What is the Transactional Leadership Style?

The transactional leadership style stems from the notion that employment and specific tasks or projects are like a transaction. This leader has a clear understanding of their role within an organization or team and has a focused mandate for the team. When the team accepts a job, they make an agreement with the leader to complete the tasks and duties as assigned. With the transactional leadership style, the team is appropriately compensated in exchange for their efforts. This means workers may be rewarded or punished based on their performance. This leader is skilled at driving the team towards a goal or outcome and often encourage a high-performance culture within a team.

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The transactional style of leadership was first introduced by the 20th-century German sociologist, Max Weber in 1947. Weber originally introduced the concept of “rational-legal leadership”. This style would come to be known as transactional leadership, “the exercise of control on the basis of knowledge.”

Sociologist, Max Weber first described the Transactional Leadership Style in 1947.

The transactional leader is the type of leadership style where leaders focus on performance, supervision, and organization. In this style, the leader promotes or motivates group members with rewards and punishments, and typically keeps them motivated for short periods of time. Today, we find this style used most commonly in consulting services, architecture, technology outsourcing, and construction work. Project managers and those involved in project delivery for an organization would be familiar with this leadership style.

Advantages and Disadvantages of the Transactional Leadership Style

This style is most effective in a situation where the issues are simple and clear but it can be difficult where the goals are evolving or yet to be defined. Transactional leadership also works well in time or cost-constrained situations where the team has to complete assigned tasks within a specific timeframe or within a budget. The transactional leader feels less at home when the team structure is less defined or when flexibility and creativity are required.

How does this leadership style compare with your own style? How does it compare to your manager? Whether you are a transactional leader, another style, or a combination of styles below are some advantages and disadvantages to the transactional leadership style to consider:

Pros:

Rewards those who are motivated by self-interest
Achieves short-term goals quickly
Rewards and penalties are clearly defined for teams
Encourages high-performance within a team

Cons:

Generally rewards the worker on a practical level only, such as money or perks
Creativity can be limited since the goals and objectives are already set
Does not reward personal initiative
individual career or personal growth within the team may be limited

Yes, there are pros and cons to each of the leadership styles, but understanding the balance is key to being a successful leader. Still unsure about your own style? To learn more about your style as a leader or an aspiring leader, take our short quiz that will give you a sense of your own style. To start the 2-minute leadership style quiz, click here.

Famous Leaders with Transactional Leadership Style

Gen. Norman Schwarzkopf
Howard Schultz founder of Starbucks
Bill Gates

RECAP: Transactional Leadership Style

This leader uses a “carrot and stick” approach, which is a combination of reward and punishment to get the desired result. The transactional leader has found a practical approach to getting things done for a team or organization.
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