Transactional Leadership Definition

The fundamental requirement for this style of leadership is that a 'transaction' exists between the leader and the team members. This transaction has two aspects:

1. It involves the organization paying wages to team members in return for effort and compliance.
2. The leader/manager has the right to discipline an employee if their work does not meet an appropriate standard.

The power of transactional leaders comes from their formal authority and level of responsibility within the organization. Such leaders are primarily concerned with establishing the criteria for rewarding team members for good performance.

This is referred to as 'Contingent Reward,' e.g. praise. Team members are rewarded for their efforts - for example for completing set goals on time, or in recognition of handling a difficult situation well.

Transactional leadership

In situations where the team member's performance is below the acceptable standard, you will need to apply appropriate sanctions. This is known as 'Management by Exception.' This corrective action can either be active or passive. If you adopt an active sanction then you are continually monitoring the team member's performance and correcting any errors as they occur. Alternatively you can use a passive sanction where you wait for issues to come up before fixing the problems.

If you adopt this style of leadership then you will focus your activities on the processes of supervision, organization, and group performance. You will be concerned with efficiency rather than forward-thinking ideas. You will have to be comfortable with being authoritative and always telling your members what to do.

This type of leadership makes certain assumptions about your team. Firstly, that they are only motivated by reward or punishment; they have no self-motivation. Secondly, that they know from the outset that they must obey your instructions without question and expect to be closely monitored and controlled.

Equipped with these facts you will be aware that this style of leadership is only appropriate in certain situations.

Situations where transactional leadership is appropriate

The situations where transactional leadership is appropriate are where:

  • Decisions must be made quickly and without dissent
  • Subordinates do not have sufficient knowledge to contribute to decisions
  • The work involves safety risks and the leader will be held accountable
  • The work is routine and there is no scope for creativity or innovation

If you find yourself in such a situation then you may want to adopt this style of leadership.

There are two other leadership styles that you should be familiar with: Transformational Leadership, and Situational Leadership.

Applied to the Team Examples
Looking at our three example teams you can easily ascertain where transactional leadership will be appropriate and where it is counter-productive to the team's objective.

Development Team
The nature of this team requires its members to use their own knowledge and skills to solve the issues raised during the development cycle of the new web-based systems. They are also by character self-motivated and are expected to and want to work independently of the team leader in how they deliver the tasks and goals they have been set by the project manager.

As project manager you also expect considerable input into discussions as part of the decision-making process from all team members, often seeking forward-thinking and innovative approaches to problems you come across during the development process.

These characteristics of the project team make it impossible for you as manager to adopt a transactional style leadership.

Customer Support Team
As Customer Support Manager you may find that many of the benefits of the Transactional Leadership style suit your team structure. The nature of the work is often repetitive and the vast majority of tasks require the members to follow a predefined path, which leaves little or no room for creativity and innovation.

Your main focus is to ensure that an acceptable level of service is maintained and you will be continually monitoring the call statistics. By its very nature of continual observation you are adopting 'active management by exception' in your approach to leadership.

Throughout the day you, as well as the team members, can see the total number of calls received and how well you are meeting your targets. The software enables you to closely monitor and control your team. It also reports on how well each member is executing their role, so you are quickly able to identify anyone who is under-performing and praise those who are working well.

Consistent under-performers usually leave the team of their own accord quite quickly, so sanctions do not often have to be instigated. This is because other team members will be constantly aware of a poor performer and may react negatively towards this person, as they have to work harder to compensate for a poor performer; if they don't, the whole team suffers. Motivation comes as a result of not wanting to let the team down rather than any personal sense of achievement.

This is one of the reasons why most call centers having a high rate of absenteeism and staff turnover. The latter also reflects the fact that the Customer Support Team is one of the few workgroups within the organization that will actually dismiss people during their probationary period if the team leader feels that they are not able to perform. It can also indicate that some people resent being treated in an autocratic way.

One reason for these problems in customer support teams arises from the stressful and unrewarding nature of the job. As manager you can try to counterbalance this by providing an opportunity for some autonomy by letting the members decide who works which shifts (within strict guidelines to maintain service quality) and who has what break and lunch times. This small freedom in an otherwise highly structured environment can do a lot to boost morale.

Transactional leadership and the example teams

Steering Team
Since all members of the Steering Team have been selected for their ability to contribute their knowledge to benefit the investigation and the organization, they are by their very nature self-motivated and innovative thinkers and decision makers.

The responsive nature of the transactional leader is out of place in this type of team, and in some instances as manager of the Steering Team you may need to use transactional leadership to impose a decision on a relatively minor issue to avoid wasting time trying to reach a consensus. This Team Leadership Checklist reminds you of the behaviors and attitudes that you need to be a successful leader.

You may also be interested in:
Team Leadership Theories | Leadership Theories and Management | Different Leadership Styles | Transformational Leadership | Situational Leadership | Leadership Continuum.


Key Points

  • The power of transactional leaders comes from their formal authority and level of responsibility within the organization.
  • If you adopt this style of leadership then you will focus your activities on the processes of supervision, organization, and group performance.
  • The situations where transactional leadership is appropriate are where: decisions must be made quickly and without dissent, subordinates do not have sufficient knowledge to contribute to decisions, the work involves safety risks and the leader will be held accountable or where the work is routine and there is no scope for creativity or innovation.
More Free eBooks

Today's Top Picks for Our Readers:
Recommended by Recommended by NetLine

Leadership Skills eBooks

Top Trending Free eBooks