership approach for both sides. We know when to await a reward for over-performance and when to await punishment for bad work. In the opinion of most workers, this mechanism makes our corporate life much clearer and easier than it would otherwise be. So, with regards to our company at least, transformational leadership theory is inappropriate.

The next argument in favour of transactional leadership is that it is based on tangible relations between leaders and followers. Some leaders “realize the importance of maintaining tangible transactions with followers as a basis of effective leadership” (Waldman et al. 1990, p. 382) cited in Ewen,  Wihler, Blickle, Oerder, Ellen, Douglas, Ferris, 2013, p. 519). Leaders might choose to satisfy ‘the needs and desires of their followers through the exchange of rewards for performance’ (Burns, 1978 cited in  Ewen,  Wihler, Blickle, Oerder, Ellen, Douglas, Ferris, 2013 p. 519). Obviously, in our company this works, and it seems that transactional leadership theory is more appropriate with regard to ethics and worker relations. We exchange rewards for performance in our daily life and enjoy doing so. For example, my needs to buy a property were satisfied by an opportunity to earn a good rate mortgage contract with our partner-bank as a bonus because of my productivity last year. This means I will continue to work harder and better for my company next year. So, obviously the transactional leadership theory works better.

A further argument for the transactional leadership model is that workers know what to do in the company and how to do to achieve rewards. Transactional leaders always clarify tasks and responsibilities, ‘reward employees for achieving the specified performance levels and take corrective action when necessary’ (Bass, 1985 cited in Epitropaki and Martin, 2012, p 302). In our company this clearly works: we work in a project-based matrix company so all of our tasks are divided into projects, with the result that all workers know their responsibilities.  Moreover, we know what we have to do to receive bonuses, so, clearly the division of tasks and the reward system works well in our company. So, we can see how the transactional leadership theory positively works.

The next argument for transactional leadership is the unclear mechanism of transformational leadership. Yukl’s research shows that the ‘underlying mechanism of leader influence at work in TL[1] was unclear’ (Yukl, 1999 cited in McCleskey, 2014, p.14). So, transformational leadership theory has sufficient disadvantages in its application. For instance, top-management’s tasks in the Big Four companies are sometimes unclear, as is its mechanism of work. In fact, they always divide tasks between people, but sometimes this is done randomly without any identification of the problem; this leads to ochlocracy throughout the teams. So, clearly the transactional theory is sufficiently more practical and better. For example, in our company we can see that the leadership of our CEO and project manager in our project team are not idealized, and we are not inspirationally motivated. Our leaders work strongly according to the project-based structure of our company giving us specific tasks and setting exact goals, so we do not have to contend with the problems of ‘empirical’ leaders.  Thus, the transactional theory is significantly better than the transformational theory.

One of the important arguments against transformational leadership is worker dissatisfactionThe approach of transformational leadership may not be accepted (Kelloway, Turner, Barling, Loughlin, 2012. p. 17). In our company workers are always unhappy with either the lack of bonuses or any delay in salary. Their motivation is thereby significantly decreased, with a commitment  and impact on their performance.  So, it might not be accepted that transactional leadership leads to lesser performance, since there are strong examples to the contrary.

Clearly, transactional leadership is sufficiently more effective than transformational leadership because of the real possibility  for workers to receive  a lot of opportunities and motivation rather than having merely gaining rewards in terms of inspiration. In our company, if any employee receives a bonus we are all stimulated to work harder, to work more, and to love the company and respect top-management more. In transformational leadership theory workers ‘are expected to work longer hours and to expend greater effort […]demonstrating conformity and commitment’, yet working under such physical pressure means losing a sense of work and life balance (Tourish, 2013, p.50). So, the effectiveness seems to me the most important argument for the application of transactional leadership theory.

 So, we considered in depth the transformational and transactional leadership.

The list of literature:

Bass and Riggio, 2006. Transformational Leadership (2nd Ed). Mahwah, NJ: Lawrence Erlbaum Associates, 282 pages, $37.50 hardback. ISBN 0–8058–4761–8.

Available from [Transformational Leadership (2nd ed.) by M. B. Bass & E. G. Riggio: (2006). Mahwah, NJ: Lawrence Erlbaum Associates, 282 pages, $37.50 hardback. ISBN 0–8058–4761–8.: The Psychologist-Manager Journal: Vol 10, No 2 (] Accessed on 27.07.2021

Epitropaki and Martin, 2012. Transformational–Transactional Leadership and Upward Influence: The Role of Relative Leader–Member Exchanges (Rlmx) and Perceived Organizational Support (Pos). The Leadership Quarterly

Volume 24, Issue 2, April 2013

Epitropaki, O., and Martin, R., 2013. Transformational–transactional leadership and upward influence: The role of Relative Leader–Member Exchanges (RLMX) and Perceived Organizational Support (POS). The Leadership Quarterly, 24 (2), pp. 299-315.

Ewen, C., Wihler, A., Blickle, G., Oerder, K., Ellen III, B. P., Douglas, C., & Ferris, G. R., 2013. Further specification of the leader political skill–leadership effectiveness relationships: Transformational and transactional leader behaviour as mediators. The Leadership Quarterly, 24 (4), pp. 516-533.

Ford, H., and Crowther, S., 1923. My life and my work. Garden City, New York: Doubleday, Page & Company. pp. 289

Furtner, M. R. and Baldegger, U., and Rauthmann, J. F., 2013. Leading yourself and leading others: Linking self-leadership to transformational, transactional, and laissez-faire leadership. European Journal of Work and Organizational Psychology, 22 (4), pp. 436-449.

Hargis, M. B. and Watt, J. D., and Piotrowski, C., 2011. Developing Leaders: Examining the Role of Transactional and Transformational Leadership Across Contexts Business. Organization Development Journal,29 (3), pp. 51-66

Kelloway, E. K., Turner, N., Barling, J., and Loughlin, C., 2012. Transformational leadership and employee psychological well-being: The mediating role of employee trust in leadership. Work & Stress, 26 (1), pp. 39-55

Knights, D. and Willmott, H., & Brewis, J., 2007. Introducing organizational behaviour and management. United Kingdom of Great Britain: Cengage Learning EMEA, pp. 639

Joyce S. Osland, Allan Bird and Gary Oddou, 2012, The Context of Expert Global Leadership. Advances in Global Leadership, 7, pp. 107 – 124McCleskey, J. A., 2014, Situational, Transformational, and Transactional Leadership andLeadership Development. Journal of Business Studies Quarterly, 5 (4), Pp. 117-130

Joyce S. Osland, Allan Bird and Gary Oddou, 2012, The Context of Expert Global Leadership. Advances in Global Leadership, 7, pp.107 – 124

Tourish, D., 2013. The dark side of transformational leadership: A critical perspective. Critical perspective. London and New York: Taylor & Francis Group. 252 p.

Waldman D., Marino F. J., Avolio B. J., 1990. A multiply level investigation of Personnel Rating. Wiley Online Library. Available from [A MULTIPLE LEVEL INVESTIGATION OF PERSONNEL RATINGS – WALDMAN – 1990 – Personnel Psychology – Wiley Online Library] Accessed on 27.07.2021

[1] Transformational leadership

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