By Mostafa Sayyadi and Michael J. Provitera
James MacGregor Burns added this profound statement: “leadership is one of the most observed and least understood phenomena on earth.” [1] Furthermore, Warren Bennis and Burton Nanus found “no clear and unequivocal understanding exists as to what distinguishes leaders from non-leaders.” [2] Thus, no single definition includes all the aspects of leadership. The key idea of this article is to cover in-depth throughout transactional leadership and provide a better understanding of this leadership aspect that has emerged as more adaptable today than the many others that are available today.
Introduction
Transactional leadership means just what it says. It is a quid per quo type of relationship between the follower and leader. A carrot on the stick approach. It involves determining the tasks, rewarding goal achievement and punishing failure in attaining goals. Two scholars by the names of Antonio Marturano and Jonathan Gosling believe that the effectiveness of this leadership style is dependent on two conditions. [3] One being that the current differences in organizational hierarchies and structures are totally accepted by subordinates and the second being that all the employees are able to work towards mutual exchange of benefits where they are rewarded for achieving the determined goals. It is somewhat reactive, however, because a benefit can be held back or taken away if the follower did not achieve the determined goals.
This leadership assumes impersonal interactions in reality where leaders do not consider higher humanistic desires or relationships between leaders and followers. Consequently, this form of leadership is still based on grounded theory that does not explore a desired probable situation. While it has its limitations it is still widely used in organizations.
Some scholars, however, such as James MacGregor Burns, Edwin Hollander and Arthur Jue illustrate that this form of leadership is successful in developing mutual exchange between leaders and employees in organizations. [1] [4] [5] In addition, it can be inferred that transactional leadership is linked with organizational effectiveness, particularly in terms of achieving goals. This is the reason that it is so popular among practicing managers today. The key is for managers to use it sparingly, on occasion, when new details and tasks are assigned but not as the main type of leadership.
Another aspect of the transactional style is passive management by exception or laissez-faire leadership. Laissez-faire is characterized through managing the situation where a problem has occurred and leaders take a reactive approach to correct mistakes or to overcome problems. This was uncovered by Robert Blake and Jane Mouton in the management grid research and still has importance in clarifying the type of transactional leader in some instances.
This style of leadership has been critiqued in the literature as leaders are not concerned with proactively identifying or preventing problems. They do not advocate for knowledge sharing and joint problem solving with subordinates. Hence, it is rational to state that laissez-faire leaders do not possess high commitment in seeking the proposed solutions jointly with their subordinates. Moreover, when such leaders assume the responsibility or intervention to solve problems, they rarely consider the empowerment of their employees to assist. Due to this limitation, a scholar by the name of Josef Frischer suggests that leaders today should empower followers to engage in problem solving. [6] In this way, transactional leadership can be used to review tasks and goals and requirements of subordinates but then move to more empowerment type leadership styles.
Decoding Transactional Leadership Practices
There is a plethora of leadership theories and models that attempt to consider leadership as an enabler of firm performance. There is an increased emphasis on the important role of leaders when interacting with followers and stakeholders. [7]
James MacGregor Burns’ leadership theory, in particular, posited that transactional leadership style is a new performance paradigm evident in organizations today. However, linking the role that transactional leaders play an important role in improving organizational performance is not particularly valid. On the other hand, understanding this dimension from a transactional leadership and performance paradigm may provide a significant realization bridging this important field of leadership and management.
For example, transactional leadership involves determining the tasks, rewarding goal achievement, and punishing failure in attaining goals. By synthesizing Antonio Marturano and Jonathan Gosling’s work we identified a code to decode transactional leadership. They claim that the effectiveness of transactional leadership style is dependent on two conditions. The first being that the current differences in organizational hierarchies and structures are totally accepted by subordinates and, the second, being that all the employees are able to work towards mutual exchange of benefits and where they are rewarded for achieving the determined goals. Scholars look at it as a passing fancy, a myth, or a schematic diagram that has not been tried and true. Unfortunately for scholars, this is not true. Millions of managers were trained in transactional leadership and it has advanced into organization’s success—-both from a performance and management level.
Transactional leadership assumes impersonal interactions in which leaders do not consider higher humanistic desires or relationships between leaders and followers. Consequently, this form of leadership does not explore a desired probable situation. In lieu of transactional leadership, a more acceptable leadership style using the concepts of transformational leadership is much richer in both followership and acceptance. The myth, therefore consists between what James MacGregor Burns and Edwin Hollander illustrate as transactional leadership being useful in developing mutual exchange between leaders and employees in organizations. There is some fallacy with the myth in that it can be inferred that transactional leadership is linked with organizational performance, particularly in terms of achieving goals.
Another aspect of the transactional leadership style is that managers using this style are passive by exception or laissez-faire when applying leadership. Laissez-faire is characterized through managing the situation where a problem has occurred, and leaders take a reactive approach to correct mistakes or to overcome problems. This brings up another myth of the usefulness of transactional leadership. For instance transactional leadership style has been critiqued by scholars as a leadership approach that is not concerned with proactively identifying or preventing problems. Transactional leaders do advocate for knowledge sharing and joint problem solving with subordinates.
Laissez-faire leaders do not possess high commitment in seeking the proposed solutions jointly with their subordinates. When such leaders assume the responsibility or intervention to solve problems, they rarely consider the empowerment of their employees to assist in problem solving and goal setting. The myth of transactional leadership further delineates the suggestion that leaders today should empower followers to engage in problem solving. In this situation, leaders would begin using transactional leadership to set goals and determine tasks and then, when time allows, move toward more transformational leadership and place more emphasis more empowered to engage followers.
In Conclusion
Transactional leadership does affect organizational performance through achieving business goals. And four scholars by the names of Timothy Obiwuru, Andy Okwu, Victoria Akpa and Idowu Nwankwere affirm this relationship. [8] They shed light on the critical role of transactional leaders in enhancing non-financial performances, particularly in terms of improving organizational commitment. Transformational leadership provides a frank appellation of the importance when beginning a leader-follower relationship, downsizing, upsizing, onboarding, and making significant changes to structure and organizational improvements but leaders must be aware of its limitations. Just as leaders need to be both autocratic and democratic at times they also need to be both transactional and transformational at times also. Knowing both styles and when is best to use them is the important concern here and will defunct the myth of transactional leadership as being an adequate style of leading in and of itself.
About the Authors
Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies – from start-ups to the Fortune 100 –succeed by improving the effectiveness of their leaders.
Michael J. Provitera is an Associate Professor of Organizational Behavior at Barry University in Florida, an author of the book titled “Mastering Self-Motivation” published by BusinessExpertPress.
References
- [1] Burns, JM 1978, Leadership, Harper & Row, New York.
- [2] Bennis, W & Nanus, B 1985, Leaders: The strategies for taking charge, Harper, New York.
- [3] Marturano, A & Gosling, J 2008, Leadership, Routledge, London.
- [4] Hollander, EP 1984, Leadership Dynamics, Free Press, New York.
- [5] Jue, AL 2004 Towards a taxonomy of spirit-centered leadership as reflected in phenomenological experiences of entrepreneurial leaders.
- [6] Frischer, J 2006 Laissez-faire Leadership versus Empowering Leadership in New Product Developing.
- [7] Anderson, A & The American Productivity & Quality Centre 1996 The Knowledge Management Assessment Tool: External Benchmarking Version.
- [8] Obiwuru, TC, Okwu, AT, Akpa, VO & Nwankwere, IA 2011 ‘Effects of leadership styles on organizational performance: A survey of selected small scale enterprises in Ikosi-Ketu council development area of Lagos state’, Australian Journal of Business and Management Research, vol. 1, no. 7, pp. 100-111.