Management and Leadership

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Leadership is an important component in any organisation. Not only does a leader represent the face of his or her organisation, he or she is also its steward, pilot, navigator and director. A leader sets the tone of the present and future direction of an organisation. There are many theories as to what makes an effective leader. Some of these theories point to the self-sacrificing idealism of Martin Luther King or Mahatma Gandhi, the charisma of John Kennedy or even Adolf Hitler, and the entrepreneurial abilities of Bill Gates or Steve Jobs. A widely accepted category of leadership is that of transactional and transformational leadership. The first is the classic type of a leader that hands rewards to followers who have done the job well, whilst punishing those who did not or cannot. On the other hand, the transactional leader persuades his followers not by external rewards, but by appealing to their sense of emotional or intellectual altruism. Nonetheless, an ideal leadership style is one that effectively combines the best elements of each type of leadership style – that is, one that is capable of anticipating and adapting to changes and at the same time is able to implement tasks that accompany these changes.

Transactional and Transformational Leadership

One widely accepted method of classifying leadership is by differentiating it into transformational leadership and transactional leadership. Transformational leadership as defined by Bass (1990) is a type of leadership that seeks to improve organisational performance by inspiring, appealing to or stimulating the employees’ emotional or intellectual needs to persuade them to go beyond self-interest to the interest of the organisation as a whole. In contrast, transactional leadership motivates employee performance by offering rewards to those who are able to meet the goals set by the leader. The transactional leader focuses on good performance and accomplishments and either watches out that employees perform in accordance to set goals or intervenes only when an employee has not met the set goals (Bass 1990). In other words, although both styles aim at improving organisational performance, the transformational leader works at the hearts and minds of the employees, whilst the transactional leader zeroes in on the practical needs of the employees.

Transformational leadership is briefly characterised as people-oriented and transactional leadership as task-oriented, but this is not true at all times. Existing literature and studies are not united in their findings on this matter. Some writers, for example, named Sam Walton of Wal-Mart as an example of a transformational leader because he made it a point to travel to all his stores across the country to inspire them by showing them his appreciation for their work (Hall et al 2013). Likewise, Ruggieri and Abate (2013) concluded in a study that transformational leadership engendered a sense of team identification stronger than that generated by a transactional leadership. Nonetheless, that same study concluded not only that team identification is likewise present in transactional leadership, although in a lesser scale, but more importantly, that transactional leaders tended to bond more with their teams than transformational leaders. In this sense, although transactional leadership is primarily concerned with meeting task, it does not necessarily follow that it is not equally concerned with people. As a matter of fact, a leader can only get the trust of a follower and persuade the latter to follow his or her demands if he or she has invested time and effort on such follower.

It would seem from the literature on leadership that the defining point of a leader, whether he/she is a transformational or transactional leader, is the manner with which he or she interacts with his or her followers, rather than the actions that he or she personally takes. It is how the leader influences or persuades — directly or indirectly, openly or subtly – that ultimately characterises him or her as a transformational or transactional leader. Thus, transformational leaders influence and persuade their followers by changing their value system and align them with that of the vision and mission of the organisation. He or she does this by engaging his/her followers’ collaboration. On the other hand, the transactional leader also engages the cooperation of his or her followers, through negotiations, conciliations and compromises, all geared to gain their support, which is necessary to achieve the goals of the organisation.

On the basis of literature on the subject, it would seem that transformational leaders are better equipped in responding to CSR than transactional leaders, but this perspective could be negated by specific examples. The issue of CSR is a hot topic that emerged in the wake of corporate scandals in the US and in other western counties in the early 21st century. The ability of a leader to fully respond to ethical issues and CSR is, therefore, a necessary requirement that concerns many stakeholders. According to the literature, transactional leadership is underpinned by utilitarian principles and deals with ethical issues in the manner consistent with teleological or utilitarian ethics. Utilitarianism, and, therefore, teleological ethics, is equated with bringing the greatest satisfaction to the most number of people (Groves et al, 2011). The usual criticism against utilitarianism, however, is that not everything that pleases the most people is necessarily ethical or moral. In some culture, for example, women whose husbands die are burned with the husbands’ corpses. This practice is accepted and condoned by such cultures, but the civilized world considered this not only as unethical, but highly immoral. Considering the underlying teleological ethics behind transactional leadership, the logical conclusion is that transactional leaders in general, are not well-equipped to respond to CSR concerns.

Nonetheless, the general principle may be negated by specific examples as shown in the case of Michael Capella. Capella took over the former WorldCom as CEO after the company filed for bankruptcy in the wake of its involvement in one of the biggest accounting fraud in the history of American business. Using transactional leadership, Capella sought to turn around the company’s fortune and reputation by making drastic changes within the organisation. These changes included creating a new board of directors, establishing an ethics division and improving its code of ethics. In addition, Capella also launched programmes addressed to employees geared to improve ethical practices (Ferrell and Fraedrich 2009). The Capella example illustrated that even a transactional type of leadership may succeed in responding to CSR issues if the task specifically involves imposing measures to achieve a CSR-compliant organisation.

In contrast to the perception that transactional leadership is not generally equipped to respond to CSR issues, transformational leadership is seen as inherently capable of dealing with it. The literature, as cited by Groves et al (2011), equated this type of leadership with deontological ethics or ethics involving moral altruism and Kantian rights. This means that leaders embracing this type of leadership see followers as end and not as means. Groves et al (2011) substantiated this view with the results of their study showing that transformational leaders who showed examples of selflessness and ethical values swayed followers’ belief of the importance of CSR stakeholders’ view. However, Adolph Hitler comes to mind at this point. Hitler rose to fame along with his little-known political party, viz. the Nazi Party, through sheer rhetorical charisma promising his countrymen deliverance from western injustices encapsulated in the Treaty of Versailles and a new prosperous Germany. The Germans adored and followed Hitler because they saw him as looking out after the welfare of Germany and its people, yet Hitler turned out to be the most immoral and atrocious leader in the history of the modern civilisation.

The literature on transactional and transformational types of leadership have cornered and specified the traits of transactional and transformational leaders. Transactional leaders are seen as task-oriented and thus, transitory since the completion of a task could mean a termination of the relationship between leader and follower. They are also implied to be practical and good negotiators, conciliator or compromisers. On the other hand, transactional leaders are characterised as charismatic, altruistic, inspiring, self-sacrificing, a visionary and ethical, amongst others.

Transformational leadership may be equated with the ability to anticipate, adapt to and make changes happen, but the transactional type of leadership has also been recognised for its ability not only to cope, but to quickly facilitate and respond to critical situations generated by changes affecting the organisation. This as illustrated in the case of Capella discussed in an earlier paragraph. In addition, Basham (2012) concluded in a study that both transactional and transformational approaches to leadership are necessary to institute changes in educational system because some tenured staff and faculty members perceived changes as detrimental to them. Achieving educational goals in higher learning likewise requires the use of both types of leadership principles (Basham 2012). Although transformational leadership is characterised as more change adaptive, transactional leadership can be most useful in critical and short-term situations, as in the case of life determining surgeries where surgeons must take the lead through transactional type of leadership.

Finally, leadership classified as transformation and transactional leadership have aspects of both contingency and behavioural theories of leadership, but is more aligned with the behavioural theory than the former. Behavioural theory of leadership is distinguished from the contingency theory by the focus in the examination of the leadership style. In the former, the focus is the behaviour of the leader or the distinctive style he or she is using in leading an organisation. In the latter, the main area of concern embraces the leader, the follower and the situation. A leadership style that matches all three variables is considered, under this theory, as the best and most appropriate type of leadership (Lussier and Achua 2012). Both transformational and transactional leadership focus mainly on the distinctive style of the leader, rather than whether such leadership style is the most appropriate given the leader, followers and the situation at hand. They are, therefore, more aligned with the behavioural theory of leadership than the other.


A good leadership style is one that combines both the best elements of transactional and transformational leadership styles. Transactional and transformational leadership have both pros and cons. One is more ideal in some circumstances, but not in others and in that sense both are important styles of leadership, depending on the attendant circumstances. A leadership style may, therefore, be suited to achieve certain goals, but not in others. According to Bass, although transformational leaders are often perceived as having the ability to learn across their area of discipline, transactional leaders are often the best in their field of expertise (cited in Basham 2012). This is the reason why transformational leaders are able to perceive the need for change and transactional leaders achieve immediate goals in line with the task at hand. In this sense, both transformational leaders and transactional leaders serve some purpose in an organisation and if a leader can integrate both transformational and transactional leadership qualities, to be used in accordance with the needs of the circumstance, then an organisation can have the best of both worlds. These types of leadership need not stand on opposing ends, but should be used together to obtain the most beneficial results for the organisation.


Basham, LM 2012, ‘Transformational and Transactional Leaders in Higher Education’, SAM Advanced Management Journal, Vol. 77, No. 2, Spring, pp. 15-37.

Bass, B 1990, ‘From Transactional to Iransformational Leadership: Learning to Share the Vision,’ Organizational Dynamics, Winter 90, Vol. 18 Issue 3, p19.

Ferrell, O, Fraedrich, J and Fereell, L 2009, Business Ethics 2009 Update: Ethical Decision Making and Cases, Cengage Learning.

Hall, J, Johnson, S, Wysocki, A and Kepner, K 2013, ‘Transformational Leadership: The Transformation of Managers and Associates,’ Institute of Food and Agricultural Sciences, University of Florida,

Groves, KS & LaRocca, MA 2011, ‘An Empirical Study of Leader Ethical Values, Transformational and Transactional Leadership, and Follower Attitudes Toward Corporate Social Responsibility’, Journal of Business Ethics, Vol. 103, No. 4, pp. 511– 528.

Lussier, R and Achua, C 2012, Leadership: Theory, Application, & Skill Development, Cengage Learning

Ruggieri, S and Abate, C, 2013, ‘Leadership Style, Self-Sacrifice and Team Identification’, Social Behavior and Personality, Vol. 41, No. 7, pp. 1171-1178.

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