See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/339612601

Assign-1-EM-transnational leadership theory

Research · March 2020

DOI: 10.13140/RG.2.2.10564.37767

CITATIONS READS
0 963

1 author:

Awais Qurni
Estonian Entrepreneurship University of Applied Sciences
7 PUBLICATIONS 1 CITATION

SEE PROFILE

All content following this page was uploaded by Awais Qurni on 01 March 2020.

The user has requested enhancement of the downloaded file.

 Estonian Entrepreneurship University of Applied Sciences
Enterprising Management (Transactional leadership theory)

Transactional Leadership Theory

The leaders perform an important role in an organization. Transaction leadership is a managerial leadership
which promotes compliance by follower through reward and punishments. Companies benefit from teaching
leaders to use the right leadership style as this is a relatively cheap procedure of making a company profitable
or successful. Good leadership can bring about higher productivity. When the work in an organization mainly
involves routine work with observable and measurable end results, Transactional Leadership provides clear
added value. (Mulder, P. 2016)

Introduction

Name(s): Transactional Leadership Theories

Author: Many throughout History, more recently: Max Weber, Bernard M. Bass, James McGregor Burns
Classification: Theories based on transactions
Year: 1970s

Max Weber, a 20th-century German sociologist, made an extensive study of leadership styles and divided them
into three categories: traditional, charismatic and rational-legal, or bureaucratic. In 1947, Weber was the first to
describe rational-legal leadership — the style that would come to be known as transactional leadership — as
“the exercise of control on the basis of knowledge.” 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 in order to complete tasks
correctly and on time. The transactional leadership style was widely used after World War II in the United
States. This was a time when the government concentrated on rebuilding and required a high level of structure
to maintain national stability.

Political scientist James McGregor Burns was one of the most prominent authors to advance Weber’s theories.
In his 1978 book “Leadership,” Burns argued that both transactional and transformational leaders must be moral
and have a higher purpose. In Burns’s model, transactional leaders espouse honesty, fairness, responsibility,
and honoring commitments. In the 1980s and 90s, researchers including Bernard M. Bass, Jane Howell and
Bruce Avolio defined the dimensions of transactional leadership:

• Contingent reward, the process of setting expectations and rewarding workers for meeting them.
• Passive management by exception, where a manager does not interfere with workflow unless an issue
arises.
• Active management by exception, in which managers anticipate problems, monitor progress and issue
corrective measures.

Many current leadership theorists agree that principals of transactional and transformational leadership can be
combined for ideal outcomes for both management and the workforce. (St. Thomas Uni, 2014). The
transactional leadership behavior constructs the foundation for specifying expectations, negotiating contracts,
clarifying responsibilities and providing the rewards and recognitions to achieve the set objectives and expected
performance between leaders and followers (Bass, 1985). The transactional leadership style satisfies the need
of followers in the form of recognition or exchange or rewards after reaching the agreed task objectives and
goals achieving the expectations of leaders (Bass, 1997, Podsakoff, MacKenzie, Moorman, & Fetter, 1990).

The most important principles

Following of the most common and important principles identified so far in transactional leadership theory.

1 AWAIS QURNI
International Business Administration (2018/19)
 Estonian Entrepreneurship University of Applied Sciences
Enterprising Management (Transactional leadership theory)

• People are motivated by reward and punishment.

• Social systems work best with a clear chain of command.
• When people have agreed to do a job, a part of the deal is that they agree all authority to their
manager.
• The prime purpose of a subordinate is to do what their manager tells them to do. (Changing W, 2018)

Why this theory is important?

Transactional leadership theory is very important in context to achieve the maximum results in a specific time.
Clear instructions and reward & punishment are the basic valuable characteristics of this theory that makes
significance. The main goal of transactional leadership is to make the employees work in order to get good
compensation. Transactional leaders enhance the motivation of the workers by giving contingent rewards. If the
work is not done properly, there can be negative consequences too. A transactional leader sets the goals and
makes clear the relationship between performance and rewards to employees. Employees know what they are
required to do in order to receive rewards. Feedback is given to subordinates in terms of their progress towards
or if they are away from the rewards. If the performance of the subordinates is not according to the pre-
determined standard then punishment is also given to the subordinates. The subordinates are given clear
instructions in order to get the desired results. The employees have little chance to affect decision making of the
leader (Fareena & Azhar, 2016).

Why this theory must be used in the real management?

The transactional leadership style played an active role in strategic leadership for organizational effectiveness.
In today’s organizations, the transactional leadership is universal than any other supportive leadership behavior
(Waldman, Rammirez, House, & Puranam, 2001).

What is the main criticism against this theory?

Burns (1978) argued that transactional leadership practices lead followers to short-term relationships of
exchange with the leader. These relationships tend toward shallow, temporary exchanges of gratification and
often create resentments between the participants. Additionally, a number of scholars criticize transactional
leadership theory because it utilizes a one-size-fits-all universal approach to leadership theory construction that
disregards situational and contextual factors related organizational challenges (Beyer, 1999).

Transactional Leadership Limitations

Transactional leadership operates work as a transaction whereby an employee performs a task for a reward.
That reward can be monetary or psychological. Managers who adopt this approach set out well-defined tasks
for employees who fit into strict job descriptions. The manager determines if objectives have been met and then
doles out rewards and punishments.

2 AWAIS QURNI
International Business Administration (2018/19)
 Estonian Entrepreneurship University of Applied Sciences
Enterprising Management (Transactional leadership theory)

1. Exceptions to Rules

Transactional leadership does not work well in environments where rules must be evaluated on a regular basis
and changed to fit the situation. That sort of judgment on the part of an employee requires freedom to choose
methods. This freedom is not part of transactional leadership, which utilizes clearly-defined rules and
parameters that each employee must follow.

2. Creative Tasks

Any task that requires creativity will frustrate the transactional leader. Because the leader does not know exactly
what the employee must create, objectives and guidelines may be difficult to set. Time constraints may be
equally frustrating. Transactional managers may find it impossible to set a deadline for coming up with a
creative idea to solve a problem.

3. Fluidity of Roles

When employees must move from role to role according to the demands of a task, transactional leaders will find
limits on their effectiveness. Well-defined roles make up the foundation of transactional leadership, and
situations that call for fluid roles lie outside the boundaries of this type of leadership approach.

4. High-Performance Attributes

High-performance employees tend to be self-motivated rather than externally motivated. Transactional

leadership, with its focus on external motivations of reward and punishment, seldom results in extraordinary
work. In fact, it aims for minimum standards that everyone can meet. High-performance work requires people
who aspire to be better at what they do, not peopling who aspire to merely live up to their bosses’ expectations.

5. On-the-Job Learning

When a company needs a skill its workers do not have, a transactional approach may not work. Offering
rewards and punishments for tasks that are above an employee’s abilities simply cannot create instant
competence. Employees who are intrinsically motivated to learn, grow and improve do so because of their own
desires, not the desires of their managers. (Kevin J, 2018)

References

1. Mulder, P. (2016). Transactional Leadership. Retrieved [23.09.2018] from ToolsHero:

https://www.toolshero.com/leadership/transactional-leadership/
2. Bass, B. M. (1985). Leadership and performance beyond expectations. New York, NY: The Free Press.

3 AWAIS QURNI
International Business Administration (2018/19)
 Estonian Entrepreneurship University of Applied Sciences
Enterprising Management (Transactional leadership theory)

3. Bass, B. M. (1997). Does the transactional-transformational leadership paradigm transcend

organizational and national boundaries? American Psychologist,52, 130–139.10.1037/0003-
066X.52.2.130
4. Podsakoff, P. M., MacKenzie, S. B., Moorman, R. H., & Fetter, R. (1990). Transformational leader
behaviors and their effects on followers’ trust in leader, satisfaction, and organizational citizenship
behavior. The Leadership Quarterly, 1, 107–142.10.1016/1048-9843(90)90009-7.
5. St. Thomas University, What is Transactional Leadership? How Structure Leads to Results, Published
On: November 25, 2014, https://online.stu.edu/articles/education/what-is-transactional-
leadership.aspx. [access 21.09.2018]
6. Changing W, 2018, Transactional Leadership
http://changingminds.org/disciplines/leadership/styles/transactional_leadership.htm [access
22.09.2018]
7. Waldman, D. A., Rammirez, G. G., House, R. J., & Puranam, P. (2001). Does leadership matter? CEO
leadership attributes and profitabiltiy under conditions of perceived environmental uncertainty, Academy
of Management Journal, 44, 134–143.
8. Freena. N & Dr. Azhar M (2016), Principals’ Transformational and Transactional Leadership Style and
Job Satisfaction of College Teachers, Vol.7, No.34, 2016.
9. Burns, J. M. (1978). Leadership. New York, NY: HarperCollins. Caza, A., & Jackson, B. (2011).
Authentic leadership. In A. Bryman, D. Collinson, K. Grint, B. Jackson & M. Uhl-Bien (Eds.), The SAGE
handbook of leadership (pp. 352-364). Thousand Oaks, CA: Sage.
10. Beyer, J. M. (1999). Taming and promoting charisma to change organizations. The Leadership
Quarterly, 10(2), 307-330. doi:10.1016/S1048-9843(99)00019-3
11. Kevin Johnston (2018), Ameriprise Financial, the Rutgers University. Transactional Leadership
Limitations, https://yourbusiness.azcentral.com/transactional-leadership-limitations-3842.html
[accessed 05.10.2018].

4 AWAIS QURNI
International Business Administration (2018/19)

View publication stats