Leadership can make or break an organization
But, how do you know which leadership style is right for you? Or more importantly, the people you lead...
Effective leaders are able to inspire, motivate and create lasting change. They're not just focused on achieving goals, but rather, helping teams navigate challenges and foster the growth of the organization.
However, not all leadership styles achieve these goals in the same way. Some prioritize clear structures and accountability, while others drive engagement and innovation.
Transactional leadership and transformational leadership are two widely adopted approaches, each with their own set of strengths and weaknesses.
In this blog, we’ll help you understand these styles of leadership with clear comparisons, definitions and practical insights.
Transactional leadership vs transformational leadership: What’s the difference?
Broadly speaking, all leaders do the same thing
Whether you’re leading an organization, a classroom or even a kitchen, leadership principles remain similar.
Your goal is to be a role model for your team. Helping them achieve the impossible, together.
Transactional leadership and transformational leadership are two commonly adopted styles for guiding teams, however they’re not mutually exclusive.
Transformational leaders are both motivating and inspiring. They encourage their team in ways beyond monetary gain and rewards. This leadership style works best with closer supervision.
Transactional leadership focuses on rewards for achieving specific goals and working hard. This can be practical for organizations because they’re able to set specific targets and reach them efficiently.
Here's a useful table of comparison:
A table of comparison
How is management different to leadership?
One common misconception is that management and leadership are two sides of the same coin. However, this couldn't be further from the truth.
The difference between management and leadership is not dissimilar to that between transactional and transformational leadership.
Writing in Harvard Business Review, John Kotter stated that:
"... leadership and management are two distinctive and complimentary systems of action. Each has its own function and characteristic activities. Both are necessary for organizational success."
For the purpose of this leadership learning process, we will distinguish between the two terms as follows:
Management is about doing the right things
Leadership is about doing things right
Consequently, one of the challenging elements of any leadership role involves determining the right balance between being transactional (managing) and transformational (leading).
It's challenging because the balance may vary depending on a number of variables and accountabilities. This is why, as a leader, you need to be highly adaptable.
What is an example of transactional leadership?
Picture a sales team in the corporate world. Typically, a Sales Manager will set specific targets for the employees to achieve every month. If the sales representatives meet or exceed targets, they’re given a bonus, if not, they get reduced commission.
This simple but effective leadership style of rewards or lack of, helps keep the team focused on meeting the primary objective.
What are the pros and cons of transactional leadership?
What is an example of transformational leadership?
Transformational leadership can often be found in the education sector. Consider a principal at a school who encourages teachers to develop new and creative teaching methods. This principal inspires the staff by sharing a compelling vision of student success.
The teachers feel motivated to go beyond the basics because they are part of a larger mission to improve the students' future.
You can also find our in-depth resource and downloadable pdf on transformational leadership here.
What are the pros and cons of transformational leadership?
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Can a leader be both transformational and transactional?
As mentioned previously, these two widely adopted leadership styles are not mutually exclusive.
In fact, when choosing between transactional or transformational, many leaders believe that a combination of both will be most effective for their employees long term.
What are the benefits of combining both styles?
Adaptability: Leaders who integrate both styles are far more adaptable depending on their situation. For example, they may decide to utilize a transactional leadership style for routine tasks, allowing them to meet deadlines quickly, then switch to a transformational leadership style for strategic initiatives.
Organization Balance: By blending both styles, leaders can ensure that the employees remain efficient in their typical day-to-day tasks while staying innovative and prepared for any future challenges.
Enhanced Motivation: Team members may feel more connected to leaders who mix their approach. They are clear about what is expected from them and feel connected to the larger organization's purpose.
Mixing both leadership styles doesn’t necessarily mean sunshine and rainbows for an organization though, it can also present several challenges like:
Conflicting demands: Balancing the structured, outcome-driven approach of a transactional leader with the flexibility of a transformational leader may create conflicting demands. Team members may struggle to understand whether they should prioritize innovative thinking or adherence to rules.
Mixed signals: Switching between leadership styles is difficult. In doing so, leaders may send mixed signals to their team leading to overall confusion and uncertainty around expectations.
Resource intense: Implementing both styles effectively takes time and effort. Developing clear transactional systems (like rewards and punishments) while maintaining inspiration and personal engagement can be draining.
How Insights can help enhance leadership
Choosing between transactional and transformational leadership depends on your unique situation and the needs of your team.
If your organization requires strict adherence to rules and efficiency in meeting short-term goals, transactional leadership might be the way to go.
On the other hand, if fostering innovation, long-term growth, and employee engagement is your priority, transformational leadership could be more effective.
Often, the best approach is a combination of both styles, tailored to fit the specific challenges and opportunities your team faces.
At Insights, our learning and development (L&D) programs are designed to help people become self-aware leaders and choose a leadership style that suits their needs and the needs of their team. By understanding your personal strengths and areas for growth, you can adapt your approach to lead more effectively.
If you’re looking to become a more effective leader and learn more about transformational leadership specifically, download our comprehensive eBook here.
Insights Discovery is an L&D training system that creates high-performing teams by enhancing awareness and workplace relationships. Using a memorable four-color model to illustrate different behavioral styles, it creates a common language that connects colleagues across geographical and cultural boundaries, fostering collaboration, driving productivity and transforming workplaces.
