Download leadership in organization ~ transactional leadership

LEADERSHIP IN ORGANIZATION
~ TRANSACTIONAL LEADERSHIP
PREPARED BY:
TEH MING TECK (MBA, BPM)
23 January 2012
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TABLE OF CONTENTS:
1) INTRODUCTION
… Page 3
2) DIFFERENT BETWEEN WEBER & BASS THEORY
… Page 4
3) ASSUMPTIONS OF TRANSACTIONAL LEADERSHIP
… Page 5
4) TRANSACTIONAL LEADERSHIP AGREEMENTS
… Page 6
5) TYPES OF TRANSACTIONAL LEADERS
… Page 7
6) TRANSACTIONAL LEADERSHIP AND WOMEN
… Page 7
7) IMPLEMENTATION OF SUCCESSFUL TRANSACTIONAL
LEADERSHIP
… Page 8
8) TIPS OF IMPLEMENTION TRANSACTIONAL LEADERSHIP
… Page 10
9) CONFLICT RESOLUTION AND THE TRANSACTIONAL LEADER
… Page 11
10) TRANSACTIONAL VERSUS TRANSFORMATIONAL LEADERSHIP
THEORY
… Page 12
11) SOME TERM USE IN TRANSACTIONAL LEADERSHIP SYTLE
… Page 14
12) CONCLUSION
… Page 16
BIBLIOGRPHY
… Page 17
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1) INTRODUCTION:
The transactional style of leadership was first described by Max Weber in 1947 and then
by Bernard Bass in 1981.1 Transactional leadership involve in motivating and directing followers
primarily through appealing to their own self-interest. The main goal of the follower is to obey
the instructions of the leader. The transactional style of leader believes in motivating through a
system of rewards and punishment. If a subordinate does what is desired, a reward will follow.
But, if he does not go as per the wishes of the leader, a punishment will follow.
This style is most often used by the managers. It focuses on the basic management
process of controlling, organizing, and short-term planning. The exchange between leader and
follower takes place to achieve routine performance goals. These exchanges involve four
dimensions:

Contingent Rewards ~ link the goal to rewards, clarify expectations, provide necessary
resources, set mutually agreed upon goals, and provide various kinds of rewards for
successful performance.

Active Management by Exception ~ actively monitor the work of their subordinates,
watch for deviations from rules and standards and taking corrective action to prevent
mistakes.

Passive Management by Exception ~ intervenes only when standards are not met or
when the performance is not as per the expectations. They may even use punishment as a
response to unacceptable performance.

Laissez-faire ~ provides an environment where the subordinates get many opportunities
to make decisions.
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2) DIFFERENT BETWEEN WEBER & BASS THEORY
a) WEBER THEORY
Max Weber identified three kinds of leader/ follower relations – traditional, bureaucratic
and charismatic. His believes that they occur in combination, and also argue that "there may be
gradual transitions between these types"
1. Bureaucratic (Transactional) ~ Bureaucracy is "the exercise of control on the basis
of knowledge”; the rational legal hierarchical power, the Bureaucratic Leader
2. Traditional (Feudal/Prince) ~ Traditional an arbitrary exercise of power bound to
loyalty, favoritism, and politics; the princely leader
3. Charismatic Hero (Transformer) ~ An individual personality set apart from ordinary
people and endowed with supernatural, superhuman powers and heroic charismatic leadership
qualities; part hero part superman/superwoman.
b) BASS THEORY
Bernard M. Bass argued that transactional leader appeals to lower order needs, while the
transformational appeals to higher order ones. The transactional leaders’ works within the
organizational culture as it exists. Transactional leader contribute confidence and desire by
clarifying required performance and how needs would be satisfied as a result.

pursues a cost benefit, economic exchange to met subordinates current material and
psychic needs in return for "contracted" services rendered by the subordinate"
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3) ASSUMPTIONS OF TRANSACTIONAL LEADERSHIP

People are motivated by reward and punishment.

Social systems work best with a clear chain of command.

When people have agreed to do a job, a part of the deal is that they cede all authority to
their manager.

The prime purpose of a subordinate is to do what their manager tells them to do.
The transactional leader works through creating clear structures whereby it is clear what
is required of their subordinates, and the rewards that they get for following orders. Punishments
are not always mentioned, but they are also well-understood and formal systems of discipline are
usually in place.
The early stage of Transactional Leadership is in negotiating the contract whereby the
subordinate is given a salary and other benefits, and the company (and by implication the
subordinate's manager) gets authority over the subordinate.
When the Transactional Leader allocates work to a subordinate, they are considered to be
fully responsible for it, whether or not they have the resources or capability to carry it out. When
things go wrong, then the subordinate is considered to be personally at fault, and is punished for
their failure (just as they are rewarded for succeeding).
The transactional leader often uses management by exception, working on the principle
that if something is operating to defined (and hence expected) performance then it does not need
attention. Exceptions to expectation require praise and reward for exceeding expectation, whilst
some kind of corrective action is applied for performance below expectation.
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4) TRANSACTIONAL LEADERSHIP AGREEMENTS
At the extreme, the only relationship that develops between the transactional leader and
the follower is an "unwritten agreement" to carry out all orders. In fact, this unwritten agreement
may begin to form very early in the manager or leader relationship as demonstrated in the
example that follows:
Immediately after the hiring process, it may be clear that the transactional leader is in
charge, and the follower can hope to get better raises in pay by following orders. This type of
agreement with the transactional leader may come about through consistent reinforcement of
certain actions the follower takes.
When the follower completes an important assignment on time, and under budget, the
transactional leader may reward them monetarily. If a deadline is missed, or a budget is "blown,"
then the leader may make it very uncomfortable for the follower.
This is not to suggest that all managers and leaders that exhibit the transactional
leadership style are locked into what might seem like extreme relationships. As mentioned
earlier, leaders will likely fall on a continuum, and exhibit behaviors characteristic of other
leadership styles too.
As discussed in our article on Leadership Style, and again in Situational Leadership, the
success of the leader is usually assured through the use of different leadership styles. Effective
leadership aligns the current work environment with the disposition of followers.
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5) TYPES OF TRANSACTIONAL LEADERS
The types of transactional leaders described by theorists include categories such as
Opinion Leaders, Group Leaders, Governmental / Party Leaders, Legislative Leaders, and
Executive Leaders.
If you examine these leadership categories more closely, then you will have a greater
appreciation for what makes the transactional style "tick." These are leaders we read about in the
press all the time. They are constantly meeting new people, making deals (completing
transactions), and moving on.
Under certain conditions, this leadership style is extremely effective, and most leaders
operate on a continuum as mentioned earlier.
6) TRANSACTIONAL LEADERSHIP AND WOMEN
An interesting study conducted by Northwestern University with respect to transactional,
transformational, and laissez fair leadership styles revealed that women are more likely to use
transformational methods than male leaders. This means most women were more interested in
working with people holistically, not just making deals.2
The study also found that when female leaders used the transactional leadership style,
they were more likely to focus on the rewards component of that style. On the other hand, when
men utilized the transactional style, they were more likely to focus on the punishment aspects of
that style.
Admittedly, the study found the differences between men and women to be small;
however the differences were consistent in one way. Women always exceeded men when it
came to the positive aspects of a leadership style, and men always exceeded women when it
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came to the negative attributes of the style. Translating: women always won when it was good to
win, and men always won when it was bad to win.
Regardless of winners and losers, the important thing for the leader is to understand the
strengths and weaknesses of the style they use most frequently. To be effective in the workplace,
the leader must also realize that switching between styles can make them a more effective leader
too.
7) IMPLEMENTATION OF SUCCESSFUL TRANSACTIONAL LEADERSHIP
To be a successful transactional leadership in the real world, there are few concern need
to be practice by a leader in an organizations.
Transactional leaders must understand what motivates their employees. 3 It is
important for the leader to understand what it is that will motivate the employee and ensure that
reward systems are appropriately aligned. The success of transactional leadership relies on the
employee valuing the rewards that are in place. It is the leader's responsibility to establish a
system of rewards that will be valued by the employee. Some reward systems are established by
the HR department or company policy, and when an employee accepts a work position with the
employer, the employee is agreeing to that reward system. However, leaders at all levels should
have a better understanding of what motivates each of his/her employees. This will allow the
leader to continually link the rewards most valued by a particular employee with the successful
completion of the task.
Ensure employees understand the reward system and how they can achieve the
rewards.4 To ensure that the full effect of a reward system is realized, leaders must ensure that
employees understand all of the rewards that are possible. Many employees do not understand
their full benefits package, and, therefore, do not realize how much their employer appreciates
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their efforts. By ensuring that the employee understands the full benefits package, a leader may
unlock additional motivation from their employees.
Ensure that both reward and punishment systems are in place and are consistently
exercised.5 To prevent situations of perceived unfairness among employees, leaders must ensure
that both rewards and punishments are awarded consistently, without bias. Perceptions of bias
among employees can detract from the value that they hold for the rewards programs, and, as a
result, employee motivations and work efforts could suffer.
Provide constructive feedback throughout the work process.
6
One of the most
disheartening moments for an employee is when they put forth what they perceive to be an
extraordinary or even an acceptable level of effort for their task only to find out after the
completion of their task that they totally missed the mark. By providing constructive feedback
throughout the work process, leaders are better able to control the quality and quantity of
employee output and better able to shape employee expectations as to whether they will actually
receive rewards for their efforts.
Ensure that rewards and recognition are provided in a timely manner. 7 Leaders can
best harness the emotions and satisfactions of the moment by recognizing and rewarding
employees as quickly as possible. By doing so, leaders set the stage for future transactions
between themselves and their employees. In effect, leaders establish a track record and build
trust by providing earned rewards and recognition in a timely manner following task completion.
In providing five things that a leader should not do, one could simply offer the opposite action of
the five things a transactional leader should do. However, the following recommendations
provide a slightly different look at some of the pitfalls frequently experienced by this model of
leadership.
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8) TIPS OF IMPLEMENTION TRANSACTIONAL LEADERSHIP
Below we will look into few tips of implementation of the transactional leadership in the
organization.
Do not assume that transactional leadership will yield the same results across
different cultures.8 Many Asian cultures emphasize collectivism, which would value the benefit
of the group. Therefore, leaders need to understand at which level to establish their reward
systems and which level to reinforce the linkage of these rewards to the work being completed.
For example, in a collectivist society, a leader might focus much of his/her communications at
the group level.
Do not fail to harness the power of positive leadership. 9 When we think of
transactional leadership, we commonly think of the no-nonsense, very objective, emotionless
leadership of a manager who simply sets goals, makes them clear, and monitors progress.
However, a leader can be so much more effective by simply showing excitement towards the
goals and the work of the employee. By showing such excitement, a leader is not crossing over
into the visionary realm of transformational leadership but simply appealing to the employee's
emotions by adding some enthusiasm into the transaction.
Do not rely on a reactive posture that can be characterized by indifference, delayed
action, and/or absence.10 Such an orientation is often referred to as laissez-faire leadership which is actually a lack of leadership activity. Perhaps some leaders, in the spirit of more
conventional emphasis on a hands-off leadership style that provides space for employee initiative,
will become so removed that they slip into an indifferent orientation. In the end, the work
environment suffers more from an indifferent leader than from an environment where the leader
tends to micro-manage the employees and processes.
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Transactional leaders should not provide leadership over task areas in which they
have no expert knowledge.11 One of the unyielding requirements of transactional leadership is
for the leader to provide absolute clarity in issuing the task and goals for the employee. The
leader must also be able to provide expertise when employees have questions during task
performance. In transformational leadership, an employee is inspired to be creative and produce
results. Transactional leadership allows little or no room for creativity and usually clings to
established procedures and work practices. The transactional leader is well-versed in these
procedures, practices, and task standards.
Do not force unethical work practices on their employees or allow them to observe
them as the leader committing ethics violations.12 The power of transactional leadership relies
on the value of the rewards that leaders can offer their employees. However, the theory behind
this leadership style fails to recognize the fact that ethics are non-negotiable for some employees.
Some employees will quickly detach themselves from any association with ethics violations. To
them, ethics violations constitute a break in the work environment contract that may have been
negotiated or simply implied at the beginning of their work relationship.
9) CONFLICT RESOLUTION AND THE TRANSACTIONAL LEADER
Conflict resolution is basically relationship building which does not fit well into the
transactional model. Transactional leaders don’t care whether or not employees are satisfied as
long as the work is being done efficiently. Employees have little opportunity to change their
working conditions or feel like they’re contributing anything more than labor. This is not
conducive to a motivating environment.
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When employment was based on supply-and-demand, transactional leadership was
sufficient. This was an industrial based society and tasks were repetitive. As the economy has
moved from industrial- to information-based, tasks have become less specific, accounting for
exponential increase in the amount of creativity, autonomy, and value expected by employees. A
leader who is unwilling to give up at least some transactional traits may find that employees are
not giving their all to the organization
A famous transactional leader is none other than the TIMES CEO of 2009, Steve Jobs. At
the top of the technology and innovation giant, Apple Computers, Steve 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. 13
In this kind of leadership, a clear chain of command is established. The leader motivates
his subordinates by presenting those rewards and punishments. All requirements for a
subordinate are clearly stated with corresponding rewards. If they fail to satisfy those
requirements, they will receive a corresponding punishment.
10) TRANSACTIONAL VERSUS TRANSFORMATIONAL LEADERSHIP THEORY
The transactional leadership theory developed by Weber and Bass later became part of a
three style model: transformational, transactional, and laissez faire. Bass believed each leader
exhibited a style along a continuum, and he later developed the Multifactor Leadership
Questionnaire, or MLQ, to determine where leaders fell on this continuum.
Transactional Leaders
The transactional leadership style developed by Bass is based on the hypothesis that
followers are motivated through a system of rewards and punishment. The transactional leader's
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view of the leader / follower relationship is one of quid pro quo - or this for that. If the follower
does something good, then they will be rewarded. If the follower does something wrong, then
they will be punished.
Transformational Leaders
The theory behind transformational leaders, on the other hand is based, on the hypothesis
that leaders can exploit a need of the follower. These particular needs are not based on quid pro
quo transactions, but higher order needs. These needs are those of the total person, and are
closely aligned with the internal motivational factors of the follower.
So at one end of the spectrum we have transactional leaders that are making many "deals" with
those being led. On the other end of the spectrum, we have transformational leaders, which are
looking to satisfy a greater need of an individual.
Difference between Transactional and Transformational Leaders 14
Transactional leadership
Transformational Leadership
Leadership is responsive
Leadership is proactive
Works within the organizational culture
Work to change the organizational culture by
implementing new ideas
Transactional leaders make employees achieve Transformational leaders motivate and
organizational objectives through rewards and empower employees to achieve company’s
punishment
objectives by appealing to higher ideals and
moral values
Motivates followers by appealing to their own Motivates followers by encouraging them to
self-interest
transcend their own interests for those of the
group or unit
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11) SOME TERM USE IN TRANSACTIONAL LEADERSHIP SYTLE
A) Value
The role of ‘value’ in transactional leadership is based on the idea that people follow the
leader because the leader somehow adds value to their lives. 15 The benefits could be social,
political, economic or even spiritual. Followers follow because of the value the leader adds to
them. The leader benefits from the value brought by those who follow him. It’s reciprocal and
the leadership equation continues successfully unhindered as long as everyone can clearly see the
benefit of the relationship.
b) Invest
With Transactional Leadership once you’ve discovered the value someone provides you
begin to invest your time and energy in that person or idea. 16 The same is true for transactional
leaders. You invest in someone or in their idea because you’re convinced you’ll get more out of
it than you put into it. Think of the coach with the perfect game strategy leading a team of underskilled players. It takes more than a winning strategy or remarkable talent. Both are necessary to
win the game.
c) Buy In
Once the Transactional Leader has begun to leverage the ‘value’ of his followers and
started ‘investing’ in them, his next step is to achieve ‘buy-in’ from those who follow. For the
Transactional Leader ‘buy-in’ is critical. 17
For owners, business is personal. It’s more than their livelihood, it’s an expression of
who they are. But employees are different. For an employee a job is what they do, not who they
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are. When casting vision transactional leaders are looking for buy in. Buy-in is more than
positive affirmation. It’s a whole-hearted acceptance of the vision cast by the leader. Buy-in is
the difference between an owner and an employee.
d) Contribute
The Transactional leader is looking for contributors. Contribute something to the project,
the company, the team or find yourself in search of a new job. The need to make a contribution
drives some to be back-stabbing, cold-hearted corporate climbers. While others simply settle in
to lower circles of responsibility, their contributions limited to the minimum required amount of
effort necessary to provide value to the team. 18
Transactional leaders search for contributors the way entrepreneurs search for venture
capitalists. There’s always one more sale to make, one more quota to break. Contribute or die
and if you contribute the most we’ll give you a fancy gold watch!
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12) CONCLUSION
The transactional style of leader believes in motivating through a system of rewards and
punishment. If a subordinate does what is desired, a reward will follow. But, if he does not go as
per the wishes of the leader, a punishment will follow.
This style is most often used by the managers. It focuses on the basic management
process of controlling, organizing, and short-term planning. The exchange between leader and
follower takes place to achieve routine performance goals.
However, this is not the ideal leadership style to be practice in the real world
organizations. The combination of the transactional leadership style & the transformational
leadership style will gain more benefits & advantages rather than we only practicing the
transitional leadership style alone.
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BIBLIOGRPHY
1
http://www.managementstudyguide.com/transactional-leadership.htm
2
http://www.money-zine.com/Career-Development/Leadership-Skill
3
http://www.leadership-and-motivation-training.com/transactional-leadership.html
4
http://www.leadership-and-motivation-training.com/transactional-leadership.html
5
http://www.leadership-and-motivation-training.com/transactional-leadership.html
6
http://www.leadership-and-motivation-training.com/transactional-leadership.html
7
http://www.leadership-and-motivation-training.com/transactional-leadership.html
8
http://www.leadership-and-motivation-training.com/transactional-leadership.html
9
http://www.leadership-and-motivation-training.com/transactional-leadership.html
10
http://www.leadership-and-motivation-training.com/transactional-leadership.html
11
http://www.leadership-and-motivation-training.com/transactional-leadership.html
12
http://www.leadership-and-motivation-training.com/transactional-leadership.html
13
http://www.brighthub.com
14
http://thefarpoint.org
15
http://thefarpoint.org
16
http://thefarpoint.org
17
http://thefarpoint.org
18
http://thefarpoint.org
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