“Good leaders make people feel that they’re at the very heart of things,
not at the periphery. Everyone feels that he or she makes a difference
to the success of the organisation. When that happens people feel
centred and that gives their work meaning.”
Concepts of Transformational and Transactional Leadership differ in regards to the dynamics used between leaders and their followers to produce effective work relationships and greater productivity.
Transactional leaders approach followers with an eye to exchange one thing for another. The nature of the transaction may vary from organisation to organisation, dependent on the nature of the work to be done and the historic relationship between leaders and followers. It can involve pay for work done and bonuses for extra effort. My son, for instance, at one stage worked for a company that paid a basic hourly rate for 80% effort and bonuses for greater effort (between 80 and 110% effort).
A transactional leader will interact with followers in one or more of three ways to affect a series of exchanges or implicit contracts:
- The transactional leader recognises what it is that followers want from work; and helps them to see that those wants will be satisfied if their performance warrants it.
- The transactional leader exchanges rewards and the promise of rewards in return for effort expended by the follower.
- The transactional leader is responsive to the self-interest of the follower if it can be met by getting the job done.
Essential components of transactional leadership are:
Contingent Reward: an active exchange relationship between leader and follower whereby rewards are contingent upon the achievement of some task or fulfilment of some obligation.
Management-by-Exception: involves a process of corrective criticism, negative feedback and negative reinforcement. It takes two forms:
Passive – involves a transaction relationship whereby the leader only intervenes if something is wrong, or standards or results are not achieved. This is a hands-off approach to leadership. However, it does not involve any positive reinforcement for work well done, except for the transaction that has been agreed upon.
Active – involves a transaction relationship whereby the leader closely watches followers for potential mistakes or rule violations and then takes corrective action. This is a more hands-on approach. However, it does not seek to provide positive reinforcement, but assumes that the workers will default on their part of the agreement and waits for that default to occur.
An example of transactional process can be seen with the Australian unions and award system. It defines the basic or minimum level of transaction that is authorised to take place. This does not necessarily prevent the use of transformational leadership dynamics, but does make it a more complex process.
A transformational leader also recognises the needs of a potential follower, but he or she goes further, seeking to satisfy higher needs to engage the full person of the follower.
These leaders inspire followers to transcend their own self-interests for the good of the organisation, and are capable of having a profound and extraordinary effect on their followers. They do this by focusing the follower on the higher collective purpose, mission, or vision of the organisation. This results in a transformation of the follower. To do this such leaders:
- pay attention to the concerns and developmental needs of individual followers;
- change followers’ awareness of issues by helping them to look at old problems in new ways;
- raise the follower’s level of awareness and consciousness about the importance and value of proposed outcomes and ways to achieve them;
- excite, arouse and inspire followers to put out extra effort to achieve group goals;
- inspire followers to transcend their own self-interest for the sake of the organisation or team;
- enable followers to understand the nature of their needs and thereby alter or expand the follower’s perception of their portfolio of needs;
- challenge followers to consider their longer-term needs to develop themselves, rather than their needs of the moment.
This transcendence calls the follower to seek the long-term satisfaction of his or her higher needs at the cost of a short-term suspension of his or her lower needs.
Whilst transactional leadership results in expected outcomes, transformational leadership results in performance that goes well beyond what is expected. The followers of transformational leaders find inspiration and encouragement to give far more of their potential and resources than can ever be achieved through transactional leadership.