What is Transactional Leadership?

Transactional leadership stems from the notion that employment and specific projects are a transaction: When an employee accepts a job, they agree to obey the leader and complete the tasks and duties as assigned and will be compensated in exchange for their efforts. Workers may be rewarded or punished based on their performance or non-performance.

Employees who are ambitious and respond to a reward structure are likely to do well under these kinds of leaders. Additionally, this leadership style establishes a clearly defined structure that enables the organization to meet short-term goals; However, transactional leadership does not allow for much innovation or creativity in employees. Furthermore, it establishes a rigid structure that may not be conducive to change and successful change management.

Although not for all, there are many areas where a Transactional Leadership style is highly effective, areas such as sports teams, militaries and fire stations or anything that needs to operate with immediacy at the highest level will do well under a transactional leadership style.

Famous Transactional Leaders

Charles de Gaulle

Charles de Gaulle was a French general during World War II and led the Free French Forces in their fight against the Nazis and the French occupation. After the war, de Gaulle was a key figure in setting up the French Republic. Thereafter, he served as the republic’s first president.

Joseph McCarthy

US senator Joseph McCarthy is also a noted Transactional Leader. McCarthy entered the public limelight in the 1950s when he took a harsh stand against communism. McCarthy started suggesting that Communists and Soviet spies have infiltrated the top levels of the US government and other such institutions.

Sir Alan Sugar

Although Sir Alan has been successful in his leadership of the Amstrad organization, the transactional qualities are especially evident in the way he runs his reality TV show, The Apprentice. The show is all about reward and punishment, with people who are able to follow Sir Alan’s orders being promoted and taken forward, while people who deviate from the required path, usually have to pack their bags.

Tim Parker

Tim Parker used transactional leadership to transform a problematic company. He took charge of a British motoring company, AA, in 2004 and quickly noticed the problems the organization were facing. Parker identified issues such as inefficiency, low productivity, and loss of staff members.

What are the Characteristics of a Transactional Leader?

1. Extrinsic motivation
2. Practicality
3. Resistant to change
4. Discourage independent thinking
5. Rewards performance
6. Constrained thinking
7. Passive
8. Directive
9. Emphasis on corporate structure
10. Emphasis on self-interest