Leadership Styles - Transactional vs Transformational leadership

A quick word on motivation...

A key component of transactional and transformational leadership is motivation and how different techniques can be used to motivate and engage employees. Before we look at each of these leadership styles in detail, let's have a look at the two types of motivation.

Extrinsic motivation is when we are motivated to perform a behaviour or engage in an activity to earn a reward (i.e. salary, positive feedback, work opportunities etc.) or avoid punishment. This is the type of motivation that transactional leadership uses.
Intrinsic motivation is when we are motivated to perform a behaviour or engage in an activity because we find it personally rewarding. This is the type of motivation that transformational leadership uses.

Of the two types of motivation, intrinsic motivation tends to be the strongest motivator over the long-term.

What is transactional leadership?

Transactional leadership is a task-oriented style of leadership based on a system of reward and punishment (i.e. extrinsic motivation). A transactional leader will clearly specify their expectations for performance and hold their employees accountable for meeting those expectations; good performance is recognised and rewarded, poor performance is reprimanded.

While transactional leadership has been shown to be effective, the big downside to it is that it doesn't drive extra role behaviour (i.e. going above and beyond the basic requirements of the role). Under this style employees will do their jobs but you're unlikely to get any extra effort.

What is transformational leadership?

Transformational leadership is a relationship-oriented style of leadership. Transformational leaders motivate and inspire their employees to move in the right direction by creating a compelling vision for the future, helping them to see the purpose in their work, and helping them to learn and grow.

Studies have shown that employees of transformational leaders are more likely to engage in extra role behaviour - that is, put in effort above and beyond what is required for their role.

What are the components of transformational leadership?

Idealised influence Transformational leaders act as role models to their team members. They build trust and respect by practising what they preach, acting selflessly (i.e. putting the needs of their team members ahead of their own), and generally leading by example.
Inspirational motivation Transformational leaders provide meaning and challenge to their team members' work. They help their team members understand why their work is important, and provide them with an inspiring (and challenging) vision of the future that they want to work towards.
Intellectual stimulation Transformational leaders foster innovation and creative effort. They encourage their team members to question assumptions and challenge the way that things are done. They encourage new ideas and creative solutions to problems, and they help their team members learn from their mistakes and failures rather than criticising them.
Individualised consideration Transformational leaders attend to the needs of each individual team member. They understand each team member's need for achievement and they act as a coach and mentor to help them learn and grow. They build strong interpersonal relationships and show empathy and compassion for their team members.

Transactional vs transformational leadership

Transactional leadership often gets a bad rap because it's not very people-oriented, but when used in combination with transformational leadership, it covers off on some fundamental aspects of management that transformational leadership overlooks.

Transactional leadership builds a foundation in terms of specifying expectations, clarifying responsibilities, and providing recognition and rewards for achieving expected performance.
Transformational leadership satisfies an employee's deeper needs. It gives them purpose and meaning in their work, and it helps them to build their skills and accomplish things beyond what they thought possible.

Bottom line, make sure you set clear expectations and hold people accountable for meeting those expectations, and recognise and reward their achievements - but don't make that your only approach.

Inspire them with a compelling vision for the future, give them purpose by helping them to understand why their work is important, invest time in their development, and most importantly, be a good role model; these leadership activities will get extra effort and commitment from your employees.