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Transactional Leadership

Transactional leadership emphasizes results, stays within the existing structure of an organization and measures success according to that organization’s system of rewards and penalties.

Transactional leaders hold the formal authority and positions of responsibility in an organization.

And responsible for maintaining routine by managing individual performance and facilitating group performance.

Transactional, or managerial, leaders set the standards for workers and do performance reviews are the most common way to judge employee performance.

Transactional leaders are expected to do the following:

  • Set goals and give specific direction about what they demand from the employee and how they will be rewarded for their efforts.

  • Provide productive feedback on performance.

  • Focus on increasing the efficiency of established routines and procedures and show concern for following existing rules rather than making changes.

  • Establish and standardize practices that will help the organization become efficient and productive.

  • Respond to deviations from expected outcomes and identify corrective actions to improve performance.

Definition of Transactional Leadership

Transactional leadership styles are more concerned with maintaining the normal flow of operations. Transactional leaders use disciplinary power and an array of incentives to motivate employees to perform at their best.

The term “transactional” refers to the fact that this type of leader essentially motivates subordinates by exchanging rewards for performance.

A transactional leader does not look ahead to strategically guiding an organization to a position of market leadership; instead, these managers are solely concerned with making sure everything flows smoothly today.

A leadership style based on the setting of clear goals and objectives for followers and the use of rewards and punishments to encourage compliance.

Transactional leaders are those who guide or motivate their followers towards established goals by clarifying role and task requirements.

Transactional leadership sometimes referred to as managerial leadership; focuses on the interactions between leaders and followers.

Related: Difference between Leadership and Management

The core of transactional leadership lies in the notion that the leader, who holds power and control his or her employees or followers, provides incentives for followers to do what the leader wants.

Transactional leaders utilize rewards and punishments to motivate their followers. While it has limitations, it can be effective in certain situations.

A transactional style can work well in cases where the problems are clear-cut and simple.

One of the major problems with this style is that it does not encourage group members to look for solutions to problems or to contribute creatively, which is why transactional leadership is not the best choice in complex situations where input from group members is required.

Related: Transactional & Transformational Leadership Styles Needed for Organization Success

The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981.

Characteristics of Transactional Leadership

  • Revel inefficiency.

  • Very left-brained.

  • Tend to be inflexible.

  • Opposed to change.

  • Focused on short-term goals.

  • Favor structured policies and procedures.

  • Thrive on following rules and doing things correctly.

Advantages and Disadvantages of Transactional Leadership

Transactional leadership works well in organizations where the structure is essential.

Transactional leadership is not the right fit for organizations where initiative is encouraged:

Advantages of Transactional leadership

  • Awards those who are motivated by self-interest to follow instructions.

  • It gives an unambiguous structure for large organizations, systems requiring repetitive tasks and infinitely reproducible environments.

  • Achieves short-term goals quickly.

  • Rewards and penalties are defined by workers. Disadvantages of Transactional leadership

  • Rewards the worker on a practical level only, such as money or perks.

  • Creativity is limited since the goals and objectives are already set.

  • It does not reward personal initiative.

Examples of transactional leadership

The transactional leadership model is likely to succeed in a crisis or in projects that require linear and specific processes

This model is also useful for big corporations, such as Hewlett-Packard, a company known for its extensive use of management by exception.

Many high-level members of the military, CEOs of large international companies, and NFL coaches are known to be transactional leaders.

Transactional leadership also works well with policing agencies and first responder organizations.

Bill Gates is a great example, a transactional leader.

Bill Gates was born in Seattle in 1955. In his early teens, he met Paul Allen at the Lakeside School, where they both developed computer programs as a hobby.

When Gates went to Harvard, Allen went to work as a programmer for Honeywell in Boston. In 1975, they started Microsoft, and by 1978, the company had grossed $2.5 million, when Gates was 23. In 1985, Microsoft launched Windows.

Bill Gates is now one of the richest and most influential people in the world.

As a transactional leader, he used to visit new product teams and ask difficult questions until he was satisfied that the teams were on track and understood the goal.


We can make sure that transactional leadership sets up a series of rewards and punishments to motivate members of the organization.

If these, individuals adequately meet the leader’s goals and expectations, they will be rewarded for their hard work.

On the other hand, if they fail or violate these goals and expectations, they may face punishment.

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