Business Management – Leadership


Don't use plagiarized sources. Get Your Custom Essay on
Business Management Leadership Dissertation
Just from $13/Page
Order Essay

Transactional Leadership:

Transactional leadership refers to the transaction or the quid pro quo arrangement whereby the employer provides a specific benefit or benefit package to employees in exchange for their professional services. Generally, the only employee motivation within the transactional leadership scheme to secure and retain the benefits of working for the organization, such as salary, health insurance, retirement plans, etc. While this form of leadership is one of the most common and easily administrated, it is also frequently associated with contributing to an organizational culture of mediocrity (Bass, 1997).

In principle, many employees whose sole vocational motivation consists of their direct benefits have little incentive to perform or produce up to their highest level because increased effort and commitment to the organization only corresponds to increased benefits to the employee is relatively few circumstances. Whereas the highest performing employees under transactional leadership may become eligible for increased benefits, such as promotions to higher-paying positions, that opportunity is usually only available to a small number of employees either next in line for promotion or whose abilities and commitment are sufficient to make them viable candidates for recognition that leads to promotion. Otherwise, the employee who puts forth greater effort than another (but for whom promotion is not a realistic or desired objective), receives the same reward for services rendered as the lower-performing employee (Bass, 1990).

For this reason, transactional leadership is also commonly linked to the concept of “management by exception,” a reference to the fact that under this vocational motivational approach, management responds only to performance at the extreme ends of the spectrum of employee performance. Under transactional leadership, the vast majority of employees do not draw attention from management; only the extreme exceptions, such as those who perform well enough to merit reward through promotion and those who perform so poorly that it threatens the continued interest of the organization in maintaining the transaction of wages and benefits in return for the employee’s service, receive specific motivation outside of their general relationship. High performing employees receive motivation in the form a carrot, represented by their promotions or bonuses while low performing employees receive motivation in the form of a stick, represented by the consequences of continued low performance if it threatens their continued employment within the organization.

Many government agencies have been characterized as functioning poorly precisely because they have traditional been administrated exclusively through transactional dynamics (Bass, 1990; Bass & Steidlmeier, 1999). In many government agencies and other organizations relying on transactional leadership, employees have been known to work just hard enough not to get fired throughout their careers, particularly after having reached and achieved their promotional or earning potential.

Federal government has been especially susceptible to this dynamic because it relies on a step-increase system for periodic raises and promotions predicated on little more than performing “satisfactorily” (Bass & Steidlmeier, 1999). Transformational Leadership:

Transformational leadership refers to the transformation of attitudes, values, and identities of employees within an organizational culture predicated upon the personal commitment to the organization and its mission and values (Bass, 1990; Bass, 1997).

Within this leadership framework, leaders motivate employees by directly promoting and modeling the desired personal commitment to the organization in a manner that often transcends the boundaries of the vocational environment. Instead of viewing their employment as merely an occupation or a quid pro quo arrangement, employees within a transformational organizational culture incorporate elements of their employing organization into their personal psychological orientation. In that regard, the mission, goals, and values of the organization become part of the employee’s persona in a manner that often generates much higher levels of personal commitment than purely transactional leadership schemes.

Typically, transformational leadership relies on social rituals that encourage the melding of personal identity and organizational values and objectives. For this reason, transformational leadership style is most suitable for sales staff, because the clarity of organizational goals of increasing revenue are directly related to the specific efforts of employees (Bass, 1997; Bass & Steidlmeier, 1999). However, precisely because transformational leadership demands such a psychological investment, that motivational framework is also susceptible to burnout, especially in .

Transformational leadership is also applicable to organizational missions that manifest a moral focus, such as environmental conservation, religious commitment, and social concerns. In addition to being well-suited to the specific leadership techniques within , employees motivated by are less likely to experience burnout by virtue of the independent value of the organizational focus. While this is generally true of transformational leadership within organizations in general, it is particularly true where the employees share the organizational values before their employment within that organization (Bass & Steidlmeier, 1999).

Fundamental Differences:

Whereas transformational leadership qualifies as a true leadership style, transactional leadership has been described more as outlining the fundamental relationship that exists between employer and employee, but without any correlation with leadership, per se. Transformational leadership, on the other hand, is often considered one of the most intense and personal types of direct leadership that much more closely parallels charismatic leadership styles, the primary difference being orientation and loyalty to organizational mission and values rather than to any individual within the organization (Bass, 1990; Bass, 1997). While all leadership styles differ in various ways, this fundamental difference makes transactional and transformational leadership diametric opposites: the former is commonly associated with complacency, mediocrity, and lack of motivation among employees, the latter is associated with a high level of personal and psychological investment that psychological burnout becomes a potential issue (Steidlmeier, 1999).

Finally, the two leadership styles also differ substantially in the requirements for successful leaders. Within , the primary requirement for supervisors is technical competence. Conversely, within , supervisors must possess charismatic interpersonal skills and the ability to motivate employee performance by leading social rituals and maintaining the high energy and commitment required under that organizational culture.


Bass, B. (1990). “From Transactional to Transformational Leadership: Learning to Share the Vision” Organizational Dynamics, (Winter, 1990).

Bass, B. (1997). “Does the Transactional/Transformational Leadership Transcend Organizational and Motivational Boundaries” American Psychologist, 52.

Bass, B. And Steidlmeier, P. (1999). “Ethics, Character, and Authentic Transformational Leadership Behavior.” Leadership Quarterly, 10.