[Go Back to Articles list] [Give your comments] [Newtimes website]

The Leadership Challenge:Transactional or Transformational Leadership?
27th August 2007 ( Published by the SMEs Today Magazine -August issue)

“Clearly the leader who commands compelling causes has an extraordinary potential influence over followers” - James Macgregor Burns

The very essence of leadership is that you have to have a vision. It’s got to be a vision you articulate clearly and forcefully on every occasion.  Most major corporations appear to operate on the basis of their CEOs’ ideas. Once their term ends, the organizations get back to the drawing board with new visions and objectives. This is not a clearly understood scenario, particularly in the banking industry where the turnover of CEOs is on the higher side.

The scenario is nevertheless interesting. It does not have clear-cut answers though, but perhaps some insights into leadership styles could give some direction. We must however first understand some basics about management which is today highly dynamic, in line with continually changing operational environment.

Management, simply put, is about manipulation of organizational resources to achieve desired results. This occurs through 5 main processes: planning, organizing, controlling, staffing and leading. Planning is about determining what resources are required, how and when they should be applied and by whom. Organizing is about departmentalizing or allocation of resources and responsibilities in the organization. Controlling on the other hand is about setting and observing standards of work performance, products and so on in the work place. Finally, staffing is about hiring and maintaining the right human resource in an organization at all times.

For all these management processes to work effectively they must be well co-coordinated and this mainly happens through the leadership process. Leadership can therefore be loosely defined as the ability of an individual to influence, motivate, and enable others to contribute towards the effectiveness and success of the organizations of which they are members. The CEO, in this case is charged with this responsibility of leading, guiding and ensuring organizational objectives are achieved. This leadership process is dynamic mainly because it cannot exist in isolation as there is need to recognize changing circumstances in the business environment and more so the industry.

Herein, the leader is bestowed the role of managing for performance. He must satisfy the interests of the shareholders first and foremost, while at the same time ensuring that his leadership skills harmonize the interests of other stakeholders for smooth continuity of the organization. There are several ways to approach this and according to James McGregor Burns, a presidential biographer and an authority on leadership studies, there are two popular approaches based on Transactional and Transformational leadership.

Transformational leadership however starts with the development of a vision, a view of the future that will excite and convert potential followers. This vision may be developed by the leader, by the senior team or may emerge from a broad series of discussions. The important factor is the leader buys into it, hook, line and sinker. Transactional leadership is highly practiced particularly in our country where the value of honesty is foreign to many. This concept is geared towards obtaining quick results. Goals and objectives are short term and results are expected immediately and everybody is keen on achieving results. Transactional leadership is based on a transaction or exchange of something of value the leader possesses or controls that the follower wants in return for his/her services. The relations of most leaders and followers are transactional-leaders approach followers with an eye to exchanging one thing for another: jobs for votes, or subsidies for campaign contributions. Transactional style of leadership is also pre-occupied with guarding of organizational culture.

In this context, culture is about the norms and values that are peculiar to an organization. Some organizations for example encourage their staff to develop themselves through continued learning. They become learning organizations and those who do not learn fall by the wayside.

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. Transactional leadership is based in contingency, in that reward or punishment is contingent upon performance. For instance, 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. Despite much research that highlights its limitations, Transactional Leadership is still a popular approach with many managers. Indeed, in the Leadership vs. Management spectrum, it is very much towards the management end of the scale. It is notable that, in transactional leadership power is derived from the position and authority in the organization.

On the other hand, the Transformational Leader seeks to transform the organization; there is also a tacit promise to followers that they also will be transformed in some way, perhaps to be more like this amazing leader. In some respects, then, the followers are the product of the transformation. One of the traps of Transformational Leadership is that passion and confidence can easily be mistaken for truth and reality. Whilst it is true that great things have been achieved through enthusiastic leadership, it is also true that many passionate people have led the charge right over the cliff and into a bottomless chasm. Just because someone believes they are right, it does not mean they are right. Paradoxically, the energy that gets people going can also cause them to give up. Transformational Leaders often have large amounts of enthusiasm which, if relentlessly applied, can wear out their followers. Transformational Leaders also tend to see the big picture since they are visionary. These leaders endear themselves to their people and influence others to see things their way. They also set long term organizational objectives, which safeguard continuity. Like wartime leaders, however, given the right situation they come into their own and can be personally responsible for saving entire companies.

They further empower their people thus giving them a free hand to control themselves. Empowerment means that people are licensed or given freedom to solve problems without reverting to the leader and are even allowed to risk to some extent and they sometimes make mistakes for which they are not punished. These leaders deliberately coach and develop their people. Their power therefore emanates from ability to influence network of relationships. They promote an environment where everybody becomes a member of a family. A family that is associated with the workplace. They even implement workable successions plans, actionable in the event of positions falling vacant. When these CEOs finally leave office, everybody moans.

Luckily, their visions are never rubbished after their departure. This is because the successors find no need to implement immediate changes to systems that are already working well. The aspirations of these transformational leaders therefore live long beyond their time in office. A great example is Nelson Mandela who even today is not only a symbol of excellence in leadership in South Africa but the world over. Perhaps, transiting to transformational leadership could lead to less crises management and drastic change of organizational direction locally once there is leadership change.

Transformational leadership and transactional leadership are not at odds with one another, but complement each other as the circumstance dictate. There is no magic formula or checklist that dictates when one is more relevant than the other in any given situation. When to make the transition is an art borne of experience and education.

The writer is a Management and Entrepreneurship Consultant in Newtimes Business Solutions

[Go Back to Articles list] [Give your comments] [Newtimes website]