Transactional Leadership Style can be rigid and uninspiring; however, is it a reasonable ground for leadership development?

Arvind Mehrotra
5 min readAug 15, 2023

Transactional leadership often gets a bad reputation for being too rigid and uninspiring — but in my experience, it is among the best ways to achieve long-term growth.

After all, there is no right way to lead, and the best leaders will combine multiple styles (depending on the context) to get the best out of their teams. Transactional leadership, in particular, has the potential to develop high-value talent and allow team members to excel in specific tasks. But to achieve this, you need to leverage it correctly.

Some ways to identify transactional leaders are:

· They set clear expectations and standards for their followers

· They avoid taking risks or making changes that may disrupt the status quo

· They have a low level of emotional involvement with their follower

· The leader intervenes early, based on signs of problems or failure. Usually, the intervention will result in negative feedback, a reprimand, or another type of punishment.

· They discourage outside-the-box thinking and want employees to follow laid-down procedures and processes.

What Makes a Transactional Style Leader?

As the term suggests, this #LeadershipStyle entails a system of performance management where leaders dole out rewards in exchange for achievement and penalties due to poor performance. Hence, the term transaction.

However, unpacking the term, we see that transactional leadership is not so simple and can go beyond the scope of a traditional, rules-based, process-driven workplace.

The transactional leadership style thrives in an environment of clarity and stability. Expectation from the employees is known to them, and they also know the consequences of doing well on the job — or failing. The leader drives the team with rewards, incentives, verbal motivation, and other forms of positive reinforcement, or penalties, punishments, warnings, and other forms of negative reinforcement.

A well-articulated and stable set of rules also governs transactional leadership. For example, the nature of reinforcements cannot suddenly change from one employee to another within the same context.

Is Transactional Leadership Dated?

In recent years, workplaces have become increasingly more dynamic — which is both a good thing and a bad thing. The typical expectation startup employee is to work beyond regular office hours to get a product off the ground. On the other hand, they may reap massive rewards like accelerating up the corporate ladder and reaching a C-level position by their 30s.

A dynamic workplace requires a new fork of leadership known as transformational leadership. This type of leader is charismatic and not afraid of disruption. They are personally invested in the team member’s personal and professional growth and work in close synergy.

Yet, transformational leadership remains a skill, not a style, that implementation outright without hinting at the transactional model. It is because the very nature of gainful employment is transactional, and transactional leadership skills allow employees to find a healthy and predictable balance between work and its rewards/consequences.

In a way, the recent trend of #QuietQuitting is a response to transformational leadership taken too far without the necessary transactional leadership abilities to provide a balance.

How Does a Transactional Leadership Style Aid in Growth?

There are four reasons why transactional leadership are more able to drive growth:

1. Achieving quantifiable targets

Growing companies rely on fast-paced delivery and impressive sales and support numbers to stay ahead of the competition. These teams regularly use a transactional leadership style to enforce a reward and corrective action system. Poor performers will receive training or may be moved into a different role, while top performers receive rewards regularly to encourage the same behaviour in others.

2. Acting fast in short-term projects

Crises and short-term projects are great candidates for a transactional leadership style. For example, incentives to employees can be overtime pay or a bonus to meet targets within the notice. There is no sense of personal compromise, as the reward is apparent, unlike in transformational leadership, where this type of teamwork relies mainly on inspiration.

3. Tracking progress over time

Long-term projects must embed transactional leadership principles in one way or the other. It is what makes it possible to track progress over time, quantify targets, and reward performers for reaching them. For example, let us say that a company is trying to improve its diversity composition index over five years. It is a good idea to incentivise affirmative action in hiring and diversity recruitment to actually — and materially — push the needle in the right direction.

4. Driving transparency

Many organisations adopt transactional leadership because it is easy to implement and maintains a clear line of control and accountability. Establishing and maintaining control can be necessary in large organisations with complex hierarchies. It is particularly true for front-line teams and field services professionals. Transactional leaders find it easier to manage large teams and prevent interpersonal conflict or workplace bias issues.

How to Become an Effective Transactional Leader

As an organisation leader, you need to have both transactional and transformative skills and the capacity to discern which situation is aligned with which style. You can improve by learning about the different forks of leadership styles, such as compassionate leadership, visionary leadership, and others, in addition to these two models.

Another critical aspect of excelling as a transactional leader is having the right key performance indicators (KPIs). A robust KPI system, supported by rewards & recognition and employee training, is the secret to the success of the transactional leadership style.

Which type of organisational leader are you? Let me know in the comments below or at Arvind@am-pmassociates.com.

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Arvind Mehrotra

Board Advisor, Strategy, Culture Alignment and Technology Advisor