What is transactional leadership?

Transactional leaders thrive on order and structure, and they use rewards and punishments to motivate their employees. They set clear goals and objectives and expect everyone to follow the established procedures. The leader tells the employees what to do and they carry out those orders. Essentially, this leadership style is based on a transaction: Employees give the leader what they want, which is a work product that meets well-defined, established standards, and the leader gives employees what they want in the form of rewards.

Employees who are motivated by rewards might respond well to this leadership style. However, under performers often face penalties under a transactional leader. If you look at examples of transactional leaders, you’ll often see them leading organizations with rigid, structured environments—they won’t likely do well in creative, innovative organizations. It can be more beneficial in larger organizations or highly regulated industries where standardized protocols are essential.

Common traits of transactional leaders

Many transactional leaders share similar traits, some of which include:

• Value on extrinsic rewards: These leaders believe that employees are motivated extrinsically, with rewards such as monetary bonuses.
• Sense of urgency: Transactional leaders take charge and act swiftly, which can be beneficial in high-stakes situations or during organizational crises.
• Clear, direct communication: This type of leader clearly communicates what they expect from their employees. They’re direct and transparent, which helps reduce any confusion in expectations.
• Practical: These leaders embody practicality and tend to avoid “what if” type situations. They stick to what’s in front of them and use data to make decisions.
• Hierarchical: Maintaining a clear corporate structure is important to this type of leader. They rely on processes and proper channels for handling things.
• Efficient: Transactional leadership focuses on efficiency by following clear directions and processes.
• Rule-followers: This type of leader follows rules and protocols precisely and expects subordinates to do the same.
• Resistance to change: Transactional leaders want things to stay the same within the organization. They enforce the current expectations and protocols to maintain the environment as it is.
• Less personal connection: Leaders with this style tend to have less of a personal connection to the people they manage.

Everyone is slightly different, so a transactional leader might not have every one of these traits. You might also notice different degrees of certain traits. For instance, some transactional leaders might not have any personal connection to their employees, while others do get to know their staff on a personal level.

Examples of transactional leaders

Looking at examples of transactional leaders can give you a better idea of what this leadership style entails. It can also help you determine if you or any of your managers lean toward this style of leading teams. Some examples include:

• General Norman Schwarzkopf: A commonly referenced transactional leader is General Norman Schwarzkopf, who was responsible for tens of thousands of troops during Operation Desert Storm.
• Bill Gates: The founder of Microsoft is also known as a transactional leader who often checked in on teams to ensure they understood the requirements and goals. Especially in the beginning of the company, Gates had strict procedures in place and gave employees very little freedom.
• Vince Lombardi: The sports world is another common area for transactional leadership. Vince Lombardi was a coach known for this style of leadership, with militant-like strategies and a chain of command in place within the team setting.

Pros of transactional leadership

When examining transactional leaders’ examples, you can see some benefits for employees and the organization. Some of those pros include:

• Goal-oriented: Transactional leaders emphasize short-term goals and ensure those goals are met. Employees are clear on what the goals are.
• Structured environment: In industries where structure is important, transactional leaders can help ensure that structure is in place and remains.
• Effective for emergencies: Transactional leaders can often handle emergency situations well with their take-charge attitude and reliance on procedures and protocols. They can make decisions quickly and assign tasks to each team member to control the crisis.
• Easy measurement of success: With clear goals in place, transactional leaders can evaluate the outcomes and compare them to the goals to measure success.
• Employee autonomy: As long as their results meet the leader’s expectations, employees are largely left to work independently under this type of leadership.
• Stability: Because this style focuses so much on standard procedures, it creates a great deal of stability and consistency within the organization.

Cons of transactional leadership

Transactional leader examples also reveal potential negative effects on employees and the company as a whole. Cons of transactional leadership include:

• Lack of creativity: Transactional leaders prefer order, so creativity isn’t usually compatible with their style. This can be a problem if your organization values innovation and creativity.
• Inflexibility: When a transactional leader is in charge, the organization can lack flexibility. This rigid environment can make it difficult for the company to grow or change directions when necessary.
• Reactive: These types of leadership situations often result in an organization being reactive instead of having a proactive, innovative approach.
• Lack of improvement: This leadership style often focuses on short-term goals without looking to improve the organization long-term.
• Employee morale: Not all employees thrive with this type of leadership, which can decrease employee morale. Receiving punishments can discourage some employees, especially if they tried to perform to the leader’s standards.
• Minimal employee effort: Some team members will only put forth enough effort to be rewarded under a transactional leader. This could limit their performance by only motivating them to do enough to keep their job or avoid punishments.
• Lack of feedback: Transactional leaders often don’t give positive feedback to employees. They only provide negative feedback when an employee doesn’t meet their expectations. This means a worker can miss out on improvement opportunities or might even perform work incorrectly without realizing it.
• Reliance on the leader: This leadership style is based on the leader telling subordinates what to do. This may work well in some situations, but it can cause employees to rely too much on their manager. If the manager is gone or leaves the company, the staff might struggle with what to do.

Is transactional leadership effective?

Transactional leadership can be effective in certain industries and circumstances. It’s often best in high-stakes situations, such as someone leading a team of firefighters, a manager in a manufacturing setting that requires strict adherence to regulations or military leaders. This type of leadership can be beneficial in certain departments, such as the sales department. Employees have a clear understanding of their sales quotas and earn rewards, typically as bonuses or commissions, for hitting those goals.

In other settings, it’s not as effective. Organizations that rely on innovation and imagination need leaders who are more flexible and can facilitate creativity. Industries with frequent changes might also perform better under a different leadership style since transactional leaders are focused on keeping things the same. It’s often a leadership style that’s used in midsize to large companies.

It’s also important to consider how your employees respond to this type of leadership. Some people appreciate the structure, clear expectations and rewards they can earn by completing their tasks to a high standard. For those employees, this leadership style can be motivating and improve employee productivity. Other people prefer an environment where they can be independent thinkers and challenge the status quo. They will often feel stifled and lose motivation under a transactional leader.