Transactional Leadership

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What is Transactional Leadership? Meaning.

Transactional Leadership is the idea that effective leadership is based on a reciprocal exchange between leaders and followers. "Quid pro Quo". Conventional reward and punishment are used to gain compliance from the employees.

Transactional leadership involves giving employees something in return for their compliance and acceptance of authority, usually in the form of incentives such as pay raises or an increase in status. The theory was propounded in the 1970's by James McGregor Burns, building on earlier work of Max Weber (1947). The theory is is closely linked with its antithesis, Transformational Leadership, which involves moral, rather than tangible, rewards for compliance.

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.

Typical Transactional Leadership behaviors

  1. Contingent Reward. Refers to leadership behaviors focused on exchange of resources. That is, leaders provide tangible or intangible support and resources to followers in exchange for their efforts and performance.

  2. Management by Exception - Active. Refers to monitoring performance and taking corrective action as necessary. The focus of management by exception is on setting standards.

  3. Management by Exception - Passive. A less active version of management by exception in which leaders take a passive approach, intervening only when problems become serious.

  4. Laissez-faire. Can be thought of as non-leadership or the avoidance of leadership responsibilities

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.

Modern organizational experts or theorists would probably not recommend this approach to leadership anymore, although it is probably still quite prevalent.

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Compare with: Management by Exception  |  Leadership Continuum  |  Covert Leadership  |  Charismatic Leadership  |  Seven Surprises for New CEOs (Porter)  |  Active Listening  |  Storytelling  |  Chain of Command  |  Chairman of the Board  |  Chief Executive Officer  |  Management by Exception  |  Span of Control  |  Transformational Leadership  |  Seven Habits (Covey)  |  Level 5 Leadership (Collins)  |  EPIC ADVISERS  |  Core Group Theory  |  Strategic Stakeholder Management  |  SMART  |  Path-Goal  |  Leadership Continuum  |  Situational Leadership  |  Theory X Theory Y  |  4 Dimensions of Relational Work  |  Leadership Styles (Goleman)  |  Strategic Intent  |  Results-Based Leadership

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