Transformational Versus Transactional Leadership

Transformational Versus Transactional Leadership

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Transformational Versus Transactional Leadership

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Leadership experts often contrast transformational leadership with transactional leadership.65

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Transactional leaders influence others mainly by using rewards and penalties, as well as by negotiating services from employees. James McGregor Burns, who coined the term four decades ago, describes transactional leadership with reference to political leaders who engage in vote buying or make transactional promises (e.g., “I’ll have a new hospital built if you vote for me”).66 Managers in organizations are rarely elected, yet transactional leadership has become the focus of study in organizational behavior. The problem is compounded by a confusing and sometimes conflicting array of definitions and measures for transactional

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leadership. For example, Burns acknowledges that transactional leaders can appeal to follower wants and convictions about morality and justice, which is similar to transformational leadership.67

For these reasons, we will avoid the “transactional leadership” concept. Instead, our main focus will be only on transformational leadership. Furthermore, we believe a more appropriate comparison to transformational leadership is managerial leadership or managing. Transformational leaders are change agents who energize and direct employees to a new vision and corresponding behaviors. Managerial leaders instead help employees become more proficient and satisfied in the current situation.68 The contingency and behavioral leadership theories described earlier refer to managerial leadership, because they focus on leader behaviors that improve employee performance and well-being rather than on behaviors that move the organization and work unit to a new direction. As leadership expert Warren Bennis noted several years ago, “Managers are people who do things right, and leaders are people who do the right thing.”69

Organizations require both managerial and transformational leadership.70 Managing improves organizational efficiency, whereas transformational leadership steers companies onto a better course of action. Transformational leadership is particularly important in organizations that require significant alignment with the external environment. Unfortunately, too many leaders get trapped in the daily activities that represent managerial leadership.71 They lose touch with the transformational aspect of effective leadership. Without transformational leaders, organizations stagnate and eventually become seriously misaligned with their environments.

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Chapter Twelve Leadership in Organizational Settings

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TRANSFORMATIONAL VERSUS CHARISMATIC LEADERSHIP

Another topic that has generated some confusion and controversy is the distinction between transformational and charismatic leadership. Many researchers either use the words interchangeably, as if they have the same meaning, or view charismatic leadership as an essential ingredient of transformational leadership. Others take this notion further by suggesting that charismatic leadership is the highest degree of transformational leadership.72

However, the emerging view, which this book adopts, comes from a third group of experts who contend that charisma is distinct from transformational leadership. These scholars point out that charisma is a personal trait or relational quality that provides referent power over followers, whereas transformational leadership is a set of behaviors that engage followers toward a better future.73 This view is most consistent with the original and ongoing scholarly definition of charisma as an inherent characteristic of one’s character, not something that can be easily learned or mimicked.74 Transformational leadership motivates followers through behaviors that persuade and earn trust, whereas charismatic leadership motivates followers directly through existing referent power. For instance, communicating an inspiration vision is a transformational leadership behavior that motivates followers to strive for that vision. This motivational effect exists separate from the leader’s degree of charisma. If the leader is highly charismatic, however, his or her charisma will amplify follower motivation.

leadership substitutes

A theory identifying contingencies that either limit a leader’s ability to influence subordinates or make a particular leadership style unnecessary.

transformational leadership

A leadership perspective that explains how leaders change teams or organizations by creating, communicating, and modeling a vision for the organization or work unit and inspiring employees to strive for that vision.

transactional leadership

The view that leaders influence employees mainly by using rewards and penalties, as well as through negotiation.

managerial leadership

A leadership perspective stating that effective leaders help employees improve their performance and well-being in the current situation.

Being charismatic is not inherently good or bad, but several writers have warned that it can have negative consequences in leadership.75 One concern is that leaders who possess the gift of charisma may become intoxicated by this power, which leads to a greater focus on self-interest than on the common good. “Charisma becomes the undoing of leaders,” warns Peter Drucker. “It makes them inflexible, convinced of their own infallibility, unable to change.”76 The late management guru witnessed the destructive effects of charismatic political leaders in Europe a century ago and foresaw that this personal or relational characteristic would create similar problems for organizations.

Another concern with charismatic leadership is that it tends to produce dependent followers. Transformational leadership has the opposite effect—it builds follower empowerment, which tends to reduce dependence on the leader. One study also found that charismatic leadership has a negative effect on follower self-efficacy, which would further increase dependence on the leader.

The main point here is that transformational leaders are not necessarily charismatic, and charismatic leaders are not necessarily transformational. Procter & Gamble CEO Alan G. Lafley is not known for being charismatic, but he has transformed the household goods company like no leader in recent memory. Similarly, IBM CEO Sam Palmisano has guided IBM’s success without much inherent charisma. “I don’t have much curb appeal,” Palmisano admits. “I just try to lead them and get them to come together around a common point of view.”77 In other words, Palmisano and Lafley lead by applying transformational leadership behaviors.

ELEMENTS OF TRANSFORMATIONAL LEADERSHIP

There are several descriptions of transformational leadership, but most include the following four elements: Create a strategic vision, communicate the vision, model the vision, and build commitment toward the vision (see Exhibit 12.6).

Develop a Strategic Vision A core element of transformational leadership is strategic vision—a realistic and attractive future that bonds employees together and focuses their energy toward a superordinate organizational goal.78 Indeed, experts describe vision as the commodity or substance of transformational leadership. Strategic vision represents a “higher purpose” or superordinate goal that energizes and unifies employees and adds meaning to each person’s self-concept.79 It is typically described in a way that departs

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from the current situation and is both appealing and achievable. A strategic vision might originate with the leader, but it is just as likely to emerge from employees, clients, suppliers, or other stakeholders. When embraced by employees, a strategic vision plays an important role in organizational effectiveness.80 It offers the same motivational benefits as goal setting (see Chapter 5), but it also serves as a source of a common bond that builds employee commitment to this collective purpose.

Edward Stack had plenty of doubters when he recommended rapid expansion of his father’s two-store sporting goods business in upstate New York. His vision was to become the nation’s leading retail sports store. “You’ll have a lot of people who won’t really share your vision and will tell you all of the reasons why it won’t work,” Stack advises. But he points out that a vision is critical to the company’s success. “If you don’t have a solid vision, you probably aren’t going to be able to grow profitably.” Today, Stack’s company employs nearly 26,000 people in more than 500 Dick’s Sporting Goods and Golf Galaxy stores through the United States.8′

Communicate the Vision If vision is the substance of transformational leadership, communicating that vision is the process. CEOs say that the most important leadership quality is being able to build and share their vision for the organization. “Part of a leader’s role is to set the vision for the company and to communicate that vision to staff to get their buy-in,” explains Dave Anderson, president of WorkSafeBC (the Workers’ Compensation Board of British Columbia, Canada).82

Transformational leaders communicate meaning and elevate the importance of the visionary goal to employees. They frame messages around a grand purpose with emotional appeal that captivates employees and other corporate stakeholders. Framing generates positive emotions and motivation and establishes a common mental model so that the group or organization will act collectively toward the desirable goal.83 Transformational leaders bring their visions to life through symbols, metaphors, stories, and other vehicles that transcend plain language. Metaphors borrow images of other experiences, thereby creating richer meaning of the vision that has not yet been experienced.

Model the Vision Transformational leaders not only talk about a vision; they enact it. They “walk the talk” by stepping outside the executive suite and doing things that symbolize the vision.84 “We hold our leaders to an even higher standard than our employees,” says Nathan Bigler, human resource director at Eastern Idaho Regional Medical Center. “Leaders have to consistently walk the talk.”85

Leaders walk the talk through significant events such as visiting customers, moving their offices closer to (or further from) employees, and holding ceremonies to destroy outdated policy manuals. However, they also alter mundane activities—meeting agendas, dress codes, executive schedules—so that the activities are more consistent with the vision and its underlying values. Modeling the vision is important because it legitimizes and demonstrates what the vision looks like in practice. Modeling is also important because it builds employee trust in the leader. The greater the consistency between the leader’s words and actions, the more employees will believe in and be willing to follow the leader. In fact, one survey reported that leading by example is the most important characteristic of a leader.86 “As an executive, you’re always being watched by employees, and everything you say gets magnified—so you teach a lot by how you conduct yourself,” advises Carl Bass, CEO of the California software company Autodesk.87

Build Commitment Toward the Vision Transforming a vision into reality requires employee commitment, and transformational leaders build this commitment in several ways. Their words, symbols, and stories build a contagious enthusiasm that energizes people to adopt the vision as their own. Leaders demonstrate a “can-do” attitude by enacting their vision and staying on course. Their persistence and consistency reflect an image of honesty, trust, and integrity. Finally, leaders build commitment by involving employees in the process of shaping the organization’s vision.

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Part Three Team Processes

Transformational Versus Transactional Leadership

Transformational Versus Transactional Leadership

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Transformational Versus Transactional Leadership

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