Transformational vs Transactional Leadership

Transformational or transactional leadership? Is one better than the other?

The concept of transformational leadership was initially introduced by the expert and presidential biographer James MacGregor Burns. According to Burns, transformational leadership can be seen when “leaders and followers make each other to advance to a higher level of moral and motivation.”

Transactional and transformational are the two modes of leadership that tend to be compared the most.

James MacGregor Burns distinguished between transactional leaders and transformational by explaining that:

  • Transactional leader are leaders who exchange tangible rewards for the work and loyalty of followers.
  • Transformational leaders are leaders who engage with followers, focus on higher order intrinsic needs, and raise consciousness about the significance of specific outcomes and new ways in which those outcomes might be achieved.

Here’s a great breakdown chart of transactional vs transformational leadership.

TRANSACTIONAL VS. TRANSFORMATIONAL
Leadership is responsive Leadership is proactive
Works within the organizational culture Works to change the organizational culture by implementing new ideas
Employees achieve objectives through rewards and punishments set by leader Employees achieve objectives through higher ideals and moral values
Motivates followers by appealing to their own self-interest 
Motivates followers by encouraging them to put group interests first
Management-by-exception: maintain the status quo; stress correct actions to improve performance.
Individualized consideration: Each behaviour is directed to each individual to express consideration and support.
Intellectual stimulation: Promote creative and innovative ideas to solve problems.

However, there has been recent arguments that transformational leadership may be more effective in a long-term setting.

“Research evidence clearly shows that groups led by transformational leaders have higher levels of performance and satisfaction than groups led by other types of leaders,” explained psychologist and leadership expert Ronald E. Riggio. The reason, he suggests, is that transformational leaders believe that their followers can do their best, leading members of the group to feel inspired and empowered.

Where transactional leaders work effectively:

Rules, procedures and standards are essential in transactional leadership. Followers are not encouraged to be creative or to find new solutions to problems. Research has found that transactional leadership tends to be most effective in situations where problems are simple and clearly-defined.

While transactional leadership can be effective in some situations, it is generally considered an insufficient and may prevent both leaders and followers from achieving their full potential.

How transformational leadership works:

In their classic text, Transformational Leadership , authors Bass and Riggio explained:

“Transformational leaders…are those who stimulate and inspire followers to both achieve extraordinary outcomes and, in the process, develop their own capacity. Transformational leaders help followers grow and develop into leaders by responding to individual followers’ needs by empowering them and by aligning the objectives and goals of the individual followers, the leader, the group, and the larger organization.”

We’ve worked together with Juan-Carlos Pastor, PhD, Professor of Organizational Behaviour at IE Business School, to develop an app on Facebook that helps you determine whether you have a more transactional or transformational leadership style.

Curious which style you are? Click here and find out!

This post was written by AIESEC in the Netherlands. We offer international voluntary projects and professional internships with the aim of developing young people into the leaders of tomorrow. 

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