Understanding Transactional Leadership Theory

Apr 02 2024 | Observaciones
Woman sat with a notepad and pen speaking to a man who is listening intently.

What is a transactional leadership style?

Transactional leadership involves using positive or negative incentives to motivate and influence a workforce. This style of management often assumes that people can only be incentivised to perform well at work by a tangible reward or a threat of reprimand. Additionally, that they must be closely monitored to ensure they are adhering to structured business processes.

Transactional leadership theory is founded on B.F. Skinner’s ideas on reinforcement, known as the theory of operant conditioning. He suggests that behaviour is influenced by its consequences and can be shaped through the control of those outcomes.

Managers with a transactional leadership style can be identified by three primary characteristics:

  • Contingent rewards, such as bonuses or awards, are given to a workforce as long as performance expectations are met.

  • Active management by exception.

  • Passive management by exception.

What is active management by exception?

This involves the process by which a manager will closely monitor employees to evaluate performance and pre-empt potential issues. Active management by exception is a good way to ensure employees can learn from any mistakes and avoid them in the future. It can also mean projects are more collaborative and interactive. However, having a manager present during every aspect of a project can often feel claustrophobic for employees, especially if they perceive it as a lack of trust.

This management style mainly focuses on avoiding problems but has little regard towards improving as a business overall. There is not as much leg room for innovation.

What is passive management by exception?

Passive management is another subtype of transactional leadership, where a leader reactively evaluates performance after completion of the task, intervening only if a serious problem occurs.

This approach is different to active management by exception in that it gives employees greater autonomy and trust during a project. Nevertheless, it remains rooted in the idea that that employees are motivated by consequences, both positive and negative. If a manager can identify that a project has gone well, the employee will receive a reward and if not, corrective action is taken. Overall, this creates a more peaceful working environment but there is still the overarching theme of control.

So, does transactional leadership work?

A transactional management style works best when an established business practise with minimal deviations is in place. All employees have their defined roles and responsibilities. It also depends on employees being able to produce clear and measurable results, often referred to as SMART goals. The benefits to this approach include a smoother onboarding process for new starters and a clear link between performance and reward, resulting in a higher volume of goals achieved.

However, whilst there may be merit to B.F Skinners theory, it’s also true that people can be self-motivated. Often, a sole focus on performance can serve to demotivate and demoralise employees rather than the opposite. Plus, a rigid structure can create hurdles for creativity, hampering innovation and progress.

While transactional leadership has been prevalent throughout the 20th and 21st centuries, alternatives are quickly becoming preferred. For example, transformational leadership focuses on building fruitful working relationships where every member of the team is considered, encouraged and supported, rather than focusing solely on output.

To learn more about how you can find your leadership style, explore EZRA’s leadership development coaching. Our tailored programs focus on honing the core skills needed to be an inspirational, forward-thinking and impactful leader, including emotional intelligence, communication and inclusively leading.

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