The Transformational and Transactional Leaders in Companies

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Transformational leaders are the necessity of today's organizations. Transformational leaders influence or motivate the followers to achieve greater heights in the workplace meeting the organization's goals and objectives in the process. There are basically 4 types of transformational leaders namely individualized consideration, inspirational motivation, intellectual stimulation, and idealized influence. First we have individualized consideration which is paying individual attention to every employee's needs and wants. They are considerate of other people and try to act as mentor or role model for them. A recent finding suggests that Australian leaders are very caring towards their employees and treat them as individuals. This kind of leadership style inspires the employees to give their 100% for the organization. Next we have inspirational motivation which consist of inspiring and motivating their staff to perform better than expected to achieve organization's goals. This kind of leadership brings out the best in the employees. Today the top leaders they inspire, motivate and reward their employees and those who don't do their tasks, they are replaced. After that we have intellectual stimulation which involves promoting creativity, innovation and challenges in the workplace. It allows the employees to enhance their skills and knowledge and also climb up the success ladder. This kind of leadership shows shades of individualized leadership as they both develop the character, along with the organizational skills of the employees through mentoring and challenges. At last we have idealized influence which is basically the way the followers idealize their leaders. In this kind of leadership the followers tend to follow in their leader's footsteps and look up to them as role models. This type of leadership can also be termed as charisma. In this the leader inspires or influence their subordinates to achieve personal as well as social goals. Charismatic leaders instil self-confidence and self-esteem in others. (Sarros & Santora, 2001)

Then we have transactional leaders who have more of an exchange type relationship with the employees. The employees get rewards and incentives in exchange for expected performance. There are 2 types of transactional leaders: contingent reward and management by exception. Firstly is contingent reward which is influencing the followers to perform better in order to get rewarded. It has its own merits and demerits. The positive thing is that it satisfies the individual as well as organizational needs, but the demerit is that collective effort doesn't exist in the organization anymore. Everyone works for their own goals and teamwork disappears. Then we have management by exception means having trust on the employees to get the job done. In this the leaders do not motivate their employees to achieve exceptional results but just get the task that has been allocated to them done. It's more of a control type of leadership rather than a inspirational type of leadership. (Sarros & Santora, 2001)


In yester years leaders used to have a heroic image who were capable of doing the impossible. No problem or issues was too big for them. This kind of unrealistic image did put a lot of burden on the shoulders of the leaders. Since it was impossible for just one person to bail the organization out of a crisis so obviously they didn't live up to the expectations. (Volckmann, 2005) Since then a lot of progress has been made to understand the true concept of leadership and it influence within the organization. Now it is being understood within an organization that leaders need the support of each and every member of the organization to achieve the set goals and objectives.. Today the business world has become very volatile. Nobody can really predict the future. In these tense situations, an effective leader is one who understands the necessary changes that need to be brought about within the organization that would help in achieving its goals and objectives.

Around 40-50 years back leaders used to be in control. They were the ultimate authority within the organization and everyone else was supposed to just obey orders just like machines. But these things don't exist in today's organizations anymore. Along with the major changes in the business world, a lot of changes have occurred in the leadership style also and those leaders who have been able to adapt to these changes have been able to make their organization a successful venture. Today attributes like ethics, employee empowerment, information sharing and effective communication are an integral part of an organization. Today emotional culture is of significant importance within an organization. So a leader today cannot treat his employees like machines anymore. They need to be felt as an important part of the organization as the leader. So it was important for leaders to change the way they run the business. They needed to modify their leadership style to adjust to the changes in the business world. That why leaders today try to keep themselves updated with the latest findings and implements them within the organization. Leader's behaviour also depends on the type of organization. Different organization strategies and policies require different behaviour on the behalf of the leader.

An effective leader today needs to have a lot of personal attributes to run an organization. Attributes such as ethics, employee empowerment, self-confidence, integrity, authenticity etc are an important aspect of today's leader. (Dulewicz & Higgs, 2004) We are now going to discuss a few of them. Ethics is nothing but a set of morals and values. Ethics focuses on the doing the right thing rather irrespective of the fact that it gives the desired outcome or not. It is an inseparable part of every organization in existence today. The leader also needs to have a set of ethics and morals that are in consistent with the organization's ethics. Leaders should make decisions which are in consistent with the organization's morals and principles. The leader needs to make sure that proper ethical training and education is given to the staff members so that a positive ethical environment can be maintained. An organization with good ethics and morals always has a positive image in the views of the society which helps in the long term sustainability of the organization. It makes sure that the organization's ethics and values are not compromised at any cost. A leader is said to be charismatic if he possess the ability to influence others to perform beyond expectations. An effective leader is able to motivate his followers to fulfill their individual needs while fulfilling the company needs in the process. (Ncube & Wasburn, 2006)

A charismatic leader should possess empathy, envision and empowerment. Envision is providing a vision for the future for the organization that the followers can relate identify and relate to. So a strong bond is created between the leader and his followers to chase that vision together. Creating that vision and communicating it with the followers is one of the important aspects of a charismatic leader. Next is empathy which is the leader's ability to understand other's feeling, needs and values. Earlier there was no room for emotions in the business. The organizations took whatever decisions it took remain ahead in the race without considering its effects on the stakeholders, employees and other people associated with the company. But now things have changed a lot in the workplace. There is a new concept called emotional culture in existence today. Leaders are now much more considerate of other's feeling in the workplace. Mutual feeling and respect is prevalent in the workplace today. Nowadays they don't take any decisions without considering its impact on the people associated with the company. It's more of a relationship building kind of behaviour on the part of the leader to have a positive impact on the followers. With this come mutual respect, trust, appreciation and support for each other which proves to be very beneficial for the organization. With this attribute, the leader is able to recognize the needs and wants of its employees the fulfilment of which will lead to better productivity. (Choi, 2006)Empathy helps in the personal development of the employees and strengthening the bond between the followers and the leaders. Lastly we have employee empowerment which can be argued as perhaps one of the most important characteristic developed by the leaders over the years. It relates to sharing the power and authority with its subordinates which was pretty much non-existent some 30-40 years ago. Today the employees are more confident and more than capable of handling important and sensitive assignment on their own. They just need the opportunity to showcase their knowledge and expertise. Employee empowerment does exactly the same i.e. it increase the self -efficacy of the employees and gives them of a feel of importance, Powerful and capable within the organization. It gives them the opportunity to initiate an action and also use their own strategies and methods to get the desired output. (choi, 2006)

Effective communication is another very important characteristic that the leader has developed in their arsenal. If an organization wants to be in business then effective communication is a must. Effective communication depends on a lot of factors the target aimed, the medium used and the source. Arguably communication does bring about a change in the receivers behaviour so there is no room for misunderstandings. Earlier only face to face way of communication used to be in existence for meetings and decision makings which made the required longer time to finish if the sender and receiver were at a distance. (Flier, Koopman & Hoogervorst, 2004)But today due to globalization, many different and more effective way of communication has been developed due to advancement in the field of information technology which saves time and money for the organization.(Smagt, 2000) Effective communication is necessary within an organization to avoid confusion and misunderstandings which can prove fatal for the organization. Sound and clear messages should lead to effective communication. There should be constant sharing of ideas and knowledge in the workplace which helps in the personal development of the employees. Seminars and conferences should be held on a more regular basis where the employees can learn about the latest finding/research related to them which can be implemented in the workplace.

Workforce diversity is a very critical and sensitive concept today in organizations. People from different cultures, traditions, generations, gender and background work together under the same roof. A lot of research has been going on in this particular concept for the past few years with great interest. (Arsenault, 2004) Due to globalization and lack of skilled labour in the domestic market of most countries companies try to get the required skills and expertise from overseas. So these skilled labours, from a different background and culture form part of the workforce. This is a very sensitive issue which requires very careful handling on the part of the organization. Misunderstandings and difference of opinion can often generate in the workplace. Today the diversity at the top level positions within an organization is very less. There are very few women and people of colour at the top managerial positions within the organizations today. There are many barriers that prevent them to move up in the success ladder. Family responsibilities, lack of opportunities, lack of role models, stereotyping the role and abilities etc to name a few.

The organization who are at the top today are the companies who provides equal opportunities to all its employees. These organizations conduct programs to change the organization culture to accept the diversity and also to address the individual needs. Top level management develops diversity strategies and policies that can be implemented within the organization. Strategies like equal opportunities, creation of role models, changing the perceptions of employees towards diversity etc are implemented. Training and education should be provided within the workforce to help them understand the concept better. (Kilian, Hukai & McCarty, 2005)Effective leaders should form a strong relationship with their employees in a diverse workplace. It helps them to understand their individual needs and support them at every level in their career. Organizations with good human resources policies and practises also do pretty well in managing diversity in the workplace.

A leader uses his power and authority to influences his/her subordinate's behaviour to meet the organizational needs. Earlier the employees were treated as machines. The top management used their authority and power to delegate tasks to its subordinates and the followers used to just do the tasks with no questions asked. But now a lot has changed in the way a leader uses his power and authority within the workplace. Today the leaders empowers others to reach their own potential and increase productivity. A leader is effective only if he understands his powers and how to use them wisely.

There are basically 5 types of power which the leader can utilize to exert his authority to influence his/her subordinates. They are coercive power, reward power, legitimate power, referent power and expert power. Now we are going to look into them one by one in detail. Let's start with coercive power, which is pretty difficult to manage, is having a control over the punishments melted out to the employees. It has its positive and negative implications. A leader cannot effort to be either too easy or too tough on its subordinates. Then we have reward power which is the leader's ability to give rewards. It pushes the employees to perform than expectations. After that we have legitimate power which means that the leaders have the right and authority to make the subordinates obey their orders. This right influences a change in the behaviour area of the follower. It is a good power in the arsenal of the leader to keep the employees on their toes all the time. Then we have referent power which depends on how much the followers respect the leader and see them as role model. In this case the leader tries to showcase a positive image in front of his/her followers. They form a strong bond of trust and faith with their leader and try to follow in their leader's footsteps meeting the organizational needs in the process. At last we have expert power in which the leader possess the necessary skills and expertise to influence their followers. This power needs constant upgrading to remain ahead of others in the race. (Braynion, 2004)


A lot has changed in the business world in the past 40 years. It's not only the technology that has changed but also the wants and needs of society. Factors like globalization, size of the organization and stiff competition has played an important in changing the organization culture to what it is today. Leadership must learn to adapt to these changes and also adjust their leadership style along with behaviour if they want to survive today. They need to do so to achieve the changing organization's goals and objectives. They also need to adjust because the followers look up to the leader for inspiration and motivation and the leader should be in a position to direct and guide them through the changes within the organization. Since changes like emotional culture, ethics, employee empowerment, diversity to name a few has become part of the organization today so a change in the leadership style was also needed. The strategies or methods that have worked in the past may not work today.(Silverthorne, 2001) In today's world it's more about competition rather than corporation in the business world. Since competition will always exist in the business world, so changes are also inevitable. Due to which the leaders also need to keep upgrading themselves with the latest findings in relation to leadership to keep them ahead in the race. The strategies and methods of the leaders need to be more in tune with the changes within the organizational culture to remain competitive. Effective leaders need to assess their leadership style from time to time and make sure that they are following the latest trends in the field to remain sustainable in the business world.