What is an example of transactional theory?

The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981. This style is most often used by the managers.

It focuses on the basic management process of controlling, organizing, and short-term planning. The famous examples of leaders who have used transactional technique include McCarthy and de Gaulle.

Transactional leadership involves motivating and directing followers primarily through appealing to their own self-interest. The power of transactional leaders comes from their formal authority and responsibility in the organization.

The main goal of the follower is to obey the instructions of the leader. The style can also be mentioned as a ‘telling style’.

The leader believes in motivating through a system of rewards and punishment.

If a subordinate does what is desired, a reward will follow, and if he does not go as per the wishes of the leader, a punishment will follow. Here, the exchange between leader and follower takes place to achieve routine performance goals.

These exchanges involve four dimensions:

1. Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations, provide necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for successful performance. They set SMART (specific, measurable, attainable, realistic, and timely) goals for their subordinates.
2. Active Management by Exception: Transactional leaders actively monitor the work of their subordinates, watch for deviations from rules and standards and taking corrective action to prevent mistakes.
3. Passive Management by Exception: Transactional leaders intervene only when standards are not met or when the performance is not as per the expectations. They may even use punishment as a response to unacceptable performance.
4. Laissez-faire: The leader provides an environment where the subordinates get many opportunities to make decisions. The leader himself abdicates responsibilities and avoids making decisions and therefore the group often lacks direction.

Assumptions of Transactional Theory

Implications of Transactional Theory

The transactional leaders overemphasize detailed and short-term goals, and standard rules and procedures. They do not make an effort to enhance followers’ creativity and generation of new ideas. This kind of a leadership style may work well where the organizational problems are simple and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit with existing plans and goals.

The transactional leaders are found to be quite effective in guiding efficiency decisions which are aimed at cutting costs and improving productivity. The transactional leaders tend to be highly directive and action oriented and their relationship with the followers tends to be transitory and not based on emotional bonds.

The theory assumes that subordinates can be motivated by simple rewards. The only ‘transaction’ between the leader and the followers is the money which the followers receive for their compliance and effort.

Difference between Transactional and Transformational Leaders

Conclusion

The transactional style of leadership is viewed as insufficient, but not bad, in developing the maximum leadership potential. It forms as the basis for more mature interactions but care should be taken by leaders not to practice it exclusively, otherwise it will lead to the creation of an environment permeated by position, power, perks, and politics.

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Transactional leader brings followers together on a joint purpose of the goal. They are the managerial leaders who supervise and organize the followers in such a way that the performance of the team is not affected and the goal is achieved, for every achievement there are some reward and punishment on the failure.

Origin

Transactional Leadership Theory was first described by Max Weber in 1947. He called it Legal – Rationality authority. He described that the leaders are always – charismatic, authoritative, traditional, and transactional by nature.

This ideology was later developed by MacGregor Burns and further expanded by Bernard Bass in his theory of Leadership. His theory explains how the leader-follower instincts work psychologically.

Types

Mac Gregor has classified leadership as two types – Transactional and Transformational leadership.

• Transactional Leader works on the organizational line to get the things done in perfection and expects that his followers do the same. Transactional Leadership is based on the transactions – a give and take basis.
• Transformational Leader works along with followers by encouraging, increasing the moral, motivate.

Characteristics of Transactional Leaders

These leaders take initiative as long as there is mutual benefit in the exchange. Every work completed comes with a prize.

• They do not go and venture beyond the organizational line and policies.
• When the target is met appropriate reward is met while punishments or intervention is there when targets and policies aren’t achieved.
• Always looking out so that there are no aberrations and rules breaking in the team.
• They are always focused on short term goals.
• Inflexible and not ready to adopt changes.
• Laissez-Faire approach i.e leaders do not involve themselves with the follower’s personal problems and issues.

Some of the renowned Transactional Leaders are Bill Gates, Norman Schwarzkopf, Vince Lombardi, and Howard Schultz.

To elaborate the way on how Transactional Leaders work – Bill Gates, known for his charismatic leadership. Before being a Transformational leader he was also known for his strict following in the chain of command. He delegates and guides through his employees on what exactly he needs and how it can be worked on about, giving them very little freedom. Control plays the central part in Transactional leadership. Bill Gates always focused on the completion of the task in hand for the efficient and quick achievement of the target.

It is also noticed that Bill Gates used a rigorous hiring process to appoint a lot of young minds and set leaders to lead the next generation. It is for his leadership and guidance that many employees stay with Microsoft for a long period of time than others.

Even though Bill Gates initially used only Transactional leadership skills he also turned to become a Transformational leader. With years of knowledge and expertise, he started using both the skills as per demand.

Assumption

It is assumed that Transactional leaders often have seen following Maslow’s theory of Hierarchical needs.

Here the leader concentrates on the Psychological satisfaction and other basic necessities of his followers to make give their best performance.

Advantages of Transactional Leadership

• Effective on maintaining Status Quo but very responsive.
• Particularly effective in crisis management and troubleshooting.
• Single-handed leadership and direct line of command is seen as cost-effective.

Disadvantages of Transactional Leadership

• Never changes from a strict line even when there is a possibility of success on a different approach.
• This model motivates the followers only on the grass-root level.

Conclusion

This leadership model is effective in achieving daily targets and short term goals. Being a very simple model it is very easy to understand and train the leaders in helping them understand the company’s requirement especially at times of crisis and troubleshooting management.

An effective manager, one who ensures that the demand of the company is efficiently met, while need fully ensuring that the basic need of the employees is communicated. For example, taking strict action such as removing an employee for sexual harassment will encourage female staff to continue working with confidence.

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