Transactional_vs._Transformational_Leadership

Transactional vs. Transformational Leadership Leadership plays an important role in the organization. While with the development of the society, more and more managers pay attention to their leadership and relationship with employees. James McGregor Burns in his book Leadership (1978) introduces the notion of transactional and transformational leadership, which have remained one of the most popular leadership models. But there are differences with each. The distinction between transactional and transformational leadership was first made by Downton (Barnett, McCormick & Conners, 2001) but the idea gained little currency until James McGregor Burns’ (1978) work on political leaders was published. Burns distinguished between ordinary (transactional) leaders, who exchanged tangible rewards for the work and loyalty of followers, and extraordinary (transformational) leaders who engaged with followers, focused on higher order intrinsic needs, and raised consciousness about the significance of specific outcomes and new ways in which those outcomes might be achieved (Barnett, McCormick & Conners, 2001; Cox, 2001; Gellis, 2001; Griffin, 2003; Judge & Piccolo, 2004). How to choose the model of leadership and how to improve the relationship between leaders and followers are still problems. So I would like to talk about the theories between transactional leadership and transformation leadership, and give some realistic examples for each leadership model. Moreover, according to cite some survey to talk about which leadership is better. First of all, Transformational leadership is defined as a leadership approach that creates valuable and positive change in the followers with the end goal of developing followers into leaders. The concept of transformational leadership was initially introduced by leadership expert and presidential biographer James MacGregor Burns (leadership, 1978). According to Burns (1978), transformational leadership can be seen when “leaders and followers make each other to advance to a higher level of moral and motivation”. Through the strength of their vision and personality, transformational leaders are able to inspire followers to change expectations, perceptions and motivations to work towards common goals. Later, researcher Bernard M. Bass expanded upon Burns original ideas to develop what is today referred to as Bass’ Transformational Leadership Theory (leadership and performance, 1985). According to Bass (1985), transformational leadership can be defined based on the impact that it has on followers. Bass suggested that transformational leaders should garner trust, respect and admiration from their followers. There are four dimensions for transformational leadership. The first one is intellectual stimulation, these leaders encourage followers to innovatively handle the problems and encourage subordinates to be innovative and creative. These leaders support followers as they challenge the deeply held beliefs and values of their leaders, their organization, and themselves (Yukl, 2006). The second one is individualized consideration, this refers to the care that the leaders are very supportive and take great care to listen to and understand their followers’ needs. In order to foster supportive relationships, transformational leaders keep lines of communication open so that followers feel free to share ideas and so that leaders can offer direct recognition of each follower’s unique contributions. The third one is inspirational motivation, the leaders have a clear vision that they are able to articulate to followers. These leaders are also able to help followers experience the same passion and motivation to fulfill these goals. What is more, they prefer to increase team spirit through coaching, encouraging, and supporting follower. The last one is idealized influence, the leaders serve as role models for followers, they are admired, respected, and trusted and followers want to emulate them. And they demonstrate high standards of ethical and moral conduct. There are many people who have characters of the transformational leadership in the business world. One of the transformational leaders is Lou Gerstner – retired Chairman and CEO of IBM. He turned IBM around from an $8.1 billion loss in 1993 after identifying part of the company’s problem as ‘success syndrome’. That is, having been one of the greatest commercial institutions on Earth from the 1960s-1980s, IBM had become insular and rigid (Sheppard, 2002). Gerstner completely transformed the culture of the organization through, he was modeling a desired behavior and abolishing IBM’s notorious dress code to reflect better the attire of their customers (Sheppard, 2002). Another example is Lee Iacocca, who is credited with saving the Chrysler Corporation. He took over Chrysler when it was on the brink of bankruptcy and set about transforming the ideals of his closest subordinates. In turn, that began to reshape the corporation’s culture. Because a transformational leader encourages others to become transformational leaders, soon the entire organization was filled with effective leaders (Kelly, 2003). In transformational leadership style, rewards are high-quality exchanges between the leader and the followers because the leader’s power is given by the followers. For the transformational leader, they encourage followers not only to perform as expected, but also to exceed expectations. Usually, transformational leaders transform the needs, values, preferences, and aspirations of followers, and motivate followers to work for goals that go beyond immediate self-interest, where what is right and good becomes important. Their aim is the interests of the wider group instead of the self-interest of individual within the group. Taking this approach can take the intrinsic value of the human and the potential lying within for leaders and managers. On the other hand, transactional leadership is different from transformational leadership. Transactional leadership focuses on leaders managing day-to-day business operations. According to Burns, a transactional leader was someone “who” approaches followers with an eye to exchange one thing for another: jobs for votes, or subsidies to include for campaign contributions’” (Klinsontorn, 2007, p. 35). Meanwhile, the transactional leaders should have recognized what his or her followers want to get from work and tries to see that followers get what they desire if their performance warrants it; exchanges rewards and promises of rewards for appropriate levels of effort; and responds to the self-interest of followers as long as they are getting the job done (Bass, 1985). What is more, transactional leaders clarify the role of subordinates, show consideration towards them, initiate structure, reward and punish, and attempt to meet the social needs of subordinates. There are two factors in a transactional leadership; the first one is contingent reward. This is familiar work-for-reward exchange agreement, where the leader makes clear what tasks must be accomplished in order to obtain desired rewards and provides there rewards only when subordinates perform adequately or put in the necessary effort. The leader provides support in exchange for required effort and gives praise where deserved. The second one is management by exception. The leader does not attempt to change methods of work if subordinates are achieving performance goals. Leaders take no action unless a problem arises. There are two forms of management by exception (MBE)-passive and active. In Washington’s (2007) dissertation, she describes active MBE as a “leaders actively monitoring follower performance in order to anticipate deviations from standards prior to their becoming problems (Hater & Bass, 1988, p. 19). In a passive MBE leadership factor, the leader only corrects when the performance is not meeting with goals (Klinsontorn, 2007, p. 38). A famous transactional leader is none other than the TIMES CEO of the year 2009, Steve Jobs. At the top of the technology and innovation giant, Apple Computers, Jobs was known for his down to earth and task oriented nature of his leadership. He was also notorious for not hesitating to give employees a dressing down should they fail to meet his expectations. In transactional leadership style, rewards were high- and low-quality exchanges between leader and followers. A low-quality exchange is “based on the exchange of goods or right” (Kuhnert & Lewis, 1987, p. 649) , like pay, bonuses and work hours. While a high-quality exchange is trust. Kuhnert & Lewis (1987) say trust is a modal value that bond leaders to followers in an attempt to actualize the needs of both parties (p. 649). For the transactional leader, they influence others by appealing to self-interest, primarily through the exchange of rewards and services. The relationship between this type of leader and the follower is seen as a series of rational exchanges that enable each to reach their own goals. Transactional managers supply all the ideas and use rewards as their primary source of power. Followers comply with the leader when it’s in their own interest - the relationship continues as long as the reward is desirable to the follower, and both the leader and the follower see the exchange as a way of achieving their own ends. Now, we already understand the theories of relationship between transnational leader and transformational leader with followers. How to flexibly use them to control the situation, and how to exactly use leadership to increase the employee’s job satisfaction is very important for an organization according to these theories. In the article “Role of the Transactional and Transformational Leadership on Job Satisfaction and Career Satisfaction”. It showed that the transactional leadership and transformational leadership associate with job satisfaction and career satisfaction. It collected at least 50 questionnaires from each organization for equal representation, a total of 100 questionnaires were floated in each organization using non-probability convenience (accidental / haphazard) sampling method. From the survey, it can be see that transformational leadership is highly correlated with job success. While transactional leadership motivated people by reward, under this leadership, employee can’t improve job satisfaction. On the other hand, the correlation results show a significant relationship between transformational leadership styles with career satisfaction. While in the book of Leadership (Keith, p.205), a study of eighty items were rated by 582males and 219 females direct reports, each of whom evaluated one of 150 male or 79 female managers for discussion comparing men and women managers on transformational leadership. The study showed that the women managers were higher in all the transformational leadership, and in the outcomes of extra effort, effectiveness, and satisfaction with the leaders. Men were rated higher in MBE and laissez-faire leadership, both less proactive styles linked to less effective outcomes. Although many study showed that transformational leadership is more efficient than transactional leadership. However, there is no evidence to support which one is better. Meanwhile, many transactional leaders also are very successful whether they are male or female. Like Ruggieri say “there are no differences between the negative adjectives used to describe the two types of leader” (Ruggieri, 2009, p1020). In my opinion, I think if a manager wants to earn the better organization outcome, having a flexible management style is very important. Furthermore, firms can use both transformational and transactional leadership styles to effectively manage knowledge. A leader like Steven Jobs can be a transformational leader and a transactional leader. He used a transformational leadership style to create a vision for the Macintosh and challenge his employees to reach nearly impossible goals. He used a transactional leadership style to create the systems and structures in Apple that allowed the knowledge created at all levels of the organization to be converted into a valuable product--the Macintosh personal computer (Scott E. Bryant,2004). In summary, transactional leadership and transformational leadership are the two main leaderships in this society. We should know the differences between these two leaderships and how to apply them. Firstly, transactional leadership is focused on performance, this kind of leadership is built on reciprocity, the idea that the relationship between leader and their followers develops from the exchange of some reward, such as performance ratings, pay, recognition, and praise. Secondly, transformational leadership is focus on organization. This kind of leadership is concerned with engaging the hearts and minds of others. It works to help all parties achieve greater motivation, satisfaction and a greater sense of achievement. It requires trust, concern and facilitation rather than direct control. The skills required are concerned with establishing a long-term vision, empowering people to control themselve, coaching, and developing others and challenging the culture to change. In transformational leadership, the power of the leader comes from creating understanding and trust. What is more, they have their own benefits; we can’t deny the transactional leadership is worse than transformational leadership, although the transformational leadership is more effective than the transactional leadership in some studies. The leaders should decide which leadership style is suit for the organization according to the situation. Reference Adnan Riaz, Mubarak Hussain Haider (2010). Role of transactional and transformational leadership on job satisfaction and career satisfaction. Peer-reviewed & Open access journal. 35. Iain Hay(nd). Transformational Leadership: Characteristics and Criticisms. Retrieved from: http://www.leadingtoday.org/weleadinlearning/transformationalleadership.htm Keith Grint(2007). Leadership. NY. P205. Nd(2008). Transactional Leadership and Transformational Leadership: what leadership style proved to work the best' Retrieved from: http://englandfile.blogspot.com/2008/01/transformational-and-transactional.html Sundas Jamil (2010). Transformational Leadership. Retrieved from: http://www.mba-tutorials.com/management/537-transformational-leadership.html Scott E. Bryant(2004). The role of transformational and transactional leadership in creating sharing and exploiting organizational knowledge. Retrieved from: http://www.entrepreneur.com/tradejournals/article/105440118_2.html