Transactional leadership was first described by Max Weber in 1947 and again by Bernard Bass in 1981. Transformational and transactional leadership are direct opposites — while the transformational leader relies upon internal motivations to achieve goals and objectives, the transactional leader motivates with rewards and punishments.
Transactional leadership is a style that has both positive and negative consequences and should be used only in specific business environments.
Followers that are motivated by a clearly defined system of rewards and punishments will work well under a transactional leader. There is often a quid pro quo arrangement to this relationship. For example, if a worker accomplishes a set goal or objective, he will be rewarded with a bonus. Alternatively, if he fails to achieve this goal or objective by a certain date, then a negative ramification is going to occur.
Furthermore, there is a degree of certainty to this relationship. The transactional leader must clarify beyond a doubt what is expected with clear goals and objectives. The followers must be clear about what needs to be accomplished and the methods for accomplishing their goals.
Another potentially positive consequence of transactional leadership is a clear line of authority from the leader to the follower. A transactional leader is responsible for making sure that their followers are working on goals and objectives in alignment with overall organizational objectives. There is no dispute as to who is in charge and generally little dispute about what the goals and objectives are.
Transactional leadership is effective in areas where it is clear what goals and objectives need to be accomplished and there is little room for creativity and innovation or alternative methods for goal accomplishment. For example, an effective manufacturing plant must have a well thought out process for producing a product. This process needs to be well defined with no room for error. Therefore, a transactional leadership style in the production of this product is appropriate and effective.
All leadership styles have deficiencies and weak spots. The transactional leadership style is flawed because it motivates at a base level only. Reward and punishment do not motivate at the higher levels of human development and thought. Therefore, the transactional style of leadership only works well with followers performing tasks and processes that are well designed and produce dependably strong results.
This style is poor if higher level thinking skills need to be utilized. Creativity is limited with the transactional leadership style because goals and objectives cannot be simply defined with a set process. For example, if a team is brought together to improve and redefine a process, this project requires creativity and high level thinking skills that are not easily defined. The quid pro quo system of rewards and punishments will not be effective here.
In addition, the transactional style of leadership will limit followers who wish to engage in a professional environment at a higher level. These types of followers are motivated individually in unique ways. Transactional leadership is not effective at motivating at this level. Reward and punishment are too basic of a motivator for this level of employee.