Leadership 101: Are you a transactional leader?

Transactional leadership typically involves compliance of followers, as opposed to enthusiastic adoption of the leader’s initiatives. In contrast to a transformational leader, a transactional leader is not particularly concerned with capturing the hearts and minds of their followers, rather (as  Gary Yukl wrote in his book Leadership in Organizations) transactional leadership “motivates followers by appealing to their self-interest and exchanging benefits.” A transactional leader creates an environment of clear reward and punishment. The leader establishes a chain of command (and he or she generally resides at the top of that chain), and tasks are easily understood and expected to be completed with little-to-no room for negotiation.

Where transformational leadership is a more persuasive style, transactional leadership can be more dictatorial – and contingent upon the performance of the followers. The transactional leadership theory embraces three factors:

  1. Contingent reward leadership (based on economic and emotional exchanges) –clarifies role requirements and rewards and praises desired outcomes. Contingent reward leadership is a constructive transaction that is reasonably effective in motivating followers.
  2. Management-by-exception (active) – a negative transaction because the leader monitors deviations from norms and provides corrective action. Similar to contingent reward (focusing on outcomes), but in this case the leader actively watches for and acts on mistakes or errors.
  3. Management-by-exception (passive) – is similar to management-by-exception active, but in this case passive leaders wait until deviations occur before intervening

Some consider the transactional leadership style to be too-heavily focused on top-down, assembly-era management philosophy…a relic of 18th and 19th century manufacturing and industry. One name has become synonymous with the whip-cracking persona of the bygone work environment: Frederick Taylor. No matter how many accomplishments Taylor experienced in his life (he was a noted mechanical engineer by trade), he will always symbolize raw and cruel management power. A prototypical tyrant, Taylor mercilessly drove his employees (whom he thought of as mindless machines) until they had nothing else to give. Although one could consider Taylor’s management philosophy to be inhumane, his top-down focus on productivity and performance helped fueled a growing capitalistic society in the late 19th and early 20th century.

Taylor developed the scientific management theory (also known as “Taylorism”) as a means to analyze the division and flow of work to increase productivity. In their seminal book Organizations and Organizing: Rational, Natural, and Open System Perspectives, Richard Scott and Gerald Davis wrote that Taylor “…insisted that it was possible to scientifically analyze tasks performed by individual workers in order to discover those procedures that would produce the maximum output with the minimum input of energies and resources.” Taylor’s theory was a logical exploration of employee performance – especially because of his focus on developing a standard method for job performance, planning the employee’s work and accounting for variances, incentivizing increased production, punishing low-to-non performance, and more.

Taylor theorized that when workers are pressed to perform repetitive tasks, they do so at a slower rate – with no punishment for working slowly. Taylor based his theory on the premise that slower workers were still rewarded with the same salary as efficient workers, illustrating his belief in the absence of vested interest among all workers. Taylor proposed a pay for performance system where highly efficient workers were incentivized for their performance beyond their traditional salary, and less efficient workers were paid lower wages commiserate with their output. Under this system, Taylor theorized that workers could learn methodical procedures to perform their jobs with maximum efficiency, and those who did were financially rewarded for their work. Consequently, less-efficient workers could no longer “hide in the shadows” of (and earn the same wages as) their more productive brethren.

Taylor also revolutionized the role of the shop foreman (or the frontline supervisor). Rather than relying on the leadership of a general foreman, Taylor implemented a system of functional foremen. Taylor employed a “speed boss” to drive the workers; a “gang boss” to manage the tools and materials; an “inspector” to monitor quality; and a “repair boss” to help maintain equipment. This division of labor helped replicate management across the shop floor, and increased productivity by narrowing managerial focus. Though Taylor’s overall scientific management theory could be considered logical, he applied the theory in a heavy-handed manner, ascribing its success because of the “stupidity” of the workers under his charge. Taylor’s disdain for the workforce belied the ultimate good in the application of his theory.

Effective leaders are adepts in analyzing their circumstances to determine the best way to maximize the performance of their followers. So, is the transactional leadership style more appropriate for specific industries or work settings?

It depends.

A strictly transformational atmosphere may lull some team members into complacency by not challenging them to achieve targets. Conversely, a strict transactional atmosphere may intimidate team members, thereby reducing a potentially vibrant and collaborative atmosphere down to an “assembly line” model that only recognizes rewards and punishment.


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