In 1947, Max Weber described a number of different leadership styles that could be viewed within the confines of corporate management. One of those leadership styles was called “transactional leadership.”
The transactional leadership style is based on a process that involves controlling, organizing, and planning employee responses to specific situations. They create rewards and consequences which apply to each worker based on the decisions that are made. Following the rules creates rewards. Not following the rules creates a consequence.
Steve Jobs was a good example of what transactional leadership looks like in the workplace. Jobs was heavily involved with product development, marketing, and corporate outreach efforts with Apple. He would visit product teams to ask them questions about the work that was being done. He wouldn’t stop until everyone understood what his expectations were and that they could be met.
We can see other examples of transactional leadership all around us. Most coaches implement a transactional leadership style, even in youth sports. The military uses this form of leadership at all levels. Most large corporations use this leadership style to create a recognizable chain-of-command at all levels.
Even though it is one of the most common leadership style types that is used today, there are specific strengths and weaknesses to look at to determine if it is the correct style to use.
List of the Strengths of the Transactional Leadership Style
1. It promotes employee motivation.
Transactional leaders create rewards and consequences for their direct reports. The goal of each transaction is to promote the idea of earning a reward over earning a consequence. By doing this, there is a greater motivation to stay productive because the employee understands that their work will be recognized. It also serves as a secondary motivation because people now their leaders are keeping an eye on what they’re doing.
2. It creates goals that are achievable for everyone.
Transactional leaders focus on creating short-term plans that lead toward a long-term vision. This structure helps everyone experience immediate successes because they can see the forward progress that is being made. That reduces the risks of demoralization within the rank-and-file, creates more confidence at the individual level, and allows for work to be delegated without the need for micromanagement.
3. It requires precise instructions to be successful.
People always know what is expected of them when a transactional leadership environment has been implemented. With clear instructions, they know what to do and when to do it. There is a chain-of-command to follow, which makes it easier to understand how to communicate results or find troubleshooting help. There is a clear association between work and reward. “If I do X, then I will receive Y.”
4. It can reduce costs for the organization.
Because transactional leaders do a good job of motivating workers toward a higher level of productivity, there are fewer expenses that the company must face over time. Transactional leaders are excellent motivators, not because of their personality, but because of the structures they’re able to implement. They find what motivates each worker, create a reward that includes those motivation points, then implement consequences that give the rewards more value.
5. It eliminates confusion.
When a transactional leadership structure is emphasized, then there is no confusion within the group or team about who is in charge. From start to finish, there is a succession plan in place that gives people leadership responsibilities in specific situations. This eliminates the issue of having an employee assume a leadership role if the transactional leader is not present for some reason.
List of the Weaknesses of the Transactional Leadership Style
1. It does provide as much flexibility as other leadership styles.
Transactional leaders are not permitted to bend the rules. They must be unyielding in their approach to every worker. The structures are implemented without exception. Even if the transactional leader wanted to go against instructions or policies because they thought it would serve their team better, there is a good chance that the organization would terminate their employment. Transactional leadership environments do not accept complaints, insubordination, or feedback, which can make it difficult to adjust to changing circumstances.
2. It reduces internal creative equity.
Transactional leaders are not interested in creative approaches to a problem. They want a process that is rigid, structured, and dependable. There is little openness to new ideas because the short-term goals, combined with the structured rules, procedures, or policies, make it difficult to implement any sort of change. Even if there were effective recommendations that were offered by the team, the transactional leader is already set in their ways and couldn’t make changes.
3. It is heavily dependent upon the leader.
Transactional leadership depends upon the skills of each leader to be successful. If the leader does not evaluate strengths and weaknesses well to determine rewards and consequences, then their leadership approach will be ineffective. This dependence upon the leader will also put the company into a disadvantageous position if the individual decides to leave the organization.
4. It requires a value proposition where the good outweighs the bad.
For transactional leadership styles to be effective, leaders must create a value proposition for each worker. They must create rewards that have more value than what the consequences create. Here’s an example: as a reward, an employee gets a “thank you,” but as a consequence, an employee gets a disciplinary action. If the worker knows they won’t be fired and personal appreciation for them is meaningless, then there is a greater incentive to do nothing and take the disciplinary action. If the bad outweighs the good, there will be no productivity benefits.
5. It comes with a certain insensitivity to the worker.
Transactional leaders work within rules that can’t be changed. That means the only opportunity to take the emotional reaction of an employee into account is when the rewards and consequences are set. The goal is to get the tasks done through detailed instructions. This creates relationships in the workplace which are based on the tasks which must be completed more than an emotional-based working relationship. That often creates a perspective that employees are just performers who are motivated by a reward or a desire to avoid a consequence.
Transactional leadership is popular still today because it teaches the value of an immediate reward or consequence for decisions that are made. It also controls how people perform and is dependent upon the ability of the leader to be creative. Great things can happen with transactional leaders in charge. These leaders can also steer a company toward disaster if they create the wrong structures.
Keith Miller has over 25 years of experience as a CEO and serial entrepreneur. As an entrepreneur, he has founded several multi-million dollar companies. As a writer, Keith's work has been mentioned in CIO Magazine, Workable, BizTech, and The Charlotte Observer. If you have any questions about the content of this blog post, then please send our content editing team a message here.