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Transformational & Transactional Leadership Theories


Organisational leadership is such a vital element, especially in shaping employees’ perceptions of work, responses to organisational change, and acceptance to organisational innovations to achieve high performance (Aarons 2006, p. 1162). Whereas transformational leadership aims at motivating and inspiring followers by paying close attention to their emergent needs, transactional leadership, on the other hand, seeks to bring about organisational exchanges and reinforcements aimed at evoking rewards that are solely reliant on performance (Aarons 2006, p. 1165).

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As Moss (2006, p. 2) posits, high-performance work-delivery is a working mode that offers promise for greater productivity and one that ensures that the followers are motivated and engaged; it summons a fair degree of autonomy among the elect. Endeavouring to achieve greater performance is often the aim of every leader. Studies indicate that this is only possible under situations where leaders exhibit leadership styles appropriate for a given organisation, in a given place and time in history (Moss 2006. p. 2).

According to Moss (2006, p. 2), studies opine that the HR roles under these categories of leadership could also be instrumental in shaping and moulding the structure of leadership under which an organisation performs best. The literature on this area holds that success in an organisation is primarily a mixture of transformational leadership with a contingent reward factor of transactional leadership that will ultimately create a viable atmosphere for higher performance (Moss 2006, p. 6).

An aqueous mixture of both transformational and transactional leadership is an outright winning combination for ascending the ladder to the peak of high performance. In contrast, studies on this area, according to Moss (2006, p. 6), contend that management by exception and laissez-faire are specific leadership styles that have time immemorial undermined efforts to introduce a high-performance culture. This usually occurs because the management systems under these structures are often under duress, invisible up to and including the moment things begin to awry within an organisation.

Given the close connection between high-performance culture and leadership style, it is usually imperative for organisations to select leaders who exhibit contingent rewards and transformational leadership skills (Moss 2006, p. 2). Series of research profoundly reveals serious institutional impediments, especially in selecting the satisfying abilities or individuals to be precise. Of particular worry is when recruiters opt to tilt the criteria of selecting leaders to conform to their pre-conceived job specification (Moss 2006, p. 2). Because of these shenanigans, it ultimately makes leadership a duty so hard to measure and rare to predict.

According to Moss (2006, p. 2), these lessons are evidently recurrent in organisations within the public sector, where this kind of leadership selection considers much of an individual’s track record as the ultimate measure of introducing high-performance culture. The literature in this area evinces substantial evidence that organisations that have always provided little evidence for high working performance are those that have picked leaders, not based on transformational or transactional leadership platforms. Rather, interviewers in such organisations use a different set of methodology when picking candidates (Aarons 2006, p. 1162).

Also, in organisations where high working performance has been given more weight, the selection panel usually insists that a leadership criterion is based on job specification. Organisations that score high under these considerations are those that endeavour to take their managers through training while emphasising on the importance of such criteria and placing such managers in the context of a given leadership framework.

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Essentially, such leadership domains focus on specific areas of competence usually experienced in several scores. As Aarons (2006, p. 1162) observe, these scores are explained in achieving active leadership and personal growth, fostering commitment, exploring diversity and moulding a learning culture, all of which points to the achievement of high performance which is after all the bone of contention in leadership and elsewhere.

Leadership Structure

Leadership expert and renowned historian, James MacGregor Burns, formally forwarded the idea of transformational leadership (Riaz and Haider 2010). By virtue of the power of their character and vision, transformational leaders adequately inspire their subordinates to alter their insights and prospects while motivating them to work towards a shared destiny. Transformational leaders engage subordinates by spending much time building trust while demonstrating great personal integrity levels, building bridges and reaching out to one another within the leadership hierarchy. As the name suggests, the eventual result is to transform an individual’s vision, goals, and sense of drive, thereby casting them into a single unit.

According to Riaz and Haider (2010), this leadership style normally focuses on the “bigger picture” and concerns for people and their emergent needs. Transactional (TRL) leadership enhances the leadership outcomes of transformational leadership. Contingent reward (CR) is a key TRL leadership outcome that greatly focuses on rewards to employees for their work. To motivate employees, strategies such as financial incentives, public recognition, and verbal praise are aligned to CR (Riaz and Haider 2010).

Novice employees are more comfortable with TRL leadership. In contrast, expert-novice employees frequently utilise TFL leadership and are more versatile with the different leadership styles to use in specific circumstances. Despite the numerous references to first-line nursing leadership, the relationships between leadership outcomes and the leadership styles on leadership satisfaction, and leadership effectiveness have not been explored extensively as per the expectations of different researchers (Leadership Research Report 2012).

Transformational and transactional leadership theories

Transformational and transactional leadership theories as developed by Bass (1985) and Burns (1978) are better explored by using a developmental or a constructive theory base to illuminate the technicalities in personality differences in leaders who chose either to exhibit transactional or transformational leadership styles. Of much significance to the study of leadership theories are transactional and transformational leadership theories (Odumeru and Ifenyi 2013, p. 235).

Over time, transformational theories and charismatic leadership styles have dominated leadership research. Several theorists, including Bass (1985 and 1996) have proposed various forms of transformational leadership with higher performance being the key factor in their considerations (Odumeru and Ifenyi 2013, p. 235). Whilst most authors contend that transformational and transactional leadership are differentiated in theory and practice, majority of these authors hold that both leadership styles supplement each other, thus resulting in a higher level of personal and organisational performance (Odumeru and Ifenyi 2013, p. 235).

Also, there is a popular belief that transactional leadership is a subsection of transformational leadership and that both of them work in tandem to produce higher performance. Transformational and transactional leadership theories delve much on a leader’s principles, standards, and personalities. According to Odumeru and Ifenyi (2013, p. 235), leadership research on transformational and transactional leadership theories focus on the need for achievement, orientation to power, personality, mental and physical capabilities, and emotional aspects.

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Early leadership research on leadership theories holds that individuals are born with certain traits, while some traits affiliate to strong leadership. Under these considerations, people with “right” traits would make the best leaders. However, identifying the ‘right’ traits for good leaders remains a great puzzle. Research on these puzzles occasioned the birth of further theories of leadership. Perhaps the behavioural theory is just another idea that informed the new thinking about leadership (Odumeru and Ifenyi 2013, p. 236). At the same time, trait theory holds that individuals are born with certain traits that make them exemplary leaders.

On the other hand, the behavioural theory contends that individuals can learn to be good leaders given that leadership is not caste in inborn abilities. Leadership styles based on behavioural theory stimulated research on power and leadership against the influences to undertake tasks to attain results. This consideration offers several openings through which we view leadership. Moving from this viewpoint, it is worthy to note that researchers have developed several other suitable models that shape leadership. Among those are transactional, transformational, Laissez-faire, contingency and situational leadership (Riaz and Haider 2010).

Overall, these theories of leadership hold that workers motivation is a key driver of individual and organisational performance, and recommend various management practices that have formed modern-day organisation practices (Klimoski and Zaccaro, 2002). These include employee empowerment, reasonable remuneration, job security, work design, monetary and non-monetary rewards, opportunities for growth and advancement, and training.

Transformational leadership

Among the greatest arguments forward by Bass (1985), as Dumdum, Lowe and Avolio (2002, p. 35) observe, transformational leadership naturally accounts for a bigger share of the variance in the performance outcomes, especially when compared with the somewhat traditional transactional leadership styles. For some time now, considerable evidence reliably show support for Bass’ original version having been backed by studies conducted under varying organisational settings (Dumdum, Lowe, and Avolio 2002, p. 35).

All the leadership styles apart from transformational leadership have often shown a greater propensity towards positive correlation with performance-based leadership initiatives ranging from junior class leadership to high-powered military performance (Dumdum, Lowe, and Avolio 2002, p. 35). In the past 30 years, transformational leadership concept has attracted the concern of scholars in various grounds of governance. Organisational leadership researchers have explicitly found it a necessary gradient in exploring their studies, especially with the aim of improving the quality of performance within an organisation (Givens 2008, p. 4).

Transformational leadership theory is premised on the assumption that leadership draws greatly from a leader’s abilities to motivate his/her followers to achieve more than what followers intend to achieve. In its idealised form, transformational leadership theory aims for the accomplishment of even greater and much better results (Givens 2008, p. 4). Bass originally forwarded transformational leadership as having four components, and these have been instrumental in leadership research, identified as inspirational motivation, individualised consideration, intellectual stimulation and idealised influence (Givens 2008, p. 4).

According to Givens (2008, p. 4), Buns in his study noted that a transformational leader is one with the ability to inspire followers to achieve higher performance by categorically factoring majorly on the followers’ abilities while helping them to align such values with those of the organisation. Also, Givens (2008, p. 4) opines that Burns in his theorisation identified transformational leadership style as a symbiosis between the leader and the follower constantly motivating each other concurrently to higher levels, which eventually results in some healthy interdependence between the follower and the leader.

Transactional leadership

The vintage standpoint from which to understand and analyse transformational leadership is to tailor it alongside transformational leadership structures (Odumeru and Ifenyi 2013, p. 358). Burns, in his study, concluded that transactional leadership consists of an exchange between a leader and his/her followers. Under this leadership consideration, the follower usually receives specific valued outcomes such as wages, incentives and prestige among other things; this is normally so, especially when they operate within the wishes of their leaders (Odumeru and Ifenyi 2013, p. 358). Borrowing heavily from Burns, Bass later noted in his studies that leadership research had been generally conceptualised either as transactional or as cost and benefit exchange practices (Odumeru and Ifenyi 2013, p. 358).

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Expressly, transactional leadership theories are founded on the ideology that relations between leader-follower are based upon a series of exchanges or better still, on the implicit bargains that exist between leaders and followers (Odumeru and Ifenyi 2013, p. 358). The implication created by these elucidations is that whenever the job or the environment at work fails to offer the necessary motivation, satisfaction, or direction, the leader normally steps into the picture. Notably, it is only through the leader’s actions and behaviours that such deficiencies can be eliminated (Odumeru and Ifenyi 2013, p. 358).

In this set of the arrangement, the leader has to clarify the performance criteria, categorically outlining what is expected of his/her followers. For that matter, clarify what they must receive in reciprocation of their outstanding performances (Odumeru and Ifenyi 2013, p. 358). To date, numerous transactional leadership theories have been forwarded, many of which have eventually received significant empirical acknowledgement. Some of the known examples include the path-goal theory, and the vertical dyad theory – both of which were institutionalised in the 1970s.

Unlike the complex transformational leadership structure, transactional leadership passes out as a one-dimensional, or unidirectional exchange that exists between the leader and the follower, and this kind of realignment usually serves to preserve and exploit the status quo (Leadership Research Report 2012). The role of a transactional leader in organisational management is to integrate and coordinate various organisational units or departmental functions within the system (Odumeru and Ifenyi 2013, p. 358).

Workplace motivation

These leadership theories have shaped modern organisational management practices. Fisher (2009, p. 348) argues that leadership theories suggest that managers are required to be aware of the various needs that influence the motivation of individual workers. The human relations approach presented ideas, which are relevant to modern-day business, especially regarding motivational influences, group norms, job satisfaction, effective leadership, as well as worker participation (King and Lawley 2013, p. 235). The need-hierarchy theory helps modern-day businesses in identifying areas where workers derive their motivation.

Some sources of motivation include reasonable pay to satisfy basic needs, good working conditions to satisfy safety and security needs, interpersonal relationships to satisfy social needs, promotion, responsibility, and recognition to satisfy self-esteem needs, and creativity, challenge, and interest to satisfy self-actualisation needs (King and Lawley 2013, p. 235). Similarly, the two-factor theory helps modern-day business to identify specific factors that may lead to workers’ dissatisfaction and those that could lead to workers’ satisfaction if fulfilled or not fulfilled in the workplace (King and Lawley 2013, p. 235).

Consequently, organisations today pay great attention to their human resource policies and the way their workers are treated by their supervisors and managers in terms of the working conditions, welfare, and salaries and benefits. Many companies, according to King and Lawley (2013, p. 235), always work to assure workers of their job security even at times when the company is facing financial difficulties, and even during downsizing situations. Besides, companies today adopt employee award programmes to recognise and reward employee achievements. Growth and promotional programs often accompany such programmes.

Additionally, job design has become a common practice in today’s companies. Bauer, Carpenter and Erdogan (2010, p. 345) summarised the implication of the acquired needs theory to modern-day business by emphasising the significance of understanding each worker’s motivation needs. This could be needed to gain approval from colleagues and supervisors in order to acquire influence over others or position that gives one high decision-making authorities (Fisher 2009, p. 348).

Follower motivation

Managers see employee motivation as a way to increase workers job performance. All the theories, for example, suggest that workers would put greater efforts and become productive if they believed their managers were giving them attention. This means that managers can motivate their subordinates to be more engaged in their work and increase productivity by paying attention to them and addressing their needs (Hall 2003).

In addition, they suggest that managers should improve the workplace atmosphere such that workers can develop a sense of belonging, interpersonal relationships, as well as collaborative relationships with the management (Hall 2003). It should also be noted that the existence as well as the importance of informal organisations, as suggested by the human relations approach, is highly accepted in the field of management (Cole 2004; Mullins 2013, p. 275). Cole (2004, p. 275) emphasises that informal organisations are essential to the operations of formal organisations since they promote communication, cohesion, knowledge sharing, cooperation, and coordination.

Mayo’s human relations approach, McClelland’s acquired needs theory, and Herzberg’s two-factor theory emphasise the need for employee training and professional development opportunities, as well as work design which are common best practices in the modern-day organisations.

Interpersonal relationship

The need for interpersonal relationships in the workplace suggested by the human relations approach, the two-factor theory, need-hierarchy theory, and the acquired needs theory imply that workers motivation can be best achieved by paternalistic leadership style. Under this leadership style, a leader assumes a more relationship-oriented kind of leadership. Amaratunga, Ginige, Haigh, and Thurairajah (2008, p. 315) described relationship-oriented leadership style as a kind of leadership that involves “encouraging participation, sharing power and information, enhancing self-worth, changing self-interests for an overall good, relating power to interpersonal skills, and believing in better performance when feeling good.”

Similarly, paternalistic leadership style involves offering fatherly leadership to subordinates by helping each one of them in each way possible (Anwar 2013, p. 109). Pellegrini and Scandura (2007, p. 567) note that paternalistic leadership involves taking a personal interest in subordinates’ lives off the job and attempting to promote their personal welfare. Arguably, this is what transformational leadership promotes.

This kind of concern is expected to motivate the workers to remain loyal to the manager or leader as well as to the organisation. Just as was proposed by the human relations theory, the paternalistic leader offers subordinates “a platform where they can give their ideas, but at the end, a mutual decision will be taken” (Anwar 2013, p. 109). This generally means that the leader cultivates a friendly working environment where the workers are encouraged to share their personal problems and are encouraged to make suggestions about issues related to their work. The leader provides social support to the subordinates and offers moral leadership by ensuring consistent, fair, and ethical practices and decisions (Anwar 2013, p. 110).

Competitive market

Constructive organisations do not only aim to survive or sustain their market base but also to thrive above their competitors. To meet these needs in the highly competitive market, organisations must persistently intensify their performance to outsmart their challengers. To achieve this, as Karamat (2013, p. 9) notes, leadership critically plays a major role in up an organisation performance.

However, prior research gives a miscellaneous opinion on the role of leadership in increasing an organisation’s performance. Therefore, these contradictory findings advocate a pressing need to analyse the role of leadership, which are presented at different levels in an organisation. Likewise, Leadership Research Report (2012, p. 2) indicates that every individual being has inherent personality, which makes every leader unique. Despite the character differences, there exist leadership traits that are common to successful management (Wells 2003, p.17).

Leadership at senior management levels

To start with the senior management level leadership, as (Wells 2003, p. 17) points out, senior managers have the sole responsibility to strategically manage the organisation, which the author indicates to involve not only formulating the goals or visions but to also ensuring that the goals and visions are implemented effectively. Further, Wells (2003, p.17) notes that strategic management is an incessant process, and thus for an organisation to achieve high performance, the managerial leaders must become strategic thinkers to change their organisational leadership and culture.

Similarly, Leadership Research Report (2012, p. 3) counters that at the senior management level the individual assigned has an obligation to delegate a task to the workforce, monitor the group’s work, mentor, motivate, and coach their workforce. The senior management team is liable for deploying and completing the implementation mechanisms developed for the strategic plan. In addition, the team is obliged to formulate mechanisms for involving their workforce serenely in steps, and to commit the time and resources necessary for achieving these ideals. A successful formulation normally results in high performance in the organisation.

However, Leadership Research Report (2012, p. 3) indicates that due to the work burden on the individual manager, obtaining positive results bears out to be more challenging to several organisations. Besides, junior employees tend to rebel with the management, as they are never part of the policy formulation, or perhaps, they may not be willing to abide by the stipulations.

Leadership at line management levels

In the line management level, leadership is subdivided into deferent levels. Leadership Research Report (2012, p. 4) describes the major levels of leadership as an individual contributor, first-level leader, mid-level leader, business unit leader, senior executive, and chief executive. Each level has its team of the workforce to manage and personal challenges. The first step in line management occurs when an individual contributor is offered a managerial obligation.

Interestingly, this compels the individuals to adopt a domineering habit (Leadership Research Report 2012, p. 4). The individuals become instructive and opinionated, thus demanding to get the work accomplished as opposed to forming the social lash with their co-workers. In addition, Wells (2003, p.17) shows that leadership traits increase significantly up the leadership ladder, thus promoting the upward trend of drive, and moulding the leaders with courage and willingness to face risks ideal for their organisation’s improvement. However, as individuals climb to a higher level of management, individuals responsibility lessens.

This motivates the individual to work harder with little fear in order to move to higher levels of management. At the same time, other co-workers get motivated as they too instigate the urge for leadership. This kind of leadership will most likely result in high performance in the organisation. On the other hand, individuals who sluggishly, or do not move up the management ladder get demoralised. This can as well lower an organisation’s performance as opposed to increasing the performance as planned.

Impact on organisational performance

Organisational performance, as Karamat (2013, p. 20) indicates, is determined by the yield realised when an organisations input is fully utilised. With regard to this context, organisational performance shows the relationship between the input and the achieved output in a firm, hence determining the growth of an establishment. Karamat (2013, p. 20) asserts that an organisation’s successes rely on three issues, such as efficiency and process reliability, leadership and relation to workers, and innovation and adjustment to the environment.

Considering the leadership impact of an organisation, Karamat (2013, p. 27) states that the size of an organisation affects the efficiency of managing the organisation, which translates to the leadership’s structure. However, for high performance, every organisation irrespective of the size requires aggressive leaders who can bring their teams together and can establish appropriate organisation composition, systems and structures as well (Karamat 2013, p. 29).

Therefore, leadership, as the key influencers in making a decision, determines what the organisations acquire, develop, and where the organisations deploy their resources. In addition, Karamat (2013, p. 29) acknowledges that leadership determines the conversion of these resources to product and services and co-relation with the organisations’ targets. Therefore, leadership even though not the only determining factor, is an essential component in the mix of factors that impact on an organisation’s performance (Karamat 2013, p. 30).

Impact on individual workers

Just like leadership impacts on organisational performance, prior research indicates that transactional leadership influence the individual’s performance in an organisation. Karamat (2013, p. 31) recognise this by indicating that transactional leadership facilitate the organisation to achieve their objectives capably by rewarding good performing employees and ensuring that their workers get the necessary resources that ease their work.

However, global completion and new work environment slip in new challenges that require leadership beyond the basic transactional style. These challenges, as Karamat (2013, p. 31) notes, require a high level of interdependency and integration, which engage contingent reinforcement, inspirational, intellectual stimulation, and charismatic. In addition, Karamat (2013, p. 32) indicates that transformational leadership creates the organisational strategic vision and goal, communicates the vision, models it, and fabricates the path for its implementation and commitment towards the vision.

This kind of leadership promotes a high level of trust, a commitment by individuals, motivation, cohesion, and comfort, thus translating to high performance by the individual worker (Karamat 2013, p. 33). This view, as Karamat (2013, p. 34) ascertains, supports previous research and meta-analyses, which indicates how transformational leadership contributes greatly to positive individual performance.


The transformational and transactional theories discussed above suggest that employee motivation is a complex phenomenon, as it is influenced by different factors. This is expected because people have different characteristics, and organisations employ dissimilar leadership styles. Consequently, employees view issues differently. Therefore, it is natural that they are influenced by different factors, although the theories have consistently suggested that employees are always seeking an environment where they can meet their personal developmental needs.

It is fundamentally important that managers understand the individual needs of their subordinates and come up with ways to fulfil such needs and tailor them towards the full realisation of higher organisational performance. Arguably, both theories present different strengths and weaknesses, although the influences brought about by the situational variables on these sets of leadership differentiations often hold. Organisational leaders seeking to improve their capacity to lead their followers to greater levels of success need to moderate their styles of leadership to match the developmental paradigms that form the trajectories of their organisations.

Assessing the impacts of these sorts of leadership on various organisational and follower outcomes offer a value standpoint for both the organisation and the leaders. The standpoint gives a platform from which to view leadership and rate employees’ behaviours. Consistent with prior research, the demonstration is rife that transformational leadership offers a direct influence on an organisational social responsibility factor, hence categorically shaping behaviour, organisational vision and culture, as well as performance.

Reference List

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Givens, R. J 2008, ‘Transformational leadership: The impact on organisational and personal Outcomes,’ Emerging Leadership Journeys, vol. 1, no. 1, pp. 4-24.

Hall, A. 2003, Behavioural management theory applied to the field of criminal justice. Web.

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King, D., and Lawley, S 2013, Organisational behaviour, Oxford University Press, Oxford.

Klimoski, J., and Zaccaro, S 2002, The nature of organisational leadership: Understanding the performance imperatives confronting today’s leaders, John Wiley and Sons, Hoboken, NJ.

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Odumeru, J, A. and Ifenyi, G 2013, ‘Transformational vs. transactional leadership theories: Evidence in literature,’ International Review of Management and Business Research, vol. 2, no. 2, pp. 355- 361.

Pellegrini, E. K., and Scandura, T. A 2007, ‘Paternalistic leadership: A review and agenda for future research,’ Journal of Management, vol. 34, no. 3, pp. 566-593.

Riaz, A. and Haider, M. H 2010, ‘Role of transformational and transactional leadership on job satisfaction and career satisfaction,’ Business and Economic Horizons, vol. 11, no. 7, pp. 29-38.

Wells, L, D 2003, Strategic Management for senior leadership: A handbook for implementation. Web.

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