The scientific approach to the study of the phenomenon of leadership has almost a century of history. Early research focused on such leadership functions as directing, controlling, coordinating, and regulating the activities of subordinates, which is traditionally associated with a transactional leadership style. Starting in the second half of the 1970s, leadership theory has been supplemented with a number of new approaches associated with theories of transformational leadership.
For organizational psychology, the concept of transformational leadership was adapted by B.M. Bass. The author identified the socio-psychological mechanisms underlying transformational leadership and studied the effects of its influence on employees (Bass & Riggio, 2005). Such effects of influence include the emergence of a vision of collective goals among followers, the emergence of motivation to achieve them, appearance of an opportunity to satisfy the need for self-actualization, the development of the interests of subordinates beyond the framework of self-realization, stimulation to achieve collective goals. Bass and Avolio defined transformational leadership as the leadership of the new formation and described the essence of transactional leadership based on interaction as the leadership of the old formation (Bass and Avolio as cited in Blane, 2017). Researchers began to look at transformational and transactional leadership in a unified leadership style model.
Transformational leadership is combined with a transactional leadership style. A leader can choose or use one of the styles to analyze the culture of leadership within the organization. Transformational leadership is a more progressive style than transactional leadership, representing a traditional exchange between employer and employees.
Transformation means increasing the number of followers by encouraging and supporting the achievement (overfulfillment) of the set goals and expectations. A leader addresses the higher needs and values of his followers, inspires them with new methods that resonate in their souls, thus increasing the degree of trust, conviction, and willingness to work towards a common goal. A transaction is understood as an exchange between a leader and his followers. As a rule, this is monetary reward for the work done or other incentives in exchange for additional efforts of followers. The leader encourages the follower to act in a certain way in exchange for the desired or, conversely, getting rid of the undesirable. For example, a leader may offer an increase in wages in exchange for higher productivity.
Transformational leadership and transactional leadership are, in fact, two different styles. The first, in essence, means that the leader changes the realities of the world around, adapting those to necessary values and ideals. The second one is focused on effective interaction (transactions) with changing realities (Arenas, 2019). Transformational leadership focuses on strategic goals and principles, while transactional leadership makes emphasis on the bottom line and current affairs.
A leadership style that uses rewards and punishments to motivate followers represents transactional leadership. In turn, a style in which a leader uses charisma and enthusiasm to inspire his followers is transformational leadership. The transactional leader focuses on his relationship with followers, while the transformational leader focuses on the values, ideals, morals, and needs of the followers.
Activities within the framework of transformational leadership presuppose the activity of a leader who is focused on transformations, who is ready to creatively solve problems that arise in a crisis situation. The components that make up the behavior of a transforming (reforming) leader are the following: focus on communicating the importance of a standing goal, the ability to motivate followers through an increase in their level of awareness, the formation of a trusting atmosphere, the creation of interpenetration of personal interests of followers with a single organizational goal, the formation of employees’ motivation for self-development. As a result of the activity of the transforming leader-manager, employees have such influence effects as the appearance of intense emotional experiences, a sense of belonging, involvement in organizational processes, the identification of employees with the leader-manager, acceptance of his vision.
A number of studies, as well as a generalization of the existing theoretical literature on the problems of the transformational-transactional concept of leadership using meta-analysis tools, revealed interesting patterns. While transactional leadership provides the expected performance of employees, the transformational leader is able to establish relationships with them in which performance can exceed any expectations (Odemeru & Ogbonna, 2013). In this regard, transformational leadership has established itself as one of the most productive ways of relationships between a leader and subordinates in the military field (the US Navy, Army and Air Force), in the management of corporate R&D, in Total Quality Management programs, in situations where the leader interacts with subordinates through telecommunications.
A transactional leader defines the goals of employees’ activities, formulates the expected results, provides positive and negative feedback, and specifies the benefits that will be available to employees if they successfully complete their assigned tasks. Within the framework of the transactional type of interaction, remuneration is, in fact, the main motive that determines the quality of employee performance. Meanwhile, Burns has shown that transactional leadership imposes a number of constraints on the leader’s ability to motivate employees (Burns as cited in Blane, 2017). In particular, he drew attention to the environmental limitations of transactional leadership, namely, to the direct relationship between the effectiveness of leadership processes and the state of the internal and external environment in which the activities of the leader himself and the organization under his leadership are carried out (Kabeyi, 2018). A transaction is most effective in a stable and predictable environment. When the equilibrium of the environment is disturbed (requiring innovative changes in employee performance), the motivation based on the transaction limits the leader’s ability to convince employees to accept innovative challenges.
In this context, transformational leaders are considered to be leaders who use the setting of non-trivial goals as a means of motivating the activities of subordinates, which are interesting to employees because they require non-trivial solutions. Often, the success of an activity is precisely determined by the ability to find an original solution to atypical problem in a non-standard situation. The emergence of transformational (reforming) leadership is often attributed to a critical situation. Meanwhile, the limitation of this approach to innovative leadership is the exclusion of the phenomenology of the leader’s activity aimed at the emergence of innovations during periods of stabilization from the analysis. However, a company with transformational leadership is much more successful in attracting the best-qualified employees, making them compete with each other (Arenas, 2019). While signs of transformational leadership are found at all levels, they must first appear at the very top in order for the organization to move in the right direction. For the organization as a whole to become transformational, change must start from top management. Role models arise at the top and develop at each lower level.
For most organizations, transformational leadership is the best choice of all possible leadership styles and can often involve some aspect of transactional leadership. The best leaders combine the qualities of the transformational and transactional types. Transformational leadership adds efficiency to transactional leadership, but does not replace it. The best combination is transformational leadership, complemented by proportional rewards – when the leader rewards effort, good work, and achievement. Thus, successful leaders should exhibit both transactional and transformational actions. Transactional leadership builds followers’ trust in leaders, which is the foundation for transformational leadership.
Arenas, F. (2019). A casebook of transformational and transactional leadership. Routledge.
Bass, B., & Riggio, R. (2005). Transformational leadership. Psychology Press.
Blane, H. (2017). 7 Principles of transformational leadership: Create a mindset of passion, innovation, and growth. Weiser.
Kabeyi, M. (2018). Transformational vs transactional leadership with examples. The International Journal of Business & Management, 6(5), 191-193.
Odemeru, J., & Ogbonna, I. G. (2013). Transformational vs. transactional leadership theories: Evidence in literature. International Review of Management and Business Research, 2(2), 355-360.