It’s Monday morning, James fires up his laptop and receives an email from his boss informing him of a new product that will be arriving from the manufacturer in the store he is managing. The Email further stresses on the urgency to get the product off the shelves as quickly as possible. As a transactional leader, James knows that in order to get the product into the hands of the customers, he must communicate this information to his employees and craft a flawless strategy to get the product selling like hot cakes.
James has high hopes from his subordinates, since he believes that they have been trained for this from the day he hired them. What James wants; he gets. He is after all, higher up on the chain of command and their immediate boss. His employees know that they must do what James says. They know that they are meant to follow the directions of James due to his responsibility and formal authority in the organization.
James organizes a meeting with his team, explains the new product and gives them a detailed road map for how they were going to market and sell the product to their target audience. As a transactional leader, he wants his employees to leave no stone unturned in selling the new product. To motivate them to excel, he put forward the incentive of a paid vacation to anyone who met their sales goals. Those to failed, will have to cover the extra shift of those on vacations. James is clear on his intent that each employee will be assessed on his/her individual performance and will be responsible for creating their own promotional activities which would help boost sales.
However, any worker who failed to comply would be held accountable for that failure. James practices what we call a passive management by exception and informs his employees that their performance will be evaluated by him on a weekly basis. Any person who falls behind their required sales quota in the first week will have to clean the store bathrooms the whole week.
James is the epitome of a transactional leader!
Traits Of A Transactional Leader
1. Extrinsic Motivator
Transactional leaders operate on a system of rewards or punishments for their direct reports, in order to elicit the desired goals and performance from them. This translates into the fact that employees receive extrinsic rewards for behaving in some expected manner and meted out punishments for any deviation. This type of motivation appeals to the self-interest of employees. For instance, employees are rewarded or castigated individually, without any emphasis on teamwork. The relationship between the employee and the leader is a transactional one, whereas transactional leaders use explicit instructions, disciplinary orders, and incentives, such as bonuses, perks, praise, or promotions, to motivate their employees.
However, for this to work, it is essential that people are crystal clear about what they get for their efforts, since this model assumes that people inherently work harder when incentivized. Not only that, it is also essential that they know in advance what they have to do to get there. Any confusion and you will fail to garner the performance you aspired for. Not to mention, you have to be consistent in your rewards and punishments. If employees feel that their leaders are biased, then any motivation that you offer will fail to inspire them.
2. Unflinchingly Practical
Practicality is one of the most distinct characteristics of a transactional leader. Their pragmatic approach to problem-solving means that they take all opportunities and realistic constraints into consideration before reaching a decision. They prefer realism over idealism and comprehend the difference between the skill and will of their employees. Their ability to link the obtained results to the overall goals of the organization helps them see the bigger picture.
Transactional leaders are laser-focused on their goals. Nothing in the world can deviate them from pursing their line of vision.
Bill Gates, one of the biggest names when we talk about transactional leadership, has stressed over the indispensability of the clarity of thought and execution over the 30 years of his career. Allen recalls meeting Gates in the late 1960s at an old Teletype computer, a mere “freckle-faced eighth grader”. Even then, the words Allen used to describe him were “really persistent”, “really competitive”, and “really, really smart”. His threw caution to the wind when it came to social convention. After his first encounter with Allen’s girlfriend, she was amazed to notice that he ate his chicken with a spoon. When Bill was thinking hard about something, social convention was the last thing on his mind.
4. Resistant To Change
Since this leadership style is in direct contrast to the transformational style, transactional leaders are inherently resistant to change and do not seek to disrupt things. The leader wants everything to work as it has always worked, and do not believe in improving working conditions. This leadership style leaves no room for creativity and innovation, since transactional leaders impose their own instructions and orders on their employees. Employee empowerment and individuality are not taken into consideration. However, fear of retribution and the concept of ‘each to his own’ spawn mistrust between the employees and the leader.
A transactional leader works within the existing constraints and systems and is often happy to operate from within the boundaries to achieve organizational goals. They don’t believe in thinking out-of-the-box. While this helps them make good on the routine affairs, they are often stumped when creativity is required.
5. Discourages Independent Thinking
Transactional leaders do not encourage employees to think for themselves or act creatively. Risky actions, decision making, and independent thought is frowned upon, since such leaders believe that whatever they have decided is the best course of action. A transactional leader always dictates their subordinates what to do and is in no way open to insubordination or complaints of any kind.
Since transactional leaders operate under unbending rules, they fail to put the emotions of employees in consideration so long as work is being done as intended. Employees are given detailed and unambiguous instructions, and they are expected to perform these tasks in a timely manner, and with perfection. They maintain a purely transactional relationship with their subordinates, which makes their employees become insensitive the company growth, and turn them into robotic performers who are motivated by rewards.
For instance, when Microsoft was still in its inception, Gates was laser-focused on the accomplishments and end-results, rather than continuity, well-being, and comfort of the staff. For example – when Bill found out that Paul Allen’s (Microsoft Cofounder) poor health was interfering in his contributions towards Microsoft, Bill was ruthless in sidelining Allen from the company.
7. Rewards Performance
Transactional leaders keep a vigilant eye on the performance and efficiency of all employees based on the targets and goals set for them. They reward employees who achieve a predetermined goal. Similarly, poor performance also never escapes their noticed, and they withhold the reward in such instances.
Due to the sole focus on status quo, this leadership style is quite passive to say the least. Instead of staying proactive and nip problems in the bud before they take root, the leader reacts to things after they have happened. They lack the foresight to anticipate problems.
Transactional leaders are notorious for micromanaging everything. This type of leader believes that only they can make the best decisions for the company, and employees must simply follow their directives or find themselves a new job.
10. Emphasis On Corporate Structure
One of the biggest traits of a transactional leader is their focus on hierarch, the corporate culture and structure. The leadership style is best suited to rigid organizational hierarchy. Employees of an organization promoting the transactional leadership management style are informed before-hand of what is expected from them. They are provided with a road map and clear set of instructions, and are expected to follow a chain of command, so that they always know what proper channels to go to.
11. Demands Accountability of Employee
Not only do transactional leaders provide tasks and instructions to their employees, they also entail strict adherence to policies and principles. By delineating the road map to success, they expect the employees to always succeed, and if something goes wrong, the employees are the ones to be blamed. This sometimes leads to the discontentment and unhappiness of employees, since they feel that their welfare is only secondary to the company. Also, this leadership style makes them feel like they are not a part of the organization but merely workers paid to do their jobs.
Applying Transactional Leadership in The Workplace
When we talk about the multiple styles of leadership, most experts will rank transactional leadership theories on a spectrum of management vs. leadership. Transactional leadership leans more towards management than actual leadership. What’s interesting about this style is that it can only work in environments where hierarchy has been set up and order takes precedence. In a nutshell, you don’t have to be a dictator to be a transactional leader; anybody can adopt this style if they work in an organization that has hierarchy in place.
Transactional leadership is a double-edged sword, and if care is not taken, it can border on the autocratic leadership style. The key is to create a balance by maintaining a system of punishments and rewards. Instead of letting your mind be diverted by the ideas and thoughts of one individual, your sole focus should be on the hierarchical chain in the office and the flow of operations. Using performance and goals reviews, following the established rules and chain of command, and staying focused would help you apply this leadership style to your own workplace.