What is transactional leadership?

• When to Use Transactional Leadership [+ Real-World Examples]
• How to Become a Transactional Leader
• The Difference Between Transactional Leadership and Other Leadership Styles
• Wrapping Up

When we think of great leaders, we often picture individuals who are empathetic, self-aware, and inspiring. This is why transactional leadership gets a bad reputation.

However, there’s no “right” or “wrong” leadership style — in fact, it’s common for leaders to employ multiple styles. Transactional leadership is one style that, when employed in the right contexts, can give teams the necessary structure, stability, and order to succeed.

Here, we’ll delve deeper into transactional leadership, explore when to use this style, discuss how to become a transactional leader, and compare it to other leadership styles.

What is Transactional Leadership?

Transactional leadership is characterized by control, organization, and short-term planning, relying on a system of rewards and punishments to motivate followers.

Transactional leadership can be appropriate in several contexts and is most effective when:

• Followers are motivated by rewards and punishments

• Followers need to be monitored to ensure they meet performance standards

• The primary goal for followers is to adhere to the leader’s instructions

The Origin Story

A 20th century sociologist named Max Weber was the first person to describe the idea of transactional leadership, which was originally referred to as rational-legal leadership. This leadership style was widely used after World War II in the United States, when the government was focused on rebuilding and required a high level of structure to maintain national stability.

In the 1990s, researchers like James McGregor Burns, Bernard M. Bass, Jane Howell, and Bruce Avolio went on to advance Weber’s theory on Transactional Leadership and defined three major dimensions of this style:

• Contingent Rewards: Transactional leaders like to link goals to rewards.

• Active Management By Exception: Transactional leaders actively monitor their teams, anticipate problems, and issue corrective measures.

• **Passive Management By Exception: **Transactional leaders tend to stay out of the team’s way and only intervene when standards aren’t met or when the performance doesn’t meet expectations.

What Type of Person is a Transactional Leader?

Let’s go through a business example to better understand what this leadership style looks like in action:

The company you work for has been struggling for many years, dealing with everything from public relations debacles to plummeting sales. Thankfully, things have stabilized recently and the organization is trying to rebuild itself. To help, Jamie was brought in as the new CEO and has been tasked with maintaining stability.

Jamie has over two decades of experience running large, multi-million dollar corporations, so she brings expertise in terms of creating structure, processes, and order. Over the next few months, she focuses on making the short-term goals of the company clear to all employees so everyone understands their roles and what’s expected of them in terms of performance.

While Jamie doesn’t get involved in the day-to-day, she actively monitors progress and intervenes as soon as she notices a problem. Jamie is also quick to praise and reward high-performing employees, while issuing performance improvement plans to team members who aren’t meeting expectations.

In the course of a year, Jamie has brought the company back to a stable place – all thanks to her high level of organization and her teams staying focused on the goals that were set for them.