Transactional Leadership
What is Transactional Leadership?
Transactional leadership is a management style focused on structured tasks, rewards, and penalties to drive employee performance and achieve specific organizational goals. This approach emphasizes clear hierarchical structures where leaders use incentives and corrective measures to maintain productivity and meet predefined targets. Often applied in fast-paced or results-driven environments, transactional leadership is thought to be effective for achieving short-term objectives through accountability and motivation. However, this approach is considered outdated by some critics, who favor a more well-rounded, transformational leadership style focused on authentic connection—which transactional relationships often lack.
The Basic Idea
If you grew up playing sports (or at least watching popular sports movies), you might have been exposed to the stereotypical coach. When players are misbehaving or not practicing hard enough, they’re reprimanded with burpees or running laps. If players aren’t scoring enough, they’re kept on the bench—but if they play well, they’re motivated with more time on the field.
The traditional coaching style depicted above, with clear rewards and penalties and an emphasis on short-term gains, falls under the category of transactional leadership. This approach is rooted in a give-and-take between leaders and followers and can be seen not just in sports but in all sorts of contexts, from military operations to manufacturing production lines and even emergency response situations. Despite this wide variety, there are some key characteristics that are seen across most transactional leadership environments:1,2
- There are clearly defined rewards for individuals who are self-motivated and follow instructions, along with clearly defined penalties for those who don’t
- There is an emphasis on productivity and rapid achievement to reach short-term and surface-level goals, with a focus on meeting certain metrics rather than self-improvement
- There is a streamlined structure and hierarchy, where the leader holds ultimate authority over subordinates
- There is an emphasis on transparency and fairness, where leaders ensure that all employees understand their roles and expectations
- Decisions tend to be reactive, with a focus on troubleshooting immediate problems instead of planning for or taking risks in pursuit of long-term growth
- Since the leaders’ focus is on practicality and productivity, there is a lack of emphasis on personal connection
Although coaching tactics focused on short-term performance may work well in the movies for churning out a series of stellar buzzer-beater or half-court shots, overly punitive coaching strategies often fall short in real life. In contrast, the most successful coaches (or at least the ones remembered most favorably) focus on a different type of goal: developing the athlete as a whole, leveraging a player’s intrinsic motivation, and focusing less on the specifics of points-scored or times run, and more on their overall efforts, ethic, and improvement. A good coach will know each player’s personal strengths and weaknesses and watch them closely to mold them into a better, higher-scoring athlete, all in pursuit of more game-time wins.
This style of management is called transformational leadership, where teams are incentivized by their genuine passion for the work, their organization, and a belief that their contributions are important. Fortunately, most organization leaders today recognize the value of transformational leadership, which allows for more flexibility, creativity, and trust in one’s team.3
"Transactional leadership occurs when one person takes the initiative in making contact with others for the purpose of an exchange of valued things. The exchange could be economic or political or psychological in nature: a swap of goods or of one good for money; a trading of votes between candidate and citizen or between legislators; hospitality to another person in exchange for willingness to listen to one’s troubles. Each party to the bargain is conscious of the power resources and attitudes of the other. Each person recognizes the other as a person. Their purposes are related, at least to the extent that the purposes stand within the bargaining process and can be advanced by maintaining that process. But beyond this the relationship does not go. The bargainers have no enduring purpose that holds them together; hence they may go separate ways. A leadership act took place, but it was not one that binds leader and follower together in a mutual and continuing pursuit of a higher purpose."
— James McGregor Burns, author of Leadership, 1978
About the Author
Annika Steele
Annika completed her Masters at the London School of Economics in an interdisciplinary program combining behavioral science, behavioral economics, social psychology, and sustainability. Professionally, she’s applied data-driven insights in project management, consulting, data analytics, and policy proposal. Passionate about the power of psychology to influence an array of social systems, her research has looked at reproductive health, animal welfare, and perfectionism in female distance runners.
