Transactional vs. Transformational Leadership | What’s the Difference?

Numerous forms of leadership exist. No two leaders are identical, yet leaders with wildly diverse styles can achieve similarly outstanding achievements.

While modern leaders exhibit a set of attributes, the majority ultimately fall into two broad categories: transactional leadership vs transformational leadership. As identified in James MacGregor Burns’ book Leadership, these significant styles were once seen as mutually exclusive. Today, however, scholars believe that leadership exists on a spectrum. Thus the need to comprehend their similarities and differences.

This post will focus on transactional vs transformational leadership. Read on!

Transactional Leadership

Transactional leadership is defined by a rigid framework that follows strict standards to retain a high level of control.

This type of leadership has traditionally dominated both the corporate and government worlds. However, organisations are increasingly loosening off on this approach.

What Are the Characteristics of a Transactional Leader?

Transactional leaders value hierarchy and accountability within their organisations and know that everyone has a specific duty to play. Typically, with a strong personality, these leaders can make difficult decisions on the fly and create comprehensive workflows to execute complex plans.

While control is essential in transactional leadership, these leaders are happy to let processes run smoothly as long as everything goes according to plan. In an unfavorable outcome, they’re more inclined to intervene.

While transactional leadership is frequently criticised in today’s more collaborative workplace, it has several advantages. It yields the best outcomes in time-sensitive scenarios or situations, especially when creativity is not required. Nonetheless, too much of it can lead to a stagnating workforce.

What Is Transactional Leadership?

Transactional leadership is most common in the army, where each member has a distinct title and responsibility—stepping outside of bounds can have serious consequences. While oppressive to outsiders, this complete control enables better control in crises where forces must be deployed quickly.

Although he wasn’t strictly transactional, Steve Jobs falls under this leadership category. It is alleged that he led with an iron fist as the creator of Apple’s most influential ideas and products. His quest for control is evident in the design of top Apple products, which operate within a strict framework.

Transformational Leadership

While transactional leaders want to keep things the same, transformational leaders want to change things. This leadership style stresses creativity based on self-motivation and trust.

Transformative leadership leans on the value of authentic passion rather than extrinsic rewards. It assumes that team members perform best when inspired by broad concepts or beliefs. The leader sees themselves as an inspiration, not an enforcer.

John Gagliardi, a legendary college football coach, is a transformational leader. He didn’t yell or threaten players. His teams excelled despite not attending harsh training camps. Most importantly, he allowed the quarterback to call the plays, displaying a confidence level rarely seen in sports.

Scholars also classify Oprah Winfrey as a transformative leader because of her vision and capacity to revolutionize every activity she embarks on.

What Qualifies as a Transformative Leader?

This leadership style is defined by four I’s, which include the following:

Idealised Influence

It’s all about modeling. Does the leader live up to their words and lead by example? Do their actions match their stated goals? Are their actions consistent?

The leader must behave as a role model for the intended high-performance behaviors so that their followers become involved with the vision and join them on the ride.

Inspirational Motivation

This entails bringing your team along with you. It’s all about encouraging and inspiring your employees to win their hearts and minds. You must construct a compelling vision that is more than just an individual work.

It involves getting the most out of each of your employees via personal development, setting challenging objectives and expectations, and encouraging them in all they do to reach their full potential.

Intellectual Stimulation

Intellectual stimulation entails upending the status quo. This includes coming up with new ideas and developing innovative processes, goods, and services to propel the company forward.

Creativity is essential in this process. It entails thinking “beyond the box” and having a growth mentality to see opportunities and make them if they do not exist.

Individualised Consideration

Lastly, this is all about treating each person uniquely according to their life needs, desires, and anxieties.

It involves tuning into the world through the eyes of your people so you can fully grasp what they need and how to adjust your approach to get the most out of each individual.

Leadership Styles: transactional and transformational leader

The difference between transformational leadership and transactional leadership are as follows

• Transformational leadership solves difficulties before they arise, whereas transactional leadership responds to problems as they occur.
• Transactional leaders operate within the existing company culture, but transformational leaders stimulate new ideas through reshaping the organisational culture.
• Transformational leaders seek to achieve results from their staff by keeping them invested in initiatives that result in an internal high order bonus system; transactional leaders penalise and reward under the organisation’s norms.
• Transformational leadership appeals to organisational concepts and team interests; transactional leadership appeals to employees’ self-interest in obtaining their benefits.
• Transformational leadership is more closely aligned with what is frequently known as leadership, while transactional leadership is more aligned with mainstream management concepts.
• Another difference between transactional and transformational leadership is that transformational leaders demonstrate inspired learning, the capacity to take calculated risks, make difficult decisions, entertain novel ideas, and are adaptive, whereas transactional leaders prioritise performance and adhering to organisational standards.

Bottom Line

Perhaps, based on the difference between transformational and transactional leadership many would say that transformational leadership is superior. Nevertheless, because of the success of transactional leadership—see Apple’s success—it isn’t easy to write it off. Besides, some scholars claim that transactional leadership is better than the other one. 

Undoubtedly, both have their advantages and disadvantages. While inquisitiveness and trusting relationships contribute to a more pleasant work environment and more opportunities for innovation (in transformational leadership), rules and prizes (in transactional leadership) can also be effective motivators. In the end, the most influential leaders will identify and entirely use unique sets of attributes that best match their objectives.

Enhance your leadership capabilities through LeadershipHQ’s development programs where you can discover leadership approaches that fit your needs. Book a FREE discovery session!

By Sonia McDonald

Founder and Managing Director of Leadership HQ and McDonald Inc. Leadership coach, entrepreneur, CEO and author. 

Sonia McDonald is changing the face of leadership across the globe. She believes we should lead with kindness and courage, from the heart, and is known for her mantra ‘Just Lead’. She leads by example in all these areas and through her transformational coaching, leadership training programs and cultural transformation for organisations and encourages others to do the same. Sonia has helped thousands of people on their leadership journey to become the best version of themselves and in turn, inspire and bring out the best in others.

Sonia is a founder and CEO of McDonald Inc., LeadershipHQ and Global Outstanding Leadership Awards and the newly launched Courage Conference. For more than 25 years, Sonia has been on the front lines of leadership and she is beyond committed to her mission around building a world of great leaders.

She has held leadership positions worldwide and through experience, research and study come to realise what it takes to be a truly great leader. She has been recognised by Richtopia as One of the Top 250 Influential Women across the Globe and Top 100 Australian Entrepreneurs.

Sonia has an ability to speak bravely and authentically about her own development as a leader, personal and career challenges in a way which resonates with her audience. She is a leading coach, an award-winning published author of newly released First Comes Courage, Leadership Attitude and Just Rock It! and has become an in-demand keynote speaker on leadership, kindness and courage.

Sonia has become recognised for her commentary around the topic of leadership, kindness, empathy and courage as well as building outstanding leadership across the Globe.