What is transactional leadership? Here’s the full discussion

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What is transactional leadership? Here’s the full discussion

What is transactional leadership Heres the full discussion

The leadership style varies from the company to the company. Some organizations provide freedom to their managers, while other companies want a cookie-cutter approach to maintain a vision, mission statement, or image. Although there are dozens of leadership styles, transactional leadership is a managerial model that values ​​self-motivation and reprimanding poor performance.

In the following article, you will learn what transactional leadership is and whether it is suitable for you and developing your business.

What is transactional leadership?

Transactional leadership is a managerial style that promotes compliance and achieving goals through supervision, organization and award systems and punishment. The results-oriented approach to this management works well with employees who have self-motivation and get rid of those who are not committed to shared goals.

This leadership style is a model that can achieve goals with the right individual group. However, transactional leadership does not focus on changes or overall organizational improvements. Instead, this aims to achieve short-term and long-term goals while maintaining a routine, suitability, and status quo within the company. Awards or punishments are therefore referred to as “transactions.”

By understanding this type of leadership, you can create a destination system if you are a manager or choose whether you want to be part of the company based on transactional leadership if you are a new employee. This system is not for everyone, but if you are motivated, you can see very good results personally and throughout the company.

Who uses transactional leadership?

Transactional leadership is usually used by middle and upper management in medium or large companies. In most cases, the company is established and does not seek change in the organization. Organizations also have fixed methods and operations that need a little concession or creativity to complete work.

In particular, the company in sales or manufacturing has little need for change and one cohesive goal is fulfilled when people perform at their highest level. Performance recognition by meeting quota is common in business with transactional leadership. For example, companies with a large sales team might use commissions as a type of transactional leadership method.

In the creative field such as advertising or marketing, transactional leadership is not always successful. Creative professionals need flexibility to bring up ideas, slogans, or offers for their products. Transactional leadership follows a rigorous rubric, so it is often contrary to advertising material and can reduce moral rather than motivating individuals.

Transactional leadership characteristics

Transactional leaders work with subordinates and other managers to achieve results, but they are not the type of person who sees something from an external perspective to facilitate change. Employees may see these people as people who are hard but fair. Not all the quality of a transactional leader may appear desired, but they can work in the right atmosphere. Here are some transactional leadership traits:


The company’s structure and culture ranks the top in the list of important in transactional leadership. Everything goes through the right channel and process. For example, if you have an idea to increase sales, you might be asked to tell your manager who then reports it to top level management. Passing this process is often regarded as disobedience.


In transactional leadership, everyday business operations are rigid. All decisions are final from transactional managers, but the responsibility of achieving goals is also on their shoulders. As a result, transactional leaders tend to manage micro employees to make sure everything goes like a clockwork.


Transactional leadership does not aim to change one of the company’s processes. They want everything to stay exactly as in business, which may look passive or laissez-faire.


Practicality and pragmatism are the two mains of this leadership style. They will make cold-headed decisions based on the constraints and information available. It rarely leads to thinking outside the box.

Motivation by personal interests

Both employees and transactional leaders have something to obtain by achieving their quota or achieving personal goals, team work is often less valued or not at all. In contrast, transactional leadership aims to find the best employees to achieve their goals and rise to top management.

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Because of the importance of status quo in business, transactional leaders are rarely proactive. Instead, they are reactionary, only make changes in the department or organization when their hands are forced.

Remember, it’s up to you to research the managerial style of a particular company. Asking questions during the interview and conducting research on companies is the two best ways to know the managerial style and quality of leadership in the organization.

Advantages of transactional leadership

Although rigid transactional leadership structures may seem unattractive to some people, it has several advantages over other types of managerial styles. Here are some of the main advantages of transactional leadership at work.

Achievement of objectives

Transactional leadership facilitates the achievement of goals. Most often, companies with transactional leadership have short-term goals, which are often more feasible and more realistic than long-term goals.


Despite the short-term goals set by transactional leaders often challenging, this encourages motivation and productivity. This is where the award system and punishment play. By achieving goals, employees receive monetary compensation, which are more attractive to individuals who have self-motivation.

Clearly defined structure and role

In the organization with this type of leadership, every aspect of the department is clearly defined from top to bottom. As an employee, you know your specific role and what is expected of you at any time. This eliminates the ambiguity of similar positions within the company, while eliminating duplication or overlapping work between coworkers.


In established companies, those who have fixed procedures, or organizations with young or inexperienced labor, transactional leadership is very effective. The roles and structures are clearly defined to play a role in this effectiveness, because they do not need to play with existing procedures. In addition, this direct approach can identify areas of bad problems or employees in the system with effective charge.

Success gauges

In some companies, success is not easily defined. Transactional leadership sets simple and clear goals and guidelines. For this effect, both employees achieve the objectives set for them or not. This success gauges can help companies enhance the process or increase appreciation and punishment for employees.

If you’ve been an employee in an organization without transactional leadership, you might find that clear goals and rewards are not attached to every company. This type of leadership may seem more interesting for you if you have ever worked for a company without clear direction or strong leadership.

Shortcomings of transactional leadership

Like other management systems, transactional leadership also has shortcomings. Although this loss may not appear in all businesses that apply transactional leadership, it is important to know employees and managers.

Focus on short-term goals

Short-term goals are always good to have in any business, but must be balanced with long-term goals. Without long-term goals or tools such as goals and main results, companies can fight when facing difficulties. The emphasis only in short-term goals can also result in a lack of preparation or vision for the future, especially in changes in market demand or consumer preferences.

Limit innovation and creativity

Rigid leadership structure gives employees a special role. As an employee, you are expected to complete the necessary work and a few others. Rarely a manager asks for your opinion or input on how to improve business procedures and processes. This idea is related to the entire company. As a result, businesses that practice transactional leadership are often left behind in innovation and creativity.

Ineffectiveness of the award system

While certain employees develop in transactional leadership models, others are negatively affected. Employees may suffer due to low work spirit and or just perform enough not to be punished or fired. This ineffectiveness can manifest itself in the company’s growth, because it might only meet but does not exceed its expectations.

Expensive mistake

Transactional leadership has a Laissez-Faire leadership style, so that transactional leaders do not often provide feedback to employees unless they fail to meet their expectations or quota. Unfortunately, an employee might have done their work untrue for weeks, months or a quarter without proper supervision. Fixing these errors often proved expensive for organizations.

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Chaos between subordinates

Transactional leadership often can make subordinates conflict. Instead of working as a team, individuals can steal prospects or sales of other employees to meet their quota, create chaos throughout the office.

Excessive dependence on the leader

Even if transactional leaders have knowledge and experience in the industry, excessive dependence on them can cause problems. At some point, some of these managers might begin to just listen to their own voices, just because they don’t have to answer their subordinates. This can cause a lack of motivation within the manager itself or a demeaning attitude towards employees.

As an employee, this transactional leadership weakness might make you disappointed. However, managers in transactional leadership organizations may find that the benefits are still greater than their losses.

Transactional Leadership Differences and Transformational Leadership

If thinking about transactional leadership makes you feel uncomfortable, don’t worry. Transformational leadership is the opposite. Unlike transactional leadership, transformational leadership aims to change the status quo or motivate employees to bring the company to the next level of profitability and success.

Transformational leadership mainly focuses on motivation and collaboration through team work at each level of the company, including organizational hierarchy. This allows you to release transactional leadership stiffness and appear with creative or innovative ideas that can improve the image or profitability of the company. This leadership style encourages personal, emotional, and professional growth in addition to money compensation.

Small businesses often benefit from transformational leadership when they overcome difficulties related to brand growth and development. As an employee of one of these companies, you are often asked what you will do in certain scenarios, and your input on how to improve operating efficiency.

Top management can also find transformational leadership useful for achieving a comprehensive vision for the company. In hybrid-style companies, they can then continue this vision to transactional middle managers.

Through transactional leadership, the company rewards the best performing and motivates others to do the same. If you have never been in a company that uses transactional leadership, it may take time to get used to this practice. However, with patience and hard work, you might find that organizations with transactional leadership can help you achieve company goals and produce the best.


That is the discussion of transactional leadership and their strengths and shortcomings. This leadership style is indeed not suitable to be adapted to small businesses with agile systems and members who need creativity and companies that are in order to require innovation.

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