HRM 419
Sec: 01
Submitted To
Engr. Kamrul Hassan
Assistant Professor
Department of Business Administration
Submitted By
Name ID
Safiul Islam 2018-3-10-045
Kifaya Akter Joya 2018-2-10-001
Md. Mahmudul Hasan Siam 2018-2-10-176
Department of Business Administration
East West University
04, September 2023.
03, September 2023
Engr. Kamrul Hassan
Assistant Professor,
Department of Business Administration
East West University
Aftabnagar, Dhaka-1212, Bangladesh
Subject: Term paper on Transactional Leadership Style.
Dear Sir,
It gives us immense pleasure in submitting to you the report on Transactional Leadership Style.
While preparing the report, we closely focused on the topic & tried to assimilate and provide the
most complete information available. We believe that it will provide you with a clear scenario of
the transactional theory and the leadership style. Also, we work on famous leaders and their
leadership style who follows this theory.
We thank you for allowing us to do a term paper on this topic. This will give us an experience that
we can use in our professional life. We will be always available for any further queries and to
answer any questions on this report.
Sincerely,
Safiul Islam Kifaya Akter Joya Md. Mahmudul Hasan
2018-3-10-045 2018-2-10-001 Siam
2018-2-10-176
Acknowledgment
We would like to thank our honorable faculty Engr. Kamrul Hassan. Assistant Professor, in the
Department of Business Administration, East West University, for providing the opportunity to
observe such an interesting topic and for his supervision, relentless guidance, and invaluable
advice whenever needed.
Table of content
Content Page
Executive Summary 1
Introduction 2
Transactional Theory 2
Transactional Leadership Model 3
Assumptions 4
Applications 4
Example of Transactional Leaders 6
Limitation of Transactional Theory 6
Situations that Favor Application 7
Conclusion 8
Reference 8
1
Executive Summary
This term paper is based on the Transactional Leadership Theory. Here we briefly explain this
theory, model, and assumptions. We try to find out the best situation for this theory to apply. Also,
we find out some examples of the most famous leaders who apply this theory in their leadership
life. Besides that, we figure out some limitations and criticism of this theory.
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Introduction
Max Weber introduced Transactional Leadership Theory in 1947. He referred to it as Legal -
Rationality authority. He described leaders as always being charismatic, authoritative, traditional,
and transactional. This idea was later established by Macgregor Burns and expounded upon by
Bernard Bass in his Leadership Theory. His hypothesis describes the psychological workings of
the leader-follower instinct.
Transactional leadership also referred to as management leadership, is concerned with the function
of supervision, organization, and group performance. It is a leadership style in which the leader
encourages his subordinates' conformity through both rewards and sanctions. Leaders that use the
transactional method, as opposed to transformational leadership, do not want to change the future;
rather, they seek to maintain the status quo. These leaders scrutinize their followers' work to
identify flaws and deviations.
1.1 Background of the Study
Transactional leadership theory is based on the idea that managers give employees something they want
in exchange for getting something they want. It posits that workers are not self-motivated and require
structure, instruction, and monitoring to complete tasks correctly and on time. Transactional leaders
have a high degree of clarity. Employees know exactly what their leader expects from them. As a result,
they feel productive in reaching clearly defined goals and objectives. This leads to effective leadership
where group performance matters.
1.2 Origin of the Study
This term paper on “Transactional Leadership Style’’ is given to us as a part of the particular
requirement of the “Leadership, Power & Influence” course (HRM 419) under the Bachelor of Business
Administration program of East West University. Our course instructor, Engr. Kamrul Hassan
assistant professor of East West University has assigned us this term paper as a part of the course.
sir has authorized the task of writing this term paper on a group basis.
1.3 Scope and Methodology
This theory creates a sense of fairness, easy to understand system and employees can see their
impact on the business.
1.4 Objective of the Study
The main objective of this term paper is to provide brief explanations of the transactional
theory. How it works, best situation for applying this theory, assumption, examples, etc.
1.5 Limitations of the Study
a) Here information is limited because this paper is based on secondary data.
b) Our resources are not enough.
Transactional Theory
Most commonly, transactional leadership is defined as a cost-benefit exchange between leaders
and their followers (Kuhnert & Lewis 1987). The transaction or exchange entails something of
value being exchanged between what the leader has or controls and what the follower desires in
exchange for his/her services (Yukl & Van Fleet 1992). The acceptance of hierarchical distinctions
and the ability to work through this method of exchange is essential for the success of this type of
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leader-follower relationship. Transactional leadership is founded on the notion that a clear chain
of command benefits subordinates and systems.
Barnard M. Bass (1985) expanded on Burns' concept of transactional-transformational leadership.
According to Bass, transactional and transformational leadership are not opposites but rather
distinct concepts. The best leaders, according to Bass, are both transformational and transactional.
His leadership model has been revised several times, but the most recent version takes into account
four aspects of transformational leadership, three dimensions of transactional leadership, and a
non-leadership dimension, or laissez-faire. The difference between transactional leadership and
laissez-faire leadership is less clear (Bass 1985; Judge & Piccolo 2004).
According to Wikipedia, transactional leadership is all about encouraging cooperation from the
leader by either rewarding or punishing them. Because it is not sustainable, it is mostly a shortterm
motivational ploy. It’s about the here and the now and getting work completed. It is not about
looking to the future for change and creativity. Productivity is more vital than innovation and the
leader would trade concrete prizes or the prospect of repercussions for the effort and the loyalty of
their people.
Transactional Leadership Model
Contingent
External Rewards
Motivation
Less Flexible Short-Term
Corporate
Practical
Structure
Some of the most important traits and characteristics of transactional leaders are as discussed in
the model grid:
Transactional leadership is built on the idea that for people to contribute, they must receive
something in return. As a result, a good framework, clear tasks, and frequent reviews are required
to drive staff to contribute.
Contingent Rewards: Transactional leadership focuses on motivating high performers and
penalizing low performers. This may appear to be a flaw, but in transactional leadership, this
technique is quite effective in getting the job done.
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Short-Term: Transactional leadership focuses on producing short-term and immediate results that
are aligned with the leaders' personal goals and interests. They may or may not share the goals of
their subordinates.
Practical: It is result-oriented and spreads high degrees of reliability. The results may be simply
tracked and reviewed to determine the leader's effectiveness.
Corporate Structure: Transactional leaders are adamant about preserving the structure, authority,
and rules at all costs. For transactional leaders, hierarchy and structure are critical.
Less Flexible: Transactional leadership is slightly stricter and has a narrower possibility for
change. They have self-interest and a goal in mind, which they subsequently delegate to
subordinates to fulfill.
External Motivation: This strategy encourages employee motivation through external incentives
such as recognition, promotions, and so on. This directly stimulates staff to increase production.
Assumptions
Managerial leadership, also referred to as transactional leadership, emphasizes the importance of
structure, oversight, and teamwork. This type of leadership focuses on particular duties and uses
rewards and punishments to inspire followers.
Max Weber, a sociologist, first introduced this leadership theory, and Bernard M. Bass expanded
on it in the early 1980s. Examine the transactional style’s operation and some of its potential
advantages and drawbacks.
Some basic assumptions of Transactional Leadership are:
• People perform their best when the chain of command is definite and clear.
• Rewards and punishments motivate workers.
• Obeying the instructions and commands of the leader is the primary goal of the followers.
Subordinates need to be carefully monitored to ensure that expectations are met.
By relying on a system of rewards and penalties, this theory approaches leadership from a
behavioral perspective.
Applications
This theory bases its behavior-based approach to leadership on a system of incentives and
sanctions. Business executives frequently practice transactional leadership, rewarding successful
workers and punishing unsuccessful ones.
Sports teams also place a lot of emphasis on transactional leadership. Players are required to follow
the team's rules and expectations, and their actions will either earn them rewards or consequences.
While winning a game could result in praise and bonuses, losing might result in rejection and
verbal criticism. Players frequently develop a strong motivation to perform well, even if it results
in discomfort and damage.
Transactional leaders are just concerned with maintaining the status quo, as opposed to
transformational leaders who have to tend to be forward-looking.
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The goals and vision of transformational leaders are sold to their followers. On the other hand,
transactional leaders instruct group members on what to do and when to do it.
Standard norms and processes, as well as specific, short-term goals, are overemphasized by
transactional executives. They make no effort to foster the innovation and originality of followers.
This type of leadership approach may be effective in situations where organizational problems are
straightforward and well-defined. Such leaders frequently do not encourage or dismiss ideas that
conflict with their current strategies and objectives.
It is discovered that transactional leaders are highly effective at directing efficient decisions that
are meant to reduce costs and increase productivity. The followers of transactional leaders
typically have short-term, non-emotional relationships with them and are highly directive and
action-oriented.
The hypothesis makes the supposition that straightforward rewards can motivate subordinates. The
only "transaction" that takes place between the leader and the followers is the payment made in
exchange for the followers' cooperation and work.
The Applications of Transactional Leadership:
• Suitable for Established and Large Organizations: Because of its simplicity and
commitment to maintaining the status quo, transactional leadership is typically dominant
in big and even mid-sized firms with established operational procedures and human
resource management techniques. It's important to remember that this leadership style is
the most basic approach to managing and leading people.
• Managing Routine or Mechanized Tasks: Transactional leadership can also be used to
manage staff members who carry out repetitive, robotic, or standardized duties. The
production lines of factories or other manufacturing facilities, call centers or customer
service groups, administrative staff teams or departments, and military groups and
organizations are a few examples.
• Situations that Require Fast Decision-Making: Some circumstances call for prompt and
definite actions or answers. Transactional leaders are more effective over time because of
their emphasis on efficient communication and an unambiguous chain of command. -
sensitive and mission-critical situations requiring quick and accurate decision-making
procedures.
• Inapplicable to New and Chaotic Organizations: Newly created teams or startup
organizations are typically good candidates for transformational leadership. However,
because there aren't always rules, protocols, or cultures in place, these teams and
organizations can occasionally become chaotic. The necessary framework can be provided
by a transactional leadership style until a given team or organization evolves.
• For Self-Motivated and Independent Individuals: A further example of transactional
leadership in action is managing independent, low-intervention workers. Examples of these
people who work in sales specifically include real estate and insurance brokers,
stockbrokers who advise on finances, tenured teachers, and doctors, among others.
• Basic Approach to Performance Management: Rewarding and punishing employees is a
key component of a transactional leadership approach to keeping them motivated and on
track. Transactional leaders are inactive managers who gauge their employees'
performance based on their deliverables. These products are easily evaluated for formal,
official qualities or faults.
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To study and evaluate the drawbacks of transactional leadership, particularly as compared to
transformational leadership, numerous studies and analyses within the subfield of leadership
theories have been undertaken and written.
However, discussions about the appropriateness of this leadership and management style in
particular circumstances are also included in this subfield. The applications of transactional
leadership should also be taken into consideration based on its inherent advantages
Example of Transactional Leaders
• Bill Gates: Bill Gates used Transactional leadership skills. With years of knowledge and
expertise, he started using these skills as per demand. He strictly follows the chain of
command. He delegates and guides his employees on what exactly he needs and how it can
be worked on, giving them very little freedom. Bill Gates always focused on the completion
of the task at hand for the efficient and quick achievement of the target. It is also noticed
that Bill Gates used a rigorous hiring process to appoint a lot of young minds and set leaders
to lead the next generation. It is for his leadership and guidance that many employees stay
with Microsoft for a long period than others.
• Norman Schwarzkopf: Norman Schwarzkopf utilized a transactional type of leadership to
accomplish complex goals. His leadership style was characterized by the utilization of a
framework that rewarded compliant behavior. Schwarzkopf had to deal with officers and
generals with strong personalities. He worked with people who were great leaders in their
own right. Thus, if one will look at the context of the Persian Gulf War, the transactional
type of leadership was a powerful tool in Schwarzkopf’s arsenal. He succeeded in using
the transactional leadership framework to generate significant results.
• Steve Jobs: Steve Jobs was a charismatic and transactional leader who was motivated by
various traits some of which were good while others were repulsive. The combination of
charismatic and transactional leadership helped him to earn employee trust. He kept all his
workers motivated toward achieving Apple Company’s goals. Despite his initial dismissal
because of his volatility, his return saved the company from crumbling.
Limitation of Transactional Theory
Lack of focus on building relationships: Transactional managers focus on using rewards to
motivate employees and boost satisfaction. They don’t focus on working conditions, such as an
employee’s relationship with their manager, which can be critical drivers of engagement and
satisfaction.
Difficult to find rewards that motivate all employees: Peoples are not all motivated by the same
factors. Some employees see more money as a reward, others appreciate time off, and others want
perks such as premium health insurance or a flexible working structure. Some people are not
motivated by rewards; they are motivated by doing a good job, helping their customers, or making
a difference in the world. As a result, a reward system may not work as an incentive for these
employees.
Discourages creativity: If a business is to innovate and thrive, then employees and leaders need to
be able to make mistakes and fail without worrying about the consequences. Transactional leaders
punish their staff for not meeting their goals and do not leave any room for failure or creativity. In
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this environment, employees are not encouraged to come up with new ideas. Instead, leaders insist
they stick to the strict system and pursue the goals they have been tasked with at the cost of any
other ideas.
No long-term vision: Transactional leadership focuses on short-term goals and planning and fails
to look at the big picture or plan for the future. While constantly achieving goals can be beneficial
in the short term, with quick wins and immediate outcomes comes a failure to recognize that
businesses need five-year plans.
Poor leadership development: For implementing business succession planning, an organization
must need to develop both employees and managers so they can step up to the plate when a position
becomes vacant. If a manager’s sole focus is monitoring staff performance, while employees are
only tasked with meeting specific goals, then it means the organization will not have provided
sufficient learning and development opportunities for either one.
Situations that Favor Application
Two things are typically cited as the causes of transactional leadership. The first conditional
reward's leadership is seen as an effective and fruitful partnership between the leader and the
followers. When these followers achieve specific objectives, the organization they are with may
reward them with bonuses, merits, or recognition. The rewards from this contingent reward are
entirely dependent on the followers' and the leader's consent.
Management by exception is the second characteristic of transactional leaders. It could be either
active or passive. Active managers are always monitoring staff performance. Passive management
only evaluates after the task has been completed and will only inform you of issues after they have
already happened. Maslow's hierarchy of needs.
Maslow's Hierarchy of Needs
In the context of Maslow's hierarchy of needs, transactional leadership focuses on the lower levels
of the hierarchy and works at the fundamental levels of need fulfillment. The trade approach is
used by transactional leaders, and incentives are given for successful work or successful outcomes.
On the other hand, those with this leadership style might punish subpar performance or unfavorable
results until the issue is resolved. Transactional leadership emphasizes precise task performance
as a means of concentrating on lower-level needs. Transactional leaders efficiently finish specified
projects by overseeing each component separately.
Instead of being concerned with innovative ideas, transactional leaders are focused on processes.
Three categories of contingent reward, management-by-exception: active, and management-
byexception: passive generally describe transactional leaders.
The focus on contingent reward, also known as contingent positive reinforcement, is a leadership
style in which awards are given when the objectives are met on schedule, ahead of schedule, or to
keep followers moving forward at a decent clip at various points during completion. When the
worker exhibits any desired behavior, the employee also receives contingent benefits.
Contingent penalties are frequently administered on a management-by-exception basis, where the
exception is when something goes wrong. There are active and passive routes within
managementby-exception. Active management by exception means that the boss constantly
assesses each employee's performance and responds right away when something goes wrong.
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Management by exception: Passive leaders wait till significant problems arise before taking any
remedial action and don't monitor staff performance. The laissez-faire dimension of transactional
leadership is acknowledged in addition to the three aforementioned aspects of leadership.
Laissezfaire leadership denotes a lack of initiative and a complete absence of engagement with the
workforce.
Transactional leadership is a basis for transformational leadership, which relates to higher-level
demands and is more managerial in style. Transactional leadership is used to address lower-level
needs.
Conclusion
In conclusion, transactional leadership that focuses on contingent rewards is an effective form of
leadership style for managers to use in harnessing employees’ capabilities. It is necessary in
ensuring that daily operations are carried out and also can be effective at the organizational level
in increasing creativity and innovation
Reference
Ø Cherry, K. C., (2020, April 29), “How a Transactional Leadership Style Works”: About
Transactional Leadership.Verywellmind.https://www.verywellmind.com/what-
istransactional-leadership-2795317
Ø Garcia, C. G., (2022, February), “Applications of Transactional Leadership”: About
Transactional Leadership.Konsyse. https://www.konsyse.com/articles/applications-
oftransactional-leadership
Ø Juneja, P. J., (n.d). “Transactional Leadership Theory”: About Transactional
Leadership.Managementstudayguide.
https://managementstudyguide.com/transactionalleadership.htm
Ø Transactional Leadership Theory,
https://www.communicationtheory.org/transactionalleadership-theory/
Ø IvyPanda. (2020, June 21). General Leadership Style: Norman Schwarzkopf.
https://ivypanda.com/essays/general-leadership-style-norman-Schwarzkopf/
Ø BusinessEssay. (2022, June 11). Steve Jobs – Transformational Leader or Transactional?
Retrieved from https://business-essay.com/steve-jobs-leadership-and-theories/
Ø Karen McCandless https://www.fool.com/the-ascent/small-
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