Transformational Leadership Vs.

Transactional Leadership Definition

by David Ingram, Demand Media
Transformational leaders can inspire creativity at all levels of an organization.
Different managers employ distinctly different management styles, ranging from relatively
hands-off, facilitative styles to autocratic, micromanaging styles. Managers can also employ
different motivational strategies and techniques to boost employee performance or accomplish
internal change. Transformational and transactional leadership are polar opposites when it comes
to the underlying theories of management and motivation. Understanding the difference between
transformational and transactional leadership is crucial for anyone pursuing a career in
management.

Transactional Leadership
Transactional leadership styles are more concerned with maintaining the normal flow of
operations. Transactional leadership can be described as "keeping the ship afloat." Transactional
leaders use disciplinary power and an array of incentives to motivate employees to perform at
their best. The term "transactional" refers to the fact that this type of leader essentially motivates
subordinates by exchanging rewards for performance.
A transactional leader generally does not look ahead in strategically guiding an organization to a
position of market leadership; instead, these managers are solely concerned with making sure
everything flows smoothly today.

Transformational Leadership
A transformational leader goes beyond managing day-to-day operations and crafts strategies for
taking his company, department or work team to the next level of performance and success.
Transformational leadership styles focus on team-building, motivation and collaboration with
employees at different levels of an organization to accomplish change for the better.
Transformational leaders set goals and incentives to push their subordinates to higher
performance levels, while providing opportunities for personal and professional growth for each
employee.

Advantages
Both leadership styles are needed for guiding an organization to success. Transactional leaders
provide distinct advantages through their abilities to address small operational details quickly.

Transactional leaders handle all the details that come together to build a strong reputation in the
marketplace, while keeping employees productive on the front line.
Transformational leadership styles are crucial to the strategic development of a small business.
Small businesses with transformational leaders at the helm shoot for ambitious goals, and can
they achieve rapid success through the vision and team-building skills of the leader.

Applications
Different management styles are best suited to different situations. When it comes to front-line
supervisors of minimum-wage employees, for example, a transactional leadership style can be
more effective. Shift supervisors at a fast food restaurant will be much more effective if they are
concerned with ensuring all of the various stations run smoothly, rather than spending their time
thinking up better ways to serve hamburgers.
On the other hand, CEOs or sales managers can be more effective if they are transformational
leaders. Executive managers need the ability to design and communicate grand strategic
missions, passing the missions down to transactional leaders for implementation of the details.
About the Author
David Ingram has written for multiple publications since 2009, including "The Houston
Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts
modern issues in management, marketing, finance and business law. He has earned a Bachelor of
Arts in management from Walsh University.

Transformational leadership, transactional leadership, locus of control, and support for

innovation: Key predictors of consolidated-business-unit performance.
Howell, Jane M.; Avolio, Bruce J.
Journal of Applied Psychology, Vol 78(6), Dec 1993, 891-902. doi: 10.1037/0021-9010.78.6.891

Abstract
1. Used measures of leadership, locus of control, and support for innovation to predict the
consolidated-unit performance of 78 managers. Results reveal that 3 transformationalleadership measures were associated with a higher internal locus of control and
significantly and positively predicted business-unit performance over a 1-yr interval.
Transactional measures of leadership, including contingent reward and management by
exception (active and passive), were each negatively related to business-unit
performance. Causal relationships between the transformational-leadership behaviors and
unit performance were moderated by the level of support for innovation in the business
unit. (PsycINFO Database Record (c) 2012 APA, all rights reserved)