24/09/2020

Transactional vs. transformational leadership – what do you need to know?

transactional leadership

When it comes to leadership styles, transactional and transformational leadership strategies are poles apart.

On the one hand, we have a style that is primarily focused on supervision and organisation, whereas the other offers a strategy where the goal is to drive change within the organisation.

Before you choose your leadership style, this guide looks at the differences between transactional and transformational leadership and details the benefits that can be gained from each. Read on to discover everything you need to know to find the best fit for your business.

Transactional Leadership

A management style that you’ve probably encountered before, transactional leaders are more concerned with the smooth flow of day-to-day business operations and maintaining productivity.

The term transactional comes from the work for reward element inherent with this form of leadership, with financial incentives (such as a salary) offered to the employees who are charged with managing in return for the completion of assigned tasks.

Transactional leaders aren’t too concerned with changing work processes and often have little to do with the strategic direction of a business, but one of the key strengths of this type of leadership is that they are able to address operational problems quickly and find solutions to common problems with ease.

This helps to keep the business productive and therefore build a solid reputation in the marketplace.

Transformational Leadership

This type of leader is more concerned with finding new strategies to enhance the productivity and success of the business as a whole.

Mainly focusing on team building, collaborative working and motivating staff across all levels and departments, transactional leaders utilise rewards and incentives to motivate their teams to succeed and champion opportunities for personal development.

This approach can be particularly helpful for small businesses who require strategic direction. It is often a route to achieving goals quickly by building successful and motivated teams.

Final Thoughts

You may be wondering if these two different styles can work in harmony together. In short, the answer to this question is yes! In many businesses, managers at different levels use different leaderships styles to keep the wheels turning and each style has benefits for various types of work.

For example, transactional leadership is a good choice for managers tasked with overseeing the production of goods on a daily basis, whereas transformational leadership works better for senior management who are given the responsibility of amplifying a brand and gaining market share.

With both leadership styles offering benefits to a business, choosing the right option really does come down to the element you’ll be managing, so choose wisely and you’ll be able to provide leadership that is effective and helps teams work towards the greater good of the organisation.  


Also published on Medium.

Written by
Scott Dylan
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Scott Dylan

I’m Scott Dylan, Fresh Thinking Group Founder and Partner. I oversee the strategic direction of the company, which I created to help, acquire and invest in both distressed and viable companies together with helping businesses improve their business processes and setting strategic directions.