Transactional vs Transformational Leadership in Change Management

Leaders play a crucial role in steering organizational change and inspire or stimulate people for achieving excellence at work by realizing the pre-defined goals. Effective leadership provide a direction and vision to the people from top to bottom, develops a conducive culture, climate and values for enabling certain expected code of conduct or behaviour out of employees.

Leaders conceptualize and administer suitable strategies for driving continuous improvement in the existing processes, motivating employees for superior performance and facilitating change across various functionalities.

Leaders play both transactional as well as transformational roles depending upon the organizational context, environmental factors and the long term objectives.

Transactional Leadership

Transactional Leaders work in accordance with the predefined modes of operation and are more concerned about ensuring a continuity in the day to day functioning, ensuring seamless operations by establishing systems and processes in place and focused towards achievement of set targets.

Such leaders can enforce disciplinarian actions, establish a systemic framework and define a road map of action, formulate & implement policies and motivate superior performance through a systems of rewards and incentives.

A Transactional Leader is not concerned about the futuristic vision or strategies for acquiring market leadership, but is more concerned about ensuring that the tasks assigned are completed on priority by meeting the quality benchmarks.

Transformational Leadership

It would be more appropriate to say that the Transformational Leaders are the real champions of change. They are the visionaries who influence or motivate teams for achieving excellence in business performance.

Transformational leaders give more importance to the development of cohesive teams and facilitate an environment of collaboration for achieving the next best level of performance, instead of ensuring the completion of day to day organizational duties/tasks.

The focus is more on team building, empowerment of employees, alignment of individual-organizational goals and culture building for motivating individuals to embrace the change for the better.

Given below are the key functions performed by the Transformational Leaders:

• Creating a Vision: Transformation Leaders are responsible for envisioning and ensuring that the vision is shared and communicated across all the levels to inspire and motivate people for driving excellence at work.

• Setting Examples or Modelling: Transformational Leaders inspire employees through Modelling or exemplification of good behaviour or a desirable code of conduct.

• Establishing Standards: Well defined standards and norms, guide the employees in following a desirable pattern of behaviour and working towards the fulfilment of common goals through a collaborative approach.

• Culture & Climate Building: Building a facilitating climate and a culture of mutuality, interdependence and flexibility are the major functions of Transformational Leaders. A conducive organizational culture can motivate individuals for delivering performance excellence and exceed expectations by achieving newer milestones at work.

• External Communication and Liaising: Transformational Leaders establish a connect with the external world and are the main point of contact for communicating with the key stakeholders for the resource support, technological assistance and acquire knowledge regarding the best business practices of leading organizations. This function essentially involves strengthening relationship with the stakeholders or business partners.

• Team Building or Synergy: This is one of the most important functions of leaders who follow transformational leadership style by building a motivational climate and creating a positivity in the work environment for completing tasks collaboratively.

• Talent Acquisition & Development: This is the key responsibility of the transformational leaders, which involves identification of the best of the talent pool and nurturing them with adequate training & development support.

Transformational Leadership: Advantages and Disadvantages at Work

Advantages:

• Transformational Leadership style encourages innovation and creativity in the workplace by creating an enthusiastic and a challenging work environment. This kind of leadership provides ample opportunities to the individuals for growth and achieving newer performance milestones.

• New Leaders may evolve out of a several followers.

• Transformational Leaders are visionaries and they possess an extraordinary capability of communicating the vision to the followers. Since, such leaders are more skilled in visualizing the bigger picture, they can address challenges much efficiently.

• The team members work for the achievement of a common goal or vision by being influenced or inspired by their leaders, thus driving excellence at work.

• Transformational leadership encourages mentor buddy relationship between the leader and the follower, thus creating a conducive environment for innovation and improves organizational preparedness for any kind of change process.

• Transformational Leadership brings reforms in the existing processes, creates higher expectations in followers and motivates the followers to deliver beyond the pre-defined expectations or the set framework.

• Transformational Leadership surely guarantees high performance of the teams as well as superior productivity and growth.

Disadvantages:

• Though Transformational Leaders can see the bigger picture, but they lack detailed orientation for which they require the support from the transactional oriented people who are more organized and detailed oriented. Lack of detailed orientation may result in a major oversight, which may ultimately affect the organizational interests in the long term.

• Transformational Leaders rely too much on inspiration, passion and emotional aspects, which may lead to a neglect of the facts or realities through research, investigation or information gathering.

Examples of Best Practices of Transformational Leaders in Business

Transformation in Technology: Various Technology giants like Apple, Microsoft, Intel, IBM and many others, revolutionized the computing world through technological innovation by introducing state of the art quality software applications and microprocessors. Even the world of internet has witnessed a change in the contemporary scenario with Google enjoying its leadership as the most effective search engine and Amazon & e-Bay leading the e-commerce platform.

Transformation in Financial Services Industry: Due to the internet revolution, the financial services industry is undergoing a sea change with the availability of online platforms for the investors for planning their investments independently, researching, trading stocks and investing in various financial products by being in any part of the world.

Pioneers like Peter Lynch, proponent of Mutual Funds and John Bogle, proponent of Index Funds, changes the attitude and preference of the investors on various financial portfolios. Today, Mutual Funds and Index Funds have become the most preferred choices for the investors because of the low costs involved and diversified benefits.

Diversification: In the era of globalization and liberalization, the organizations follow diversification strategy for business expansion across the globe and maintaining a leadership edge in the competitive market.

Leaders like Jack Welch, the CEO of General Electric during 1980s, restructured the entire organization from the traditional bureaucratic set up to a more agile and lean framework.

Other Examples include Business Process Outsourcing and Knowledge Process Outsourcing which has resulted in generation of cost advantages for the organizations and enhanced business efficiencies, increased job opportunities for millions of people across the world and revolutionized organizational functioning as a whole.

Again quality tools and processes like TQM, Kaizen, Six Sigma, etc have led to continuous improvement in business operations and achievement of superior quality benchmarks in manufacturing practices.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.