Make your own free website on

Transactional and Transformational Leadership

1.      Introduction


The increasing complexity and ever-changing environment are challenging the performance capabilities of traditional organization structure.  The scalar principle of classical management hinders the responsiveness to the environment changes.  In order to respond to the dramatic restructuring of the marketplace, many organizations change from vertical command and control structures to horizontal structures that emphasize employee involvement, efficiency and flexibility.  Managers are therefore required to be good leaders in today・s complex workplace to tackle the new conditions.


Leadership is important and recognized as one major function that constitutes the management process.  Most people even value leaders higher than managers.  It is because leadership is linked to the qualities of individual who has the ability to transform and realize her/his visions into actions (Rosenfeld and Wilson, 1999).  Burns argues that leaders are .transformational・ and managers are .transactional・ (cited in Al-jedaibi, 2001).  Thus, to be a good leader is the most challenge to all managers.


2.      Leaders versus managers


By definition, a manager is .a person who directs or manages an organization・; while a leader is .a person who rules, guides, or inspires others・ (The Collins English Dictionary, 2000).  Campbell (1997) argues that manager is an organization title while leader is an ascribed honorific title.  However, the difference is more than title as concluded by Wilson (1996), Bennis (cited in Coutts, 2000), Robinson (1999) and Verma and Wideman (1994).  They argue that leaders are different from managers in their emphasis and focus, which is summarized in six perspectives.


First of all, leaders emphasize in the future so they plan for longer-range; managers focus on present so they plan for short-range.  Secondly, leaders emphasize setting direction for .what・ and .why・; managers deal with .how・ and .when・.  Thirdly, leaders give vision and inspiration so they encourage risk-taking, innovation and originating, and challenge status-quo; managers are risk-avoidance so they accept status-quo and imitation.  Fourthly, leaders lead people through inspiring trust; managers manage things, programs and resources through controlling.  Fifthly, leaders are result-oriented so they build organizational effectiveness through policy; managers are task-oriented so they focus on organizational efficiency through procedures, consistency, goals and objectives.  Finally, leaders emphasize diffused authority so they encourage democracy and empowerment to enable and develop human talents; managers emphasize chain of command through organization and structure so they are autocracy and restrain talent development.


Wilson (1996) extends the differences further and believes that leaders should have five inner compasses (strategic, action, culture, socio-political, and moral) in order to set and maintain a direction in a turbulent environment.  The strategic compass is the trait that helps determine direction and keep the organization on course to the destination.  The action compass is the combination of vision and action to guide the analysis and the strategizing towards the ultimate goal.  The culture compass keeps the leader・s thinking, words, and actions oriented towards the task of aligning vision, strategy and culture.  The social-political compass is required to meet the greater expectation from the public for the corporate performance.  Finally, the leaders must always use a moral compass to navigate through the complexities of their every decision.


Therefore, Bennis (cited in Coutts, 2000) argues that leaders focus on doing .the right things・ while managers focus on doing .the things right・.  Leading is influencing, guiding in a direction, course, action, opinion and hence, doing the right things is crucial for vision, strategic direction and handling of the organization's external interfaces.  In contrast, managing means to bring about, to accomplish, to conduct, to have charge of or responsibility for and therefore, doing the things right is important for efficiency in day-to-day business.


3.      Transformation versus transactional


Leadership can be transformational or transactional.  Schermerhorn (1998) defines transactional leadership as .leadership that directs the efforts of others through tasks, rewards, and structures・ and transformational leadership as .inspirational leadership that gets people to do more in achieving high performance・.  Robinson (2000) argues that transactional and transformational leadership are different from their key directional ideas. 


Robinson (2000) and Bass (1997) views transactional leadership as leadership by contingent reinforcement so the role of this kind of leaders is rather mechanistic.  According to Robinson and Bass, the leaders use control, measurement, administration, and performance, for example leaders・ promises, rewards and/or threats of disciplinary actions or punishments, to guide and motivate followers.  Hence, transactional leadership requires clear boundaries to control and manage interactions to drive desired business results.  Highly ordered system is designed for interaction to drive predictably uniform outcomes systematically over time.  Followers must comply with mutually defined operational guidelines and methodologies in every aspect of the business system.  The leaders strive to impose order and control on an otherwise chaotic and uncontrollable environment.


In contrast, Bass and Avolio (cited in Bass, 1997) argues that transformational leadership contains the interrelated components of charisma or idealized influence (attributed or behavioral), inspirational motivation, intellectual stimulation, and individualized consideration.  Put it simply, the transformational leaders use vision, charisma, symbolism, empowerment, intellectual stimulation and integrity to raise aspirations and shift people and organizational systems into new high performance patterns (Schermerhorn, 1996). 


This involves large-scale innovation and change which is achieved through the link between the present (known) and the future (unknown) by the transformational leaders (Rosenfeld and Wilson, 1999).  During the process, the leaders can envision the future and inspire the followers a sense of purpose, direction and importance so that they feel they contribute and make a difference.  Hence, according to Robinson (2000), transformational leaders use open systems and recognizes the interconnections and inter-relationships to create synergies and influences between people, process, and technology.  For example, the leaders allow chaos that can be harnessed as a source of creativity, innovation, and inspiration.  They also use their influence, confluence, and synergy to attract and allow things such as people, process, technology and opportunity to self-organize and making things happen.  Ultimately, the presence of charismatic leadership is reflected in followers who are enthusiastic about the leader and her/his ideas, who work very hard to support them, who remain loyal and devoted, and who seek superior performance accomplishments.


Leadership is the vital factor leading to the success of Microsoft.  The management of Microsoft is effective through transformational leadership to motivate its employees to do more than is expected and therefore achieve superior performance.  For example, through charisma, the management is excellent in leading the company with visions that instills pride, trust and respect from the employees.  It encourages the teams to .imagine tomorrow today・ for continuous innovation and improvement.  This has led to several innovation successes such as Windows, Office and Internet Explorer, etc.  Through inspiration, the management motivates employees through intrinsic rewards by offering opportunity to learn new skills and participate in projects that eventually lead to the important outcomes described in the vision.  This leadership style is effective in Microsoft as it arouses employees to be more dedicated, more satisfied with their work, and more willing to put extra efforts to achieve success in challenging environment.


4.      Implications


The analysis distinguishes between the role of managers and leaders.  Managers negotiate with employees to obtain balanced transactions of rewards for employee efforts; while leaders target efforts to change, improve, and transform the organization.  Thus, managers are .transactional・ as they direct and manage the organizations in a boundary (in accordance with the organization・s rules and regulations) so they engage in very little change.  On the other hand, leaders are .transformational・ as they use vision and inspiration to challenge status quo (identification of organizational goals).


Rosenfeld and Wilson (1999) warn that there might be problem with this way of viewing leadership is effective or not.  It is because the accuracy of vision is central and the leaders might get the vision wrong.  There are also rarely questions on the ethics or morals of the leader・s vision and the approach relies heavily on the abilities and traits of key individuals to inspire and transform.  Therefore, it is suggested that we should concentrate on the wider context in which leaders operate to explain why they are effective or not.


Consequently, trying to run an organization with only leadership or management is risky because both management and leadership skills are needed at the organizational, team, and personal levels.  Transactional and transformational leadership must be viewed as complementary.  Leithwood (cited in Southwest Educational Development Laboratory, 2001) argues that transactional practices needed to get the day-to-day routines carried out, however, maintains these practices would require transformational leadership to provide the incentive.  Andrewartha (2003) also argues that to lead a person needs to posses excellent management competencies, and to manage effectively a person needs vision and motivational leadership skills. 


Leadership, as noted above, is defined by function.  It is not restricted to people occupying particular positions.  Any person who can deliver the leadership function is a leader.  Block (cited in Southwest Educational Development Laboratory, 2001) claims that anyone can be a leader when s/he provides leadership with .the process of translating intentions into reality・.


5.      Conclusion


As a conclusion, the tasks and the roles of leaders are different from those of managers by means of their perspective and skills, their measures of success, and their functions in an organization.  Hence, leaders are .transformational・ and managers are .transactional・ because they have the similar characteristics each other. 


Viewing leadership in this way is too simplistic so it is suggested to evaluate the effectiveness of leadership in a wider context.  The dynamic environments require managers to have talents with both transactional and transformational to be complemented each other.  However, it is difficult to find a person with both skills.  It is therefore a distinct challenge for the managers and the organizations to equip with the necessary talents to meet the new conditions of today・s restructuring marketplace. 



Al-jedaibi, Hani K (2001), .Determining how Information Technology is Changing the Role of Leadership in Virtual Organization・, University of Wisconsin-Stout, [Online, accessed 2 April 2003]

Andrewartha, Graham (2003), .Leadership and Organizational Effectiveness Study Notes・, Charles Sturt University, Australia

Bass, Bernard M (1997), .The Ethics of Transformational Leadership・, Kellogg Leadership Studies Project: Transformational Leadership, Working Papers, [Online, accessed 1 April 2003]

Campbell, Rex (1997), .Leadership: Getting it Done;, University of Missouri, [Online, accessed 3 April 2003]

Coutts, Peter (2000), .Leadership vs Management・, PCC Leadership, [Online, accessed 3 April 2003]

Robinson, Graham (1999), .Leadership vs Management・, The British Journal of Administrative Management, Jan/Feb, Orpington, [Online, accessed 3 April 2003]

Robinson, Marcus S (2000), .Transactional Leadership That Drives Results・, Ethos Channel, [Online, accessed 1 April 2003]

Robinson, Marcus S (2000), .Transformational Leadership Defined・, Ethos Channel, [Online, accessed 1 April 2003]

Rosenfeld, Robert H and Wilson, David C (1999), Managing Organizations: Text, Readings & Cases, 2nd Edition, McGraw Hill. UK

Schermerhorn, John R Jr (1996), Management, 5th Edition, John Wiley & Sons, USA

Southwest Educational Development Laboratory (2001), .Facilitative Leadership: The Imperative for Change・, [Online, accessed 3 April 2003]

The Collins English Dictionary (2000), Harper Collins Publishers, [Online, accessed 4 April 2003]

Verma, Vijay K and Wideman, R Max (1994), .Project Manager to Project Leader? And the Rocky Road BetweenK・, Max・s Project Management Wisdom, [Online, accessed 2 April 2003]

Wilson, I H (1996), .The 5 compasses of Strategic Leadership・, Strategy and Leadership, Jul-Aug

Back to Management, Human Resource Management and Organizational Behavior Article List