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What Is Transactional Leadership? (Pros, Cons, How-to’s)

A leader who employs a transactional leadership style believes in granting rewards based on employee performance. They function in a heavily structured environment that encourages employees to achieve their best through rules and regulation.

Typically, transactional leaders stick by the status quo and are not as open to a flow of creativity and innovation that a transformational or charismatic leader would be. Transactional leadership is defined by traditional roles and allocations of power instead of motivational influence. The goal is to produce results and keep the company afloat today.

Widespread criticism of transactional leadership technique is its impact on employee motivation, creativity, and performance. Some of the traits that transactional leaders employ might decrease engagement and employee self-motivation. Their concern with order, structure, and keeping up with the way things have always been can destroy employee engagement. According to program management firm, BlackHawk Networking, below are some statistics impacted by some problematic traits of transactional leadership:

  • Only 25 percent of most businesses likely have an employee engagement program that puts them first.
  • Thirty-nine percent of employees feel underappreciated at work, and 77 percent reported they would work harder if better recognized.
  • Forty-two percent of employees consider rewards and recognition program opportunities when looking for a place to work.
  • Seventy-five percent of employees who willingly leave their jobs are leaving because of their bosses.

Employees put a considerable emphasis on how they are treated and viewed by their managers and those in authority. The traits of Transactional leadership do not emphasize engagement or employee recognition without the promise of performance.

Free online tools for work:
1. Fluxes.com — Free Project and Task Management Software
2. Status.net — Software for Effective Communication

Part 1

The Traits and Principles of Transactional Leadership

  1. An Emphasis on Discipline and Rewards

    Transactional leaders are concerned with maintaining employee performance. Instead of motivating this through natural means of promoting self-motivation, inspiration, and personal purpose; transactional leaders use external motivations to reward desired performance, and they can also use disciplinary measures to punish behaviors or productivity they deem undesirable.

  2. Dedication to the Status Quo

    Unlike transformational and visionary leaders, transactional leaders’ goal is to keep the company moving in its present state and keep things the way they have always been. This can frustrate leaders or employees who are driven by innovation and not leaving things the way they found them.

  3. Passive Leadership

    The transactional leader is only concerned with increasing productivity. This means there is no concern for present problems that arise that have nothing to do with performance. There is more of a reaction to current issues than a commitment to proactively planning for them.

  4. Dependence on Hierarchy

    Transactional leaders depend on the authority given to them by corporate hierarchies. Instead of cultivating a style that improves trust, loyalty, and engagement, these leaders are more concerned with maintaining a rigid organizational structure that grants them power.

  5. Lack of Direction

    Since these leaders do not pay a lot of attention to problems or happenings outside of employee performance, there is a likelihood that employees will not receive the direction they need. Communication, process efficiency, and vision will suffer since those traits are not a priority.

  6. An Unhealthy Increase in Competition

    High employee performance is the ultimate goal of the transactional leader. Therefore, there will likely be an emphasis on competition. This will cause employees to act in their self-interest. Traits like collaboration and teamwork will not become prevalent.

Part 2

Qualities of Transactional Leaders

  • One of the most significant qualities of transactional leaders is practicality.
  • There is not a lot of extra complexities involved in their leadership style. They give when they get.
  • Rewards are given when metrics are met.
  • Transactional leaders adhere more to realism over idealism.
  • They value order over a system that promotes free-thinking.
  • Transactional leaders are loyal to the company structure, procedures, and policies instead of their employees.
  • Often a discomfort with change will make them shy away from innovation.

Part 3

Advantages of Transactional Leadership

  • Lower Training CostsSince this leadership style has a simplistic style and goal, then there is not a lot of costs needed to train employees to do it. There not as many nuances like transformational or charismatic leadership that employees need to learn to employ this style.
  • Utilizes Powerful MotivatorsExternal rewards like money or other tangible perks can be huge motivators for employees. At least in the short term, this can drive performance and productivity.
  • A Short Surge in Performance If a company or department needs fast results to deal with a seasonal increase in activity or a problem, external “reward for performance,” agreements can help produce quick help and support.
  • Clear OrderIn transactional leadership styles, there is never a question about who is in the leadership chair and what the organizational structure is. Transactional leaders are transparent how things work and what their expectations are regarding rules and authority. Some employees may appreciate this clarity.
  • Increase in ProductivitySince the ultimate goal is increased performance, an increase in productivity is likely. Also, employees are being motivated by incentives that likely appeal to them. It will make it feasible to meet goals a lot faster.

Part 4

Disadvantages of Transactional Leadership

  • UnbendableTransactional leaders and the corporate structures that support them are not flexible which can frustrate employees who enjoy an atmosphere that promotes individual thought and innovative ideas.
  • A Lack of MotivationTransactional leaders are sometimes known as insensitive by those who work for them because it may look like they are not concerned with the human element of the workplace. If the personal lives or feelings of employees are not a priority, this attitude can come off cold and uncaring, which can adversely impact the employee morale.
  • A Lack of Leadership Development The most important thing that matters to leaders who use this style is numbers and performance. This means there will not be opportunities for training that promotes anything outside of this.
  • Creativity Will SufferCollaborative ideas that better the company, and opportunities to create solutions for performance issues are not the main concern for transaction leaders. If employees will not be given the freedom to bring creative solutions to problems, this can negatively impact the organization.

Part 5

Transactional Leadership: Best Practices

  1. Integrate Short-Term Goals with Long Ones

    It can be daunting to outline a plan to meet a significant goal or eventually reach a vision. Transactional leaders implement short-term goals, and other leadership styles can create short-term goals along the way to fight against burnout and low employee morale.

  2. Move Beyond Performance

    Employees are their best when they feel motivated, engaged, and respected. Their ambitions and ideas should be supported. Employees should be recognized when they have ideas that can better the company.

  3. Increase Opportunities for Leadership Development

    Companies will not survive if they do not have leaders to replace those that leave. Transactional leaders need to become open to moving beyond productivity to encourage leadership development. It will save the organization a lot of time and money if they are able to create leaders internally.

  4. Approach Problems Proactively

    Again, leaders cannot wait to address problems when they arise. If turnover is increasing, tasks are taking longer to get done, or conflict is on the rise; leaders need to deal with these problems as they arise instead of waiting for the problem to become unavoidable. Thought needs to be given to strategies that take care of present issues that are not just related to productivity.

Individuals who use transactional leadership might come off as insensitive and unbothered by the emotional aspects of being a manager, especially if intrinsic motivations are not cultivated, and the emphasis is solely on task completion. However, these leaders are effective at keeping an organization together through a crisis or accomplishing short-term goals rapidly.

Effective leadership is all about communicating effectively.

Status.net is a cloud solution for effective leadership communication. It brings a more light-hearted tone to messaging making it easily digestible, and makes it easy for leaders to provide and receive updates regularly.

How to use status.net for effective leadership communication:

  1. Downward communication:
    a) Build trust and improve leadership communication by sharing regular updates and reasoning behind your decisions.
    b) Share information about company announcements, branch news, new hires, etc.
    c) Share company goals and objectives regularly.
  2. Upward communication:
    a) Easily implement daily or weekly status updates for your team members by creating a status feed “How did you contribute to the team’s goals this week?”.
    b) Create automated scheduled questionnaires with questions like “How can we improve?”.
    Status.net allows you to configure granular access permissions to set up who can view the answers (optional).
  3. For recurrent questionnaires: no one forgets to answer because status.net sends automated reminders according to the recurrence schedule you chose.
  4. Increase workplace satisfaction by improving transparency:
    Each status update has a separate section for comments, which is used by team members to clarify information and by leaders to provide guidance and feedback in context.
  5. Use status updates for future reference and decrease time and efforts spent on monthly, quarterly, and yearly reporting thanks to powerful filtering and export features.
  6. Optionally, enrich reports with the latest updates automatically added from web apps your team uses (such as project management tools, version control systems, support systems, financial applications, CRM, etc.) by connecting these apps to your status feed.
  7. Spend less time on meetings by making them more productive because everyone is on the same page at all times.
  8. Sharing: Status updates can be either— exported to files and printed, or sent by email;
    — shared with manager online; or
    — shared online as company-wide or team-wide status reports, i.e., all team members share their progress with each other.

How to configure status updates:

Step 1:

  • Create a “Status Update” feed and set up a recurrence.
  • Configure who will write and read status updates by choosing the “Participants” tab and then clicking the “Cog” button near “Feed Participants” title.
how to create status updates status feed

Options:

  • Set the status feed as “Team-wide” if you want all team members to view each other’s status updates.
  • Alternatively, you can allow access to status updates for certain participants only (such as yourself if you’re a team lead). In this case, turn “Team-wide” mode OFF and restrict viewing by unchecking “View” properties for other participants. Team members with the “View” checkbox unchecked will only be able to view their own status updates.
  • If you’re a manager and you don’t plan to share your status updates with your team, uncheck “Update” for yourself – in this case, you won’t receive reminders.
  • The Recurrence setting configures how often participants receive email reminders to fill in their status updates. This feature is optional and can be turned off.
  • You can add, remove, and assign new team members at any time.

Step 2: The text of the status update should be added to the “Update” field of status feed.

how to add an update to status report

As soon as a new status update is added, participants with “View” rights can view it in real time when they log in to their accounts. They will also automatically receive emails with the full text of status updates.

Done!

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