From American Management Association
Being an effective leader requires developing several core qualities and skills—courage, empathy, accountability, integrity, flexibility, active listening, and the ability to communicate across cultures with clarity and respect among them.
It also depends on finding your style. Ranging from coaching to autocratic, from servant to visionary, each leadership style has its strengths and weaknesses, and no style is right for everyone or every organization. Of all the various styles, two of the most important are Transactional Leadership and Transformational Leadership—and it’s important for every leader to understand their differences.
Understanding Leadership Motivation
In order for leaders to effectively guide, inspire, motivate and empower their teams to perform their best and deliver results, they must embody and demonstrate a strong sense of purpose, direction and passion in how they endeavor to achieve organizational goals. They may act out of extrinsic motivation or intrinsic motivation.
- Extrinsic motivation typically involves such things as accountability to their own organization, meeting necessary criteria for advancement in their careers, promotions and other rewards, and/or maintaining their position within a company or being promoted to a higher level.
- Intrinsic motivation might be a leader’s own drive, the desire for personal growth, career satisfaction, personal belief in a team or organizational objective, or similar internal desire that motivates them to lead more effectively.
- Motivation can manifest itself differently depending on a manager’s style. An autocratic manager, for example, may effectively demotivate their team if they use their style in inappropriate circumstances, such as when a team has a strong sense of purpose and perceives an autocratic management style as micromanagement, thus demoralizing team members and negatively impacting productivity and business results.
- Similarly, with laissez-faire, democratic and facilitative management styles, motivation is more successful when the management style itself is appropriate for the circumstances and personnel involved.
An example in business where leadership motivation and management style work synergistically to achieve a positive result could occur when an organization’s workforce responds most effectively to a democratic style— and the senior management of the organization recognizes this and rewards the leaders’ efforts in exercising this style for optimal results in ways that satisfy their extrinsic and intrinsic motivators. Thus, motivation and style work together to achieve a mutually advantageous outcome.
What is Transactional Leadership?
Transactional Leadership is best suited for:
- Situations where compliance to standard procedures is paramount
- Environments where individual performance can be quantified
- Sectors where employees work to meet quotas
- Projects with strict parameters and time constraints
Since expectations are clearly established, employees know exactly what they need to get done, upfront. They also know how their work will be evaluated, based on numbers, which tends to make performance appraisals more transparent and fairer.
Key Applications
- Manufacturing environments
- Sales organizations
- Specialist project teams
- Quality control operations
What Is Transformational Leadership?
Transformational Leadership is best suited for situations that call for significant change, whether to seize competitive advantage or resolve internal issues or some combination of factors. When people feel inspired and part of a shared vision, their performance tends to ramp up.
Key Benefits
- Strengthens alignment and focus
- Improves efficiency
- Builds trust
- Increases employee morale and dedication
- Reduces cultural clashes and ethical issues
Leadership Style Comparison
| Aspect |
Transactional Leadership |
Transformational Leadership |
| Focus |
Task and results |
People and growth |
| Motivation |
Rewards and consequences |
Vision and inspiration |
| Structure |
Hierarchical |
Collaborative |
| Timeframe |
Short-term |
Long-term |
| Decision-making |
Top-down |
Participative |
Potential Challenges
Transactional Leadership Challenges
Each style comes with its own potential disadvantages as well. Under Transactional Leadership, people sometimes feel controlled rather than inspired, which could cause morale to plummet. The emphasis on individual over group performance can fuel excessive competition and foster a lack of trust. And when trust and collaboration take a back seat, alignment around the company’s larger goals and vision is difficult to achieve. What’s more, people tend to become resistant to and suspicious of change—even when change is clearly needed.
Transformational Leadership Challenges
Under Transformational Leadership, the urgent need to change can make people feel overwhelmed and anxious rather than inspired. And if the vision is too powerful, people might be reluctant to question it. Along with discouraging constructive dialogue and feedback, this style’s emphasis on teamwork can stifle individual creativity. What’s more, the strong commitment to change might overshadow anything positive about their organization and make employees less likely to want to work to make it better.
The Role of Transitional Leadership
Falling in between these two styles is Transitional Leadership. This approach is best suited when the company generally has a positive culture but some change is needed to improve overall effectiveness. It’s less rigid than Transactional Leadership and a less radical, easier-to-handle approach to change than Transformational Leadership. This style places an emphasis on milestones and reinforces linking short-term priorities to long-term goals and vision. On the downside, Transitional Leadership tends to promote a short-term mentality, which is already a problem for most organizations.
Like every leadership style, both Transactional Leadership and Transformational Leadership have positive and negative qualities. As a leader, you need to understand their differences and recognize when the circumstances are right for applying each.
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About AMA
American Management Association (AMA) is globally recognized as a leader in professional development. For over 100 years, it has helped millions of people bring about positive change in their performance in order to improve results. AMA’s learn-by-doing instructor-led methods, extensive content, and flexible learning formats are proven effective—and constantly evolve to meet the changing needs of individuals and organizations. To learn more, visit amanet.org