Transactional vs Transformational Business Leadership

 

Jennifer Goldman Consulting Transformational leadership vs transactional leadership

A good leader will help their business and their teams navigate crises. In times of doubt or difficulty, the difference between a good leader and a bad leader can dictate how a business will overcome and thrive, especially in times of uncertainty. Insights from Forbes balances the significance of leaders acting swiftly and decisively, but also with empathy. Faced with rising health concerns and employees forced into overtime and eventual burnout, top leaders stand out by championing trust and transparency.

Today, we resume a world of work now changed by experiences from an exploration of remote work and digital-based interactions. No doubt, leaders around the world will take different approaches to leadership in an attempt to get by and ensure their business remains standing. Of the many types of leadership, the transactional leader and the transformational leader are two opposing leadership styles. Today, we’ll go over how they differ, and which one is more effective in current times:

Transactional leadership

The transactional leader is one who approaches work and employee management through a rigid, rewards-and-punishment-based system. A feature from Business Insider emphasizes how outcome-focused this style of leadership is, especially when leaders keep themselves distant from their employees, which tends to make for weaker relationships. Overall, transactional leadership relies on the monitoring of employee performance to ensure the team moves towards the end goal.

However, a common downside of the transactional leader is a tendency to micromanage. While monitoring of employee performance is a good start and can help leaders stay on top of the various workflows involved in running a business, it can also become stifling to most workers. Due to everything being pre-determined with the threat of a “punishment” hovering over your employees’ heads as they work, there can be very little space for creativity or doing things a different way — even when their way could be better or more efficient.

Another disadvantage of this kind of leadership is that it doesn’t provide an environment where leaders can build personal or individualized relationships with their employees, because their performance is based strictly on a set of metrics. Business coach Bruce Eckfeldt emphasizes employee growth by way of constructive feedback and support from their leader, both of which are more than usually overlooked in a transactional leadership.

Transformational leadership

On the other hand, transformational leadership focuses on cultivating relationships and a positive working culture for both you and your employees. Like all other leadership styles, the transformational leader also focuses on getting results — but in a more people-centric way, instead of stats and metrics. As insights from LHH on hiring a transformational leader point out, competition for transformational leaders has exploded. Moving through a post-pandemic world, many organizations are not satisfied to spend year after year treading through the COVID-19 vortex. Rather, they are moving forward and looking for leaders who can guide them through an uncertain future — along with the emotional rollercoaster this future can bring.

Instead of reverting back to pre-pandemic norms, adopting transformational leadership just may be key to navigating economic concerns in this hazy world of work. Unlike the more traditional and rigid structure that a transactional leader brings, a transformational leader is emotionally equipped to engage a workforce filled with doubts, fears, and personal concerns. We’ve covered the importance of managing time and energy in a previous post on the ‘Symbiotic Relationship of Energy and Time’, and it’s an example of why taking into account individual concerns in a team — rather than merely the team as a generalized concept — can help mitigate risks of employee burnout and stress. The ability to manage time not just for yourself, but in a way that benefits each team player, creates space for creativity and success.

Ultimately, in times of crisis and constant change, people naturally turn to transformational leaders. These leaders are equipped with the necessary agility to make adjustments that benefit not only the whole business, but also the employees that work hard to support it.

Key takeaways:

Transactional leaders get things done, but at the cost of no relationship building with their employees — causing emotional distance.

Transformational leaders lead with empathy and passion, focusing on employee well-being instead of outcome-based decisions.

In an ever-changing world of work, a leader who is agile and can adapt to new situations, without overlooking their employees’ concerns and demands, will gain competitive advantage to stand out from the rest.

The only thing left to learn is which type of leader are you and can you improve?

Post by: JBatts

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Good luck. And as always, health and sanity to you!

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