The Difference Between Transactional And Transformational Leadership

Two of the most popular types of leadership are transactional and transformational. But if you don’t know what the real difference is, don’t worry, you’re not the only one.

We’ve previously answered ‘why is leadership important?’ And now, in this blog, we delve into not only the difference between and importance of both of these leadership styles, but the benefits, drawbacks, and key competencies that underline them.

Transactional leadership 

Transactional leadership describes a style where leaders promote compliance using a system of rewards and punishments. This transactional relationship is the more traditional form and typically follows existing processes and policies. Transactional leaders measure their team’s performance closely, monitoring daily progress.

In this type of leadership, goals are also used for individuals – rather than collective aims. It’s very much a case of extrinsic motivation. Issues tend to only arise if practices aren’t complied to, and with such explicit guidance, this is rarely the case.

The transactional perspective takes the stance that any problems are reacted to – rather than the leader being proactive. Constructive feedback is important in this type of leadership.

Transformational leadership

 Transformational leadership, on the other hand, is much more proactive. Transformational leaders motivate, inspire and encourage staff to innovate. New ideas are expected, and with these the business will transform for the better – hence the term ‘transformational leadership’.

The leader’s vision and values are followed by employees, but not because of a reward. Instead, they are motivated because the transformational leader inspired them. It’s a case of ‘lead by example’.

 Whilst the transformational theory of leadership looks to appeal to the entire group’s interests, there is still an individual focus. Their strengths and weaknesses are assessed, and the approach looks to enhance these capabilities, plus hear their views.

Transformational and transactional leadership characteristics

As there is such distinction between the two types of leadership, the behaviours they exhibit are different too.

Transformational leaders are typically seen as a mentor, attending to their team’s needs and being empathetic. Often, they will create an interpersonal relationship with each one. With inspiration playing such a huge part in transformational leadership, leaders encourage staff to leave any comfort zones. The influential leader will be a driver of change, delivering their vision via effective communication. It needs to be clear, meaningful, powerful and engaging. Motivation leadership skills are also essential.

Transactional leadership competencies include being pragmatic. They are also results-focused, so they can reward performance when necessary. Their way of working with employees is quite directive – they will make decisions and provide the instructions for work. They are more like a ‘manager’ whereas transformational leadership aligns more closely to leadership in management.

Transactional leadership vs transformational leadership

 Now you know the difference between the two and the variation in their characteristics, you might wonder, which is better? Both have their benefits and drawbacks.

The strengths of transformational leadership include the promotion of positive feelings, which in turn increases motivation, engagement, and ultimately, productivity. This style of leadership also takes a long-term view – working to keep employees invested in the business not just for rewards, but to achieve organisational success.

A disadvantage of this style is that because it has a lack of structure, it also lacks the necessary detail. On top of this, its dependency on passion may mean that visions don’t actually align to reality or logic.

Transactional leadership is beneficial because it promises recognition and reward, thereby providing employees with the necessary motivation. And, as it has clear structure, goals are clearer and easier to achieve.

However, this rigidity might prove ineffective for some employees. Not only does it restrict creativity, but it can result in employee dissatisfaction, due to the dictation of policies.

Both have their strengths and weaknesses, and which is most effective depends on the type of business. Transactional leadership has proven to work well in sports teams, whereas transformational has seen success in innovative start-ups. However, they don’t have to be disparate. There is ‘blended leadership’, where a leader uses a mixture of each style to suit the business’ needs.

Effective leadership skills with Bright Direction Training

You might not know the type of leader you want to be or have the necessary skills. Thankfully, there’s the option to do a Leadership and Management apprenticeship. You’ll learn the essential competencies like communication and problem-solving, plus benefit from practical experience too. At Bright Direction Training, we offer such apprenticeships – and they’re aligned to ILM qualifications.

To find out more about how our qualifications will benefit you, get in touch with our friendly team today. We can also tell you more about why leadership development is important. Call us on 01204 859 859, email us at info@brightdirectiontraining.co.uk, or fill out our contact form here.

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