2020 iLEAD e-book

Transactional Leadership
Transactional Leadership is the idea that effective leadership is based on a reciprocal exchange between
leaders and followers, "Quid pro quo". Conventional reward and punishment are used to gain compliance
from the employees.
Transactional leadership involves giving employees something in return for their compliance and acceptance
of authority, usually in the form of incentives such as pay raises or an increase in status. The theory was
propounded in the 1970's by James McGregor Burns, building on earlier work of Max Weber. The theory is
closely linked with its antithesis, Transformational Leadership, which involves moral, rather than tangible,
rewards for compliance.
The transactional leader often uses Management by Exception, working on the principle that if something is
operating to defined (and hence expected) performance then it does not need attention.
TYPICAL TRANSACTIONAL LEADERSHIP BEHAVIORS
1. Contingent Reward: Refers to leadership behaviours focused on exchange of resources. That is,
leaders provide tangible or intangible support and resources to followers in exchange for their
efforts and performance.
2. Management by Exception – Active: Refers to monitoring performance and taking corrective
action as necessary. The focus of management by exception is on setting standards.
3. Management by Exception – Passive: A less active version of management by exception in which
leaders take a passive approach, intervening only when problems become serious.
4. Laissez-­ ‐faire: Can be thought of as non-­‐leadership or the avoidance of leadership responsibilities
ASSUMPTIONS OF TRANSACTIONAL LEADERSHIP
People are motivated by reward and punishment.
Social systems work best with a clear chain of command.
When people have agreed to do a job, a part of the deal is that they cede all authority to their
manager.
The prime purpose of a subordinate is to do what their manager tells them to do.
Modern organizational experts or theorists would probably not recommend this approach to leadership
anymore, although it is probably still quite prevalent.