Transformational Leadership, Transactional Leadership and Management - A Brief Comparative Overview

Management and Organizational Behaviour 1

Donald M. McCartneyPoullang DoungDr. William Waugh Management and Organizational Behaviour PAUS 8431 10th November 2004

Transformational Leadership, Transactional Leadership and Management: A Brief Comparative Overview

At its dawn, the challenge and possibilities of the 21st century focused attention on

leadership in a new light. Historically, the focus on becoming a true leader was through

developing an intellectual understanding of leadership. Similarly, leadership power and

meaning have been limited by the assumption that one can only be a leader if there are

followers. The focus has also been on intellect, but not intuition; knowledge, but not

wisdom; and as a consequence, the expectation that a leader should have all the answers

has been created.

In dealing with the question of leadership, in this time of unprecedented change,

one has only to examine the annals of history in order to find examples of men and

women, who had the opportunity to be successful and were rendered unsuccessful by

their failure to see the many pitfalls that come with the acquisition of leadership. The

pitfalls of bad leadership can trip you up whether you run a country, a large corporation, a

small business or a growing family (Gardner 1990).

James MacGregor Burns, in his landmark book, Leadership, defines leadership:

Leadership is leaders acting as well as caring, inspiring and persuading others to act-for certain shared goals that represent the values-the wants and the need, the aspirations and expectations-of themselves and people they represent. And the genius of leadership lies in the manner in which leaders care about, visualize, and act in their own and followers values and motivations.


This definition is appropriate in these times of challenge and possibilities because it

underscores the following: (1) It does not allow leadership to use coercive power which

would render it null and void; (2) Good leaders are more in tune with movement toward

goals that are common to those who lead and those who follow; and (3) Leaders act in

accordance with the values of those whom they lead (Phillips 1997).

Leaders are confronted with “risk” when they try untested approaches and accept

the risk that accompanies all experiments. They are also confronted with risk when they

are (a) confronted with new challenge or a new idea, (b) pushed outside their comfort

zone, (c) willing to be “first” and or to “trust”, (d) willing to experiment with new ways

of doing things and or (e) willing to go beyond boundaries (Kouzes and Posner 1995).

It has been said that there were three revolutions in American history: (1) The

American Revolution (1776-1783); (2) The Civil War (1861-1865); and (3) The Civil

Rights Movement (1954-1968). These three major events transformed the American

landscape and created the atmosphere in which many disenfranchised Americans would

eventually realize the achievement of the American dream (Phillips 1998). There is no

doubt that it took transformational leadership, transactional leadership, and perhaps

management for these three revolutions to transform America. The difference or lack

thereof between transformational and transactional leadership will be explored later in

this paper.

Among those who provided the leadership were the Founding Fathers, Abraham

Lincoln and Martin Luther King Jr., respectively. To this list of transformational leaders,

the names of Winston Churchill and Nelson Mandela can be added.


This paper will examine briefly the following: (1) definitions of transformational

and transactional leadership; (2) differences between transformational leadership, and

transactional leadership, (3) whether leadership is exclusively transactional and

transformational, (4) the pitfall of transformational leadership, (5) relationship between

leadership and management and (6) the attributes of transformational leadership.

This research paper is a comparison of transactional leadership and management

(as a unit) to transformational leadership. In any event the scope of this paper will not

allow for comparison between the three in all respects. Therefore, in the sections on the

pitfalls of transformational leadership, the attributes of transformational leadership and

leadership and management, transactional leadership will not be at the focal point. The

focus will be on transformational leadership because it embodies the universally accepted

principles toward which all organizations should strive. In the following sections, several

definitions of transformational and transactional leadership will be reviewed.

There has been growing interest in the study of transformational leadership. The

pace of change confronting organizations today has resulted in calls for more adaptive,

flexible leadership. Adaptive leaders work more effectively in rapidly changing

environments by helping to make sense of the challenges confronted by both leaders and

followers and then appropriately responding to those challenges. Adaptive leaders work

with their followers to generate creative solutions to complex problems, while also

developing them to handle a broader range of leadership responsibilities (Bennis 2001).

The type of leadership described above is labeled as transformational leadership (Bass

1985).


Transformational leaders inspire others to excel, give individual consideration to

others and stimulate people to think in new ways (Kouzes and Posner 1995).

James MacGregor Burns coined the terms transactional leadership and transformational

leadership in 1978 in which he sets out to describe the situation between leaders and

followers. Such a leadership takes two forms: (1) transactional and (2) transformational.

When leaders go by the current goals of followers, the relationship becomes nothing

more than an exchange process, and is therefore transactional leadership. Of

transactional leadership, he said:

Such leadership occurs when one person takes the initiative in making contact with others for the purpose of exchange of valued things. The exchange could be economic or political or psychological in nature: a swap of goods or of one good for money; a trading of votes between candidates and citizens or between legislators; hospitality to another person in exchange for willingness to listen to one’s troubles. Each party to the bargain is conscious of the power resources and attitudes of the other. Each person recognizes the other as a person. Their purposes are related, at least to the extent that the purpose stand within the bargaining process and can be advanced by maintaining that process. But beyond this the relationship does not go. The bargainers have no enduring purpose that holds them together; hence they may go their separate ways. A leadership act took place, but it was not one that binds the leader and follower together in a mutual and continuing pursuit of a higher purpose. On the other hand, Burns saw transformational leadership as being diagonally

opposed to transactional leadership. The relationship becomes transformational when

leaders try to bring about a change in followers’ motives and goals. He describes

transformational leadership as the ideal relationship between leaders and followers in this

way:

Such leadership occurs when one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality. Their purposes, which might have started out as separate but related, as in the case of transactional leadership, become fused. Power bases are linked not as counterweights but as mutual support


for common purpose. Various names are used for such leadership, some of them derisory: elevating, mobilizing, inspiring, exalting, uplifting, preaching, exhorting, and evangelizing. The relationship can be moralistic, of course. But transforming leadership ultimately becomes moral in that it raises the level of human conduct and ethical aspiration of both leader and led, and thus has a transforming effect on both.

The difference between transformational and transactional leadership will be presented

next.

Transformational leadership takes place when followers and leaders raise one

another to higher levels of motivation and morality. Leaders address themselves to

followers’ wants, needs, and other motivation as well as their own. By so doing, the

leader serves as an independent force in changing the makeup of the followers’ motives

base through gratifying their motives (Burns 1978). Transformational leadership is

comprised of four interrelated dimensions: (1) charisma, (2) inspiration, (3)

individualized consideration and (4) intellectual stimulation (Bass 985). Transformational

leaders bring about change, innovation, and entrepreneurship. They describe the process

of corporate transformation that recognize the need for revitalization, create a new vision,

and institutionalize change (Seltzer 1990). Transformational leaders build confidence in

followers, encouraging them to reframe the future and question the tried and true, and

coaching them to develop their full capabilities (Avolio, et al. 1999). Transformational

leaders integrate creative insight, persistence and energy intuition and sensitivity to the

needs of others to forge the strategy-culture for their organization (Bass & Avolio 1993).

Transformational leaders adopt a long-term perspective. Rather than focusing

only on current needs of their followers or themselves, they focus on future needs. While

transformational leaders focus on short-term issues, they also concern themselves with

long-term issues. Rather than seeing intra and extra organizational factors as discrete,


transformational leaders view them from a holistic viewpoint (Dubinsky et al. 1995). Six

attributes of transformational leadership have been identified: (1) displaying empathy, (2)

dramatizing the mission, (3) projecting self-assurance, (4) enhancing the leader’s image,

(5) assuring followers of their competency, and (6) providing followers opportunities to

experience success (Behling & McFillen 1996). It must be noted that transformational

leadership does not stand alone in the leadership vocabulary. Transactional leadership

will be the focus of the next section.

Prior to the introduction of charismatic transformational leadership most

researchers in the field of leadership study referred to transactional leadership contingent

reinforcement as the centre component of effective leadership behaviour in organizations

(Bass et al. 2003). Showing transactional leadership meant that followers agreed with,

accepted, or complied with the leader in exchange for praise, reward and resources or the

avoidance of disciplinary action (Northouse 2004). Rewards and recognition were

provided based upon followers successfully carrying out their roles and assignments.

Transactional contingent reward leadership clarifies expectations and offers recognition

when goals are achieved. The clarification of goals and objectives and providing

recognition once goals are achieved should result in individuals and groups achieving

expected levels of performance (Bass 1985; Burns 1978). In its more corrective form,

under the nomenclature management by exception, the leader specifies the standards for

compliance, as well as what constitutes ineffective performance, and may punish

followers for being out of compliance with those standards. This style of leadership

implies closely monitoring for deviances, mistakes and errors and then taking corrective

action as quickly as possible when they occur (Burns 1978). In its more passive form, the


leader either waits for problems to arise before taking action or takes no action at all and

would be labeled laissez-faire. Such passive leaders avoid specifying agreements,

clarifying exceptions, and providing goals and standards to be achieved by followers

(Northouse 2004). The next section will explore whether leadership is exclusively

transactional or transformational.

As noted earlier, transformational leadership occurs when leaders and followers

raise one another to higher levels of motivation and morality. On the other hand,

transactional leadership is based on a transaction or exchange of something of value the

leader possesses or controls that the followers want in return for his or her services.

The relationship of most leaders and followers are transactional – leaders

approach followers with an eye to exchanging one thing for another: (1) jobs for votes, or

(2) subsidies for campaign contributions. Transactional style works well when both

leader and led understand and are in agreement about which tasks are important.

Despite what has been noted above, the seasoned, savvy leader recognizes that

transformational leadership and transactional leadership are not at odds with one another.

Experience has shown that they compliment each other as the circumstances dictate.

There is no magic formula or checklist that dictates when one is more relevant than the

other in any given situation.

Bernard Bass, who is an avowed disciple of James MacGregor Burns (the father

of the transactional and transformational concepts of leadership), points out the

relationship between transactional and transformational leadership this way:

The best leadership is both transformational and transactional. Transformational leadership augments the effectiveness of transactional leadership; it does not replace transactional leadership.


Bass continues by saying:

Transaction continues to be an effective tool, and a necessary tool, for leaders at all levels. Transformational leaders, whose choice would be to gain agreement by appealing to values of the followers or peers, finding the road blocked, may resort to the transactional style.

In fact, when the transformational leader finds himself/herself in a win-lose

situation, he or she tries to convert it into a win-win problem-solving situation. When this

does not provide the results, he or she desires, then he or she can revert to the

transactional skills necessary as an effective negotiator.

Despite what may have been said about the transformational leadership style, it

appears, however, that the transactional, at least on the surface, provides the basis of most

leader-follower encounters. On the other hand, while the transactional style may appear

to be most prevalent, it produces results that may not be as high as with the

transformational style. This phenomenon is explained in the six-stage development

theory of R. Kegan. The six stages range from 0-5. Karl W. Kuhnert and Phillip Lewis

explore stages 2, 3, and 4. According to Kuhnert and Lewis, stage 2 is the transactional

stage, stage 3 is the higher-order transactional stage and stage 4 is the transformational

stage of leadership traits (Kuhnert & Lewis 1987).

If Kegan’s theory holds true, then it is safe to accept the thesis that leadership

moves from the transactional to the transformational, thus establishing a relational link

between the two. It is prudent that leaders know the difference.

Since transformational leadership is at the centre of this comparative research

paper, the next three sections will deal with (1) the pitfalls of transformational leadership,

(2) the relationship between leadership and management and (3) the attributes of

transformational leadership.


One may get the impression that transformational leadership and participative

decision-making are always based solely on the consensus of the leader and follower.

Given certain circumstances, it is not always practical to afford the luxury of debate as to

what course of action can be taken. In fact even when there is debate, it must be

understood that some individuals’ interests may have to be sacrificed.

With that said, it is generally agreed that most powerful tools are potentially

double-edged. Transactional leadership has a potential immoral and unethical dimension

that could be exploited by an unscrupulous leader on naïve and unsuspecting followers.

In support of this Bass and Steidlmeier in their “Ethics, Character and Authentic

Transformational Leadership” said:

Fundamentally, the authentic transformational leader must forge a path of congruence of values and interests among stakeholders, while avoiding the pseudo-transformational land mines of deceit, manipulation, self-aggrandizement and power abuse.

Hitler was a case study in transformational leadership gone wrong. Indeed, he appealed to

the values and ethics of the German people. It could be argued that instead of fulfilling

his followers higher order needs and aspirations he lead them to ruin. Hitler was a

powerful, charismatic leader that would fit the definition of a pseudo-transformational

leader, because his aim did not lead to the betterment of his followers, but rather his own

fulfillment through the abuse of power. In this regard, another argument is offered and is

worthy of attention.

“Transformational leadership is seen as immoral in the manner that it moves members to sacrifice their own life plans for the sake of the organization’s needs. There is no moral justification for the vision of the CEO becoming the future sought by the employees” (Bass & Steidlmeier 1998).


In order to overcome this warning of Bass and Steidlmeier, it is crucial that the leader’s

agenda must be able to uplift the followers. James MacGregor Burns puts it best when he

said:

“…transforming leadership ultimately becomes moral in that it raises the level of human conduct and ethical aspiration of both leader and the led, and thus has a transforming effect on both.”

As noted earlier, transformational leadership may be double-edged, however, with

high moral values as ethics espoused by both leader and led, the dark side is mitigated

and the forces of good are championed. Now that the up and downsides of

transformational leadership have been explored, how does this relate to management?

When discussing leadership, inevitably a discussion of management ensues. What

if any, is the relationship between transformational leadership and management?

According to Kotter:

The fundamental purpose of leadership is to produce change, especially non-incremental change. The fundamental purpose of management is to keep the current system functioning.

Kotter further tells us that leadership is distinguished by appealing to the values of the

followers by:

…satisfying the basic human needs for achievement, a sense of belonging, recognition, self-esteem, a feeling of control over one’s life and the ability to live up one’s ideals.

On the other hand management, Kotter continues,

…develops the capacity to achieve its plans (the leader) by organizing and staffing – creating an organizational structure and set of jobs for accomplishing plan requirement, staffing jobs with qualified individuals, communicating the plan to those people, delegating responsibility for carrying out the plan, and devising systems to monitor implementation.

While leadership works hand in hand with management, their focus is different.

Leadership envisions the future course and management builds the administrative process


to get there, producing orderly results and maintaining the desired end-state. A listing of

some of the attributes of transformational leadership will be presented in the next section.

In writing this research paper, several attributes of transformational leadership

have been unearthed. These attributes are highlighted by the current literature on the

subject, and are noted as follows: (1) Authentic transformational leadership builds

genuine trust between leaders and followers. (2) Transformational leaders concentrate on

terminal values such as integrity and fairness. They see responsibility for their

organization’s development and impact on society. (3) They increase the awareness of

what is right and good, important and beautiful, when they help to elevate followers’

needs for achievement and self-actualization, when they foster in followers higher moral

maturity, and when they move followers to go beyond their self-interests for the good of

their group, organization or society. (4) The truly transformational leader who is seeking

the greatest good for the greatest number and is likely to avoid stretching the truth or

going beyond the evidence for he or she to set an example for followers about the value

of valid and accurate communication in followers. (5) Leadership and follower ship in

transformistic organizations are predicated less on positional authority and more on

interdependent work relationship centred on common purpose. (6) When organizational

participants are empowered to act as effective leaders and followers based on core values

and a unifying purpose, the potential for unprecedented advance and exceptional

outcomes are greatly enhanced. (7) Transforming leadership is evaluating. It is moral

but not moralistic. Leaders engage with followers, but from higher levels of morality. In

the enmeshing of goals and values both leaders and followers are raised to more

principled levels of judgment.


In conclusion, the merits of transformational leadership, transactional leadership

and management have been presented and will succeed or fail on their own strength or

weakness. It is incumbent upon those who position themselves for leadership to develop

the sophistication and savvy which will assist them in determining when to use

transformational leadership, transactional leadership or management techniques in the

interest of those whom they serve, lead, their organizations and themselves. They must

know how to create a balance among the three concepts in terms of their application,

because they are all necessary in order to successfully navigate the treacherous waters of

leadership and management in this century of unprecedented change and challenge.

.


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Transformational Leadership, Transactional Leadership and Management - A Brief Comparative Overview