Leadership is central to both individual behaviour and organisation wide performance and culture. The leaders within an organisation have the greatest ability to influence the culture, so much so organisational culture can often take on the leaders’ personality. How leaders react to problems, resolve crises, reward and punish followers are all relevant to an organisations culture as well as how the leader is viewed internally by followers and externally by clients and customers. Leadership can be differentiated from power, status, authority or management and any person at any level of the organisation can display leadership. John Maxwell’s model suggests there are five stages or levels of leadership that do not necessarily correlate to organisational hierarchy. Level One – The Boss; Level Two – The Coach; Level Three – The Producer; Level Four – The Provider; and Level Five – The Champion (1993), each with accompanying characteristics. For example, the boss dictates using power and control and leadership is not conferred by followers, while the coach commands through action and example and leadership is conferred. The producer is admired for what they can contribute to the organisation and people follow them for this ability, despite them being self-centered, while the provider is ‘others centered’ or a servant leader and gives, helps, encourages and supports others to achieve. The champion seems to be a status reserved for only a few leaders who have spent years growing people and organisations. Leadership is a process where leaders influence followers’ outcomes and engagement through their impact on the work environment. Transactional and transformational leadership are well researched examples of this process. Burns (1978) first introduced the concepts of transactional and transformational leadership and Bass (1985) extended these ideas which now assists our understanding today. This article looks closely at these two different leadership styles and asks whether these models are still relevant for the future of work.
Transactional Leadership
Transactional leadership focuses on contractual exchanges and interactions. Features of transactional leadership are: contingent reward, active and passive management by exception. A transactional leader will set direct expectations explicitly in employment agreements, codes of conduct, and benefit systems in exchange for reward or criticism and punishment for lack of achievement. Management by exception puts greater emphasis on corrective actions for failings and errors identified. Interactions or exchanges between employees in a transactional culture are deals that each have an associated price attached. Commitments are short term and self-interest is stressed. The organisation operates like a marketplace where reward is contingent on performance, people work independently from each other and cooperation requires negotiation. The organisation mission, vision and value is not visible and creativity and risk taking may be suppressed in this type of culture. Transactional leadership is a common and effective leadership style and does have a number of strengths, such as ensuring objectives are clear which can motivate followers to meet (but often not exceed) expectations, maintaining accountability through sanctions for non-conformance, and ensuring order, consistency and discipline which is critical for environments where errors must be minimized. This is helpful in a crises or in high hazard environments where the deviation to standards and procedures must be monitored and addressed immediately.
Transformational Leadership
Central to the concept of Transformational Leadership is the idea of charisma characterised by the four I’s: Idealised influence, inspirational motivation, intellectual stimulation, and individualised consideration. Idealised influence comes from leaders placing followers needs above their own and operating in a consistent, values based way that promotes trust and confidence. Inspirational motivation comes from leaders providing work that has meaning and purpose and develops each person. Followers are positively motivated when they are treated positively and respond with increased effort and performance. Intellectual stimulation exists where leaders stimulate creativity and innovation empowering followers to solve problems and operate autonomously. Individualised consideration is where close leader / follower interaction with a focus around mentoring and development can promote positive perceptions, trust and commitment. Transformational leaders tend to believe that people are trustworthy and purposeful, everyone’s unique contribution should be valued, and complex problems can be solved at lower levels of the organisation through empowerment and creativity that is aligned to mission, vision, principles, values and purpose. This encourages a culture that supports growth and change rather than maintaining the status quo. Learning, improvement and personal development is encouraged and helps employees achieve self-actualisation, increased performance, satisfaction and commitment.
Model for the Future
Burns (1978) proposed transactional and transformational leadership sat at polar opposite ends of a spectrum, yet Bass (1985) viewed the styles as complementary and found those who scored high on transformational leadership also scored high on transactional leadership suggesting these leadership constructs are not independent. Fundamentally, both styles are intended to encourage followers towards a particular outcome, goal or target through a process of influence and can be effective in certain contexts and cultures. Aside from this similarity, there are a number of differences with these styles:
- Transactional leadership is a mutual exchange between the leader and the follower for the benefit of the organisation, where transformational leadership goes beyond this by appealing to and supporting the individual needs of the follower also.
- Transactional leadership is focused on procedures, rules and compliance while transformational leadership goes beyond this and focuses on vision and mission and connecting employees to a higher purpose.
- Transactional leadership invites the follower to meet expectations, whereas transformational leadership inspires followers to go beyond and exceed expectations.
- Transactional leadership tends to focus on maintaining the current status quo, whereas transformational leadership promotes change.
- Transactional leadership is task focused and directive whereas transformational leadership is humanistic and empowering.
The challenge for leaders is to know which style to apply in what circumstance to influence the required response from a follower. Typically, this involves understanding the organisational culture, and other factors that might influence a person’s response such as demographics, ability or motivation. Insightful leaders are tuned into these signals in the environment and are self-aware enough to adjust their approach in different situations. While popular, transformational leadership does have some conceptual limitations, as its origins were in political influence and it may not be universally applied. Some authors argue the transformational leadership concept is too idealogical and the four I’s do not have an exponential additive effect. Arguably while both styles are effective and leaders often apply a mixture of both, transformational leadership is believed by a number of authors to be more effective and that the most effective leaders use transformational leadership more frequently than transactional. Engagement in the future of work relies on leaders connecting people to a higher purpose in order to inspire the right behaviours. How to achieve this is the number one challenge for leaders wanting to succeed as the world of work continues to change.
There are many leadership styles. Of these two, which style is more effective in your organisation and why? Do we need a good mixture of both? How do you educate leaders at all levels to utilise the appropriate style? I would love to hear from you … https://www.linkedin.com/in/lisa-oakley-94b876a