Transactional vs Transformational Leadership
Hi, I’m Brett Quinn, CEO and Founder of StrategyX.
Today we are talking about a topic that I am incredibly passionate about. Predominantly because in my 20 years as a CEO of public and private companies I’ve never found two words that best describes the two types of leadership that helps businesses grow.
Among all the different leadership styles, transactional and transformational are probably the two that are compared the most. Both styles have their advantages and disadvantages and are suitable for achieving slightly different results. But the question is what style should you adopt for business growth and lasting business success?
In this podcast, we’ll discuss both leadership styles and I’ll give examples of each.
We’ll also cover how you can leverage modern technology to automate transactional leadership, which will provide you with more time to focus on the long-term growth of your business, or rather the transformational leadership style.
What Is Transactional Leadership?
Transactional leadership theory, also called managerial leadership, centers around the role of creating direction and establishing structure, organization, and compliance.
This includes the use of rewards and punishments to achieve desired outcomes from employees.
Transactional leadership is a more passive style of leadership, or at least it should be. It’s best suited for reaching tangible short-term goals efficiently and for task-oriented transactions.
Elon Musk is someone who uses transactional leadership to attain great results.
He incentivizes his employees by directing them to achieve specific goals in return for rewards. This style has proved particularly successful for his company in achieving short-term goals.
What Is Transformational Leadership?
The transformational leadership theory is that leaders inspire employees and stimulate their performance beyond what was previously expected of them.
This style of leadership motivates people to achieve better than expected results.
The theory believes in the leader identifying areas where change is needed and then inspiring employees to take initiative beyond their immediate self-interests.
Leaders work to intellectually stimulate the employees by encouraging them to think independently and brainstorm new solutions for challenges, and by fostering different learning opportunities.
Perhaps one of the best examples of transformational leadership is Steve Jobs.
He was a great businessman and an exceptional leader. He encouraged his team to always come up with distinctive ideas and products. His leadership revolutionized the tech industry and made Apple a household name.
Difference Between Transactional and Transformational Leadership
Transactional leadership vs. transformational leadership is an extensive debate, both having their advantages in certain scenarios.
Transactional style leaders use structure, processes, systems, delegation and consequences to achieve specific outcomes. Whereas transformational leaders engage and inspire employees and tend to be more actively involved in identifying the things that will truly help the business grow.
You’ll often hear leaders say, “I’m spending too much time working in the business rather than on the business.” Or “I’ve just been busy all day.”These are transactional leaders. While every business needs transactional leaders, there needs to be a fine balance for where leaders spend their time, especially in small or medium-sized business where you don’t have as many resources or as much time to spend in the transformational leadership space. However, if you want real growth, your leaders need to be transforming your business, creating the direction for the future and empowering, inspiring, coaching and supporting their staff to be the best they can be.
I’d like you to ask yourself these questions:
Based on the definitions I’ve provided for transactional and transformational leadership, where do you think most leaders currently spend most of their time? In the transactional space or in the transformational space?
Our research suggests your answer probably would have been the transactional space. Here’s another way to ask that question: do you hear more leaders say, “I really want to spend more time working on the business” or do you hear them say, “I really built the business today”? I think we all know the answer to that.
Now let’s ask the next question: where do you think leaders should spend most of their time?
In the transactional or in the transformational space? I think we know the answer to that. But here’s the really big question: how do you spend more of your time in the transformational space?
You recognize that you have to have the transactional space BUT you automate it! This will give you a lot more time to spend in the transformational space.
What Leadership Style Should Businesses Adopt?
Adopting a leadership style is a decision that will have long-term effects on your company and employees.
We’ve already discussed that transformational leadership is where leaders should be spending most of their time to get the sort of growth that companies need in a competitive market.
For your brand to really make a difference and stand out, you want to get the best performance from each employee.
Transformational leadership style encourages employees to think independently and own the tasks assigned to them, instead of just following orders to get a job done. This might bring in fresh ideas and perspectives.
Pushing your employees out of their comfort zone will change their perception of what you expect of them, inspiring improved output and productivity.
Automation Can Help You Efficiently Manage Transformational Tasks
To focus on transforming your business, you need to first automate or delegate everyday transactional tasks.
This will free up your time from monotonous work and reserve your capabilities for more creative and intellectually stimulating challenges.
Automation uses technology to make certain processes run automatically with little or no oversight.
For example, in the case of StrategyX, when our strategy planning software is combined with strategy execution software, the structure needed to plan goals, measure goals, and ensure staff are engaged and are being held accountable for results all happens automatically, giving leaders more time to focus their energies on transforming their department or business.
Automation can streamline the process of planning and cut down on the effort and time needed to execute your business goals..
As another example, consider an ordering system that tracks seasonal supplies, calculating the expected number of orders in any particular time frame and ensuring sufficient supplies, packing materials, and raw materials are ordered. This kind of automation helps prepare your company for a large influx of orders, such as around the holidays.
Here are some of the transactional leadership duties that StrategyX has automated.
- Establishing Structure
- Variance Management
These are a few of the top ways automation can assist transformational leadership, but we have listed many more on our website.
Transactional Leadership vs. Transformational Leadership - The Takeaway
You should evaluate your leadership style and determine if you’re practicing the right approach based on your long-term business goals.
The best leaders use a mix of both styles, depending on what they are doing or trying to achieve.
Business is full of transactional leaders because short-term goals are those needing immediate attention. However, If your endgame is to distinguish your brand from your competitors, you have an opportunity to create lasting change and inspire your employees to deliver their best, and the transformational leadership style is more suited to accomplish this.
If you’re ready to automate transactional leadership and shift towards a more transformational leadership style for your business, then check out how StrategyX can help you automate routine transactional tasks.
That way, you can be sure all the important day-to-day tasks are completed, giving you time to focus on transforming your business while ensuring short-term success.