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There have been a number of studies undertaken with the hope of discovering whether transactional or transformational leadership, leads to greater employee engagement. On the surface one might hypothesis that transformational leadership would be the preferred style by employees however the findings are not that clear cut and there are some important distinction to be gained for both leaders and organisations.

In reality both forms of leadership have their place in the appropriate context, however many organisations will require a blend of leaders who display the skills of  transactional and transformational leadership.

So let’s first look at some broad definitions for both leadership styles and discuss how they are best utilised in an organisation.

Transactional Leadership

This style is also referred to as managerial leadership and this style of leadership tends to

– Use reward and punishment as the basis for performance motivation

– Requires the leader’s instructions to be closely adhered to by the team members with regard to procedures, rules and processes. There is no room for negotiation on this

– Dictate that team members are closely monitored to ensure compliance with rules and procedures

This kind of management style works best with frontline teams delivering systemised products or services for example employees in a McDonald’s Fast Food Outlet, call centres, production teams in manufacturing environments and even some sales environments appear to benefit from transactional leadership.

In this kind of environment a successful transactional leader is extremely good at setting and managing expectations in line with clearly formulated rules, procedures and processes to give consistent and predictable outcomes. These business environments are process driven and generally have no room for individual innovation or creativity. However these employees are often best placed to provide insights into better ways of doing things, they most often share their thoughts and ideas for innovation with family, friends and work colleagues but are rarely asked for input.

Transformational Leadership

This style of leader on the other hand goes beyond managing the day to day tasks and processes of their team and operate more strategically. The transformational leader is focused on team building, motivation and collaboration to achieve team cohesion and  business outcomes. They use their ability to inspire and influence team members to perform. This environment is one where both personal and professional development is encouraged and supported.

Transformational Leaders tend to:

– Use charisma and enthusiasm to influence team performance, they are often seen as inspiring role models

– Generate an environment based on shared values and ethical standards

– Provide individual coaching and mentoring

– Promote cooperation and collaboration within their teams

Transformational leaders tend to set high expectations not just for their teams but also for themselves. Observers will often make the comment that they ‘walk their talk’.  These leaders are better equipped to manage their people through change and uncertainty than purely transactional leaders tend to be.

Here in lies the issue, the definitions of transformational and transactional leaders are just that – definitions, they do not accurately describe individual leaders. It would be easy to assume that transformational leadership is that panacea all businesses are looking for in a rapidly changing environment. However individual  leaders are typically a blend both transactional and transformational leadership characteristics and fall somewhere on the continuum between both extremes. The key is applying the applicable skills at the appropriate time to gain the best outcome. Organisations who equip their leaders to be agile in a swift moving environment will more readily harness the ability of their workforce to deliver on business objectives and gain the strategic market advantage all organisations desire.

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