By Nick Jankel

Professional Global Keynote Speaker, Transformation & Innovation Catalyst, Leadership Theorist & Practitioner, 6 x Dyslexic Author, 3 x TV Coach, Co-Creator of Bio-Transformation®



Understanding Transactional Leadership

To compare transformational v transactional leadership, let’s start with the latter. It’s well-established and is the model used by business leaders and decision-makers for decades. It’s marked by the use of “hard” power. That is, employees are motivated by fear or greed.

For instance, leaders who focus on motivating employees through external means, like raises, paid days off, and similar perks, are focusing on the “greed” aspect. Leaders who focus on motivating employees through fear use write-ups and punishment as goads to change performance.

The problem is that neither of these methods works in today’s world. Employees are more empowered than ever and will look elsewhere if a leader uses the wrong type of motivation. This method drives increased turnover, increases operating costs, and can mean delays in project completion due to the need to replace outgoing team members, train replacements, and get them up to speed.

Another problem with transactional leadership is that these leaders tend to “manage by exception.” That is, only the worst-performing and best-performing employees are actively managed. Everyone else is deemed to be doing “well enough” and left alone. That can be demoralizing for many people. It also eliminates professional growth through guidance and fails to build strong relationships between team members and leaders.

 

Exploring Transformational Leadership

Now it’s time to compare transactional to transformational leadership. While there are a handful of similarities between transformational and transactional leadership, you’ll find that the two methods are relatively dissimilar.

Transformational leadership focuses on using influence to encourage better performance, employee buy-in, and organization-wide transformation rather than punishments for poor performance or greed-based incentives.

These leaders lead by example, demonstrate high ethical and moral standards, and connect with employees on a deep, intrinsic level. They’re able to get team members excited about being part of the organization and about the changes that the organization wants to make in the world.

In addition, transformational leaders focus on inspired motivation. That is, they motivate their teams by creating a compelling vision of the future, setting clear expectations, and fostering a sense of shared purpose. It’s about creating strong connections between people through shared goals and experiences.

 

The Key Differences Between Transactional and Transformational Leadership Styles

As you can see, transactional and transformational leadership styles are not all that similar. The key differences include:

  • Motivation – Transactional leadership focuses on external motivation, while transformational leaders encourage intrinsic motivation by inspiring employees to perform their best out of a genuine desire to contribute to a shared vision, sense of belonging to a greater whole, and a belief in the purpose of the organization to better the world.
  • Goals – Transactional leadership is usually focused on short-term goals rather than a long-term vision. Transformational leadership is more about seeing the bigger picture than it is about immediate task completion. The overarching idea of transformational leadership is sustained growth and development.
  • Emotional Connections – Transactional leaders may have little to no real connection with the people they lead. They’re there to do a job and nothing more. Transformational leaders, on the other hand, focus on building strong emotional connections that help make others feel interconnected, valued, and supported and unleash vital relational energy that unlocks discretionary effort, trusted teamwork, and creative ideas.
  • Creativity and Innovation – Transactional leadership does not foster innovation and stymies creativity. That’s because both innovation and creativity require a break from conventional thinking and best practices, which challenges the norms and behaviors of transactional leadership. Transformational leadership, on the other hand, encourages the exploration and out-of-the-box thinking necessary for creativity and true innovation.
  • Ability to Adapt to Change – We live in uncertain times, and the rate of change is only accelerating. Climate change, generational expectations from employers, social justice…these are just a few examples of what leaders must adapt to handle. Transactional leadership is unable to adjust rapidly (or at all in some cases). Transformational leaders are better equipped to guide organizations through turbulent periods of change and uncertainty, and their teams can rise to the challenge.

 

Transactional or Transformational – Which Is the Way Forward?

Organizations must be able to chart a way forward to enjoy stability and success. Transactional leadership offers cold comforts and seeming simplicity, but in fast-changing environments, tends to fail rapidly to deliver. However, transformational leadership offers the agility, inspiration, support, and motivation that team members need to feel deeply connected with the organization’s purpose, vision, mission, culture, and community. It offers the ability to navigate change and thrive in the face of challenges.

 

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