Transactional leadership

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Transactional leadership or transactional management is a part of a style of leadership that focuses on supervision, organization, and performance; it is an integral part of the Full Range Leadership Model. Transactional leadership is a style of leadership in which leaders promote compliance by followers through both rewards and punishments. Through a rewards and punishments system, transactional leaders are able to keep followers motivated for the short-term. Unlike transformational leaders, those using the transactional approach are not looking to change the future, they look to keep things the same. Leaders using transactional leadership as a model pay attention to followers' work in order to find faults and deviations.

This type of leadership is effective in crisis and emergency situations,[1] as well as for projects that need to be carried out in a specific way.

Textbook edit: Transactional Leaders[edit]

"Adhering to the path-goal theory, transactional leaders are expected to do the following:

  • "Set goals, articulate explicit agreements regarding what the leader expects from organizational members and how they will be rewarded for their efforts and commitment, and provide constructive feedback to keep everybody on task" (Vera & Crossan, 2004, p. 224).
  • Transactional leaders focus on increasing the efficiency of established routines and procedures and are more concerned with following existing rules than with making changes to the structure of the organization.
  • Thus, they operate most effectively in organizations that have evolved beyond the chaotic, no-rules stage of entrepreneurial development that characterizes so many new companies.
  • Transactional leadership establishes and standardizes practices that will help the organization reach maturity, emphasizing setting of goals, efficiency of operation, and increase of productivity. "

Maslow's hierarchy of needs[edit]

Within the context of Maslow's hierarchy of needs, transactional leadership works at the basic levels of need satisfaction, where transactional leaders focus on the lower levels of the hierarchy. Transactional leaders use an exchange model, with rewards being given for good work or positive outcomes. Conversely, people with this leadership style also can punish poor work or negative outcomes, until the problem is corrected.[2] One way that transactional leadership focuses on lower level needs is by stressing specific task performance.[3] Transactional leaders are effective in getting specific tasks completed by managing each portion individually.

Transactional leaders are concerned with processes rather than forward-thinking ideas. Transactional leaders are generally split into three dimensions: contingent reward, management-by-exception: active, and management-by-exception: passive.[4] The type of leader who focuses on contingent reward, also known as contingent positive reinforcement, give rewards when the set goals are accomplished on-time, ahead of time, or to keep subordinates working at a good pace at different times throughout completion. Contingent rewards are also given when the employee engages in any desired behavior. [5] Often, contingent punishments are handed down on a management-by-exception basis, in which the exception is something going wrong.[6] Within management-by-exception, there are active and passive routes. Management-by-exception: active means that the leader continually monitors each subordinate's performance and takes immediate corrective action when something goes wrong.[7] Management-by-exception: passive leaders do not monitor employee performance and wait for serious issues to come up before taking any corrective actions.[8] In addition to the three dimensions of leadership above, another form of transactional leadership is recognized, the laissez-faire dimension. Laissez-faire leadership indicates a lack of leadership and a complete hands-off approach with employees. [9]

With transactional leadership being applied to the lower-level needs and being more managerial in style, it is a foundation for transformational leadership which applies to higher-level needs.[6]


Transactional leaders use reward and punishments to gain compliance from their followers. In any case, transactional leaders are not concerned with the well-being of the workers as compared in transformational leadership. They are extrinsic motivators that bring minimal compliance from followers. They accept goals, structure, and the culture of the existing organization. Transactional leaders tend to be directive and action-oriented. Transformational leaders want followers to achieve intrinsic motivation and job fulfillment..

Transactional leaders are willing to work within existing systems and negotiate to attain goals of the organization. They tend to think inside the box when solving problems. On the other hand, transformational leaders are pragmatic and think outside the box when solving problems

Transactional leadership is primarily passive. On the other hand, transformational leadership is interactive and inspiring.. The behaviors most associated with this type of leadership are establishing the criteria for rewarding followers and maintaining the status quo.[10]

The overall effectiveness of transactional management is that it can be very practical and directive. Through transactional management, an explicit measure of success can be discovered through the consistent monitoring of managers. The model is also viewed as very straightforward and understandable due to the simple reward and punishments system.

Within transactional leadership, there are two factors, contingent reward and management-by-exception. Contingent reward provides rewards for effort and recognizes good performance. Management-by-exception maintains the status quo, intervenes when subordinates do not meet acceptable performance levels, and initiates corrective action to improve performance.[10]

Transactional vs. transformational leadership[edit]

Transactional and transformational are the two modes of leadership that tend to be compared the most. James MacGregor Burns distinguished between transactional leaders and transformational by explaining that: transactional leaders are leaders who exchange tangible rewards for the work and loyalty of followers. Transformational leaders are leaders who engage with followers, focus on higher order intrinsic needs, and raise consciousness about the significance of specific outcomes and new ways in which those outcomes might be achieved.[11] Transactional leaders tend to be more passive as transformational leaders demonstrate active behaviors that include providing a sense of mission.

Transactional VS. Transformational (Odumeru & Ogbonna, 2013)
Leadership is responsive Leadership is proactive
Works within the organizational culture Works to change the organizational culture by implementing new ideas
Employees achieve objectives through rewards and punishments set by leader Employees achieve objectives through higher ideals and moral values
Motivates followers by appealing to their own self-interest[12] Motivates followers by encouraging them to put group interests first [13]
Management-by-exception: maintain the status quo; stress correct actions to improve performance.[10] Individualized consideration: Each behavior is directed to each individual to express consideration and support.[10]
Intellectual stimulation: Promote creative and innovative ideas to solve problems.[10]

Theory Y and Theory X[edit]

Douglas McGregor's Theory Y and Theory X can also be compared with these two leadership styles.Theory X can be compared with Transactional Leadership where managers need to rule by fear and consequences. In this style and theory, negative behavior is punished and employees are motivated through incentives.[14] Theory Y and Transformational Leadership are found to be similar, because the theory and style supports the idea that managers work to encourage their workers. Leaders assume the best of their employees. They believe them to be trusting, respectful, and self-motivated. The leaders help to supply the followers with tool they need to excel <(Odumeru & Ogbonna, 2013)>


Coaches of athletic teams provide one example of transactional leadership. These leaders motivate their followers by promoting the reward of winning the game.[15] They instill such a high level of commitment that their followers are willing to risk pain and injury to obtain the results that the leader is asking for.

Another example of transactional leadership is former U.S. Senator from Wisconsin, Joseph McCarthy, and his ruthless style of accusing people of being Soviet spies during the Cold War. By punishing for deviation from the rules and rewarding followers for bringing him accused communist infiltrators, McCarthy promoted results among followers.[16] This leadership style is especially effective in crisis situations, and another example of this type of leadership was Charles de Gaulle. Through this type of reward and punishment he was able to become the leader of the free French in a crisis situation.[16]


  1. ^ Odumeru, James A; Ogbonna, Ifeanyi George (2013). "Transformational vs. Transactional Leadership Theories: Evidence in Literature". International Review of Management and Business Research. 2 (2): 355–361. ISSN 2306-9007.CS1 maint: multiple names: authors list (link)
  2. ^ Bass, Bernard (2008). Bass & Stogdill's Handbook of Leadership: Theory, Research & Managerial Applications (4th ed.). New York, NY: The Free Press. pp. 50, 623.
  3. ^ Hargis, Michael B.; John D. Wyatt; Chris Piotrowski (1 September 2011). "Developing Leaders: Examining the Role of Transactional and Transformational Leadership Across Contexts Business". Organization Development Journal. 29 (3): 51–66.
  4. ^ Aamodt, M. G. (2016). Industrial/organizational psychology: an applied approach (8,2). Australia: Cengage Learning.
  5. ^ Aamodt, M. G. (2016). Industrial/organizational psychology: an applied approach (8,2). Australia: Cengage Learning.
  6. ^ a b Bass, Bernard (1985). Leadership and Performance Beyond Expectations. New York, NY: The Free Press. pp. 14, 121–124. ISBN 978-0-02-901810-1.
  7. ^ Mulder, P. (2016). Transactional Leadership. Retrieved [insert date] from ToolsHero:
  8. ^ Mulder, P. (2016). Transactional Leadership. Retrieved [insert date] from ToolsHero:
  9. ^ Essays, UK. (November 2013). Transformational Transactional And Laissez Faire Leadership Management Essay. Retrieved from
  10. ^ a b c d e Hackman, Johnson, Michael, Craig (2009). Leadership: A Communication Perspective. Long Grove, IL: Waveland Press. pp. 102–104. ISBN 978-1-57766-579-3.
  11. ^ Hay, Ian. "Transformational Leadership: Characteristics and Criticisms". Retrieved 25 March 2012.
  12. ^ Hatcher, Tim (2002). Ethics and Hrd: A New Approach to Leading Responsible Organizations. p. 141. ISBN 9781459608962. Retrieved 25 March 2017.
  13. ^ Hatcher, Tim (2002). Ethics and Hrd: A New Approach to Leading Responsible Organizations. p. 142. ISBN 9781459608962. Retrieved 25 March 2017.
  14. ^ {{cite web| <(Odumeru & Ogbonna, 2013)
  15. ^ Carthen, Jason B. "War, Warrior Heroes, and the Advent of Transactional Leadership in Sports Antiquity". Archived from the original on 2012-03-16. Retrieved 2012-03-18. Cite uses deprecated parameter |deadurl= (help)
  16. ^ a b Dems, Kristina. Edwards, Ginny (ed.). "7 Leadership Styles & Famous Examples". Retrieved 2012-03-18.
  17. ^ Turner, N.; Barling, J.; Epitropaki, O.; Butcher, V.; Milner, C. (2002). "Transformational leadership and moral reasoning". Journal of Applied Psychology. 87 (2): 304–311. doi:10.1037/0021-9010.87.2.304. PMID 12002958.

Odumeru, J., & Ogbonna, I. (2013). Transformational vs. transactional leadership theories: Evidence in literature, International Review Of Management And Business Research, 2(2), 355-361. Retrieved from

  • Schultz & Schultz, Duane (2010). Psychology and work today. New York: Prentice Hall. pp. 164. ISBN 0-205-68358-4.