Transactional Vs Transformational Leadership

This essay is required to conduct a better understanding of leadership styles transactional and transformational leadership styles from researching on Richard Branson and Steve Jobs’ success, and discuss about different types of changes (incremental and radical changes) may occur in an organisation in order to learn change management methods can be applied to a real case (Virgin Group).

Although both of the excellent leaders exhibit characteristics of both transactional and transformational leadership styles, this essay will identify Steve Jobs as a transactional leader and Richard Branson as a transformational leader with three reasons for each statement.

This essay will identify and describe six examples of changes (incremental and radical) for each leader (three examples each type).

At last, this essay will discuss about the concepts of change management and explain Kotter’s 8-Step Change Model by applying to a real case (Virgin Group).

Transactional Leadership VS Transformational Leadership

Good leadership is the key to the success of an organization. Transactional leadership is performance-oriented and transformational leadership is people-oriented. To be more specific, transactional leadership involves reinforcement to monitor and justify followers’ performances by using reward and punishment, while transformational leadership tends to inspire and motivate the followers’ loyalty and concentration by leaders’ charisma.

Steve Jobs as Transactional Leader

Transactional leaders’ characteristic behaviours are: (Barbuto, 2005)

Contingent Reward

Contingent reward is actually a usual way that most of the managers use to motivate teams, create positive competition and improve effectiveness.

Steve Jobs had the impressive ability to notice talent and active employees and allocate them to the right place in the company. Each year, Jobs took his “top 100” people on a retreat. It is not only a reward as a vacation, but also an acknowledgement from STEVE JOBS!

In my opinion, acknowledgements from successful genius would be the best reward for my hard working.

Management by exception

Transactional leaders take actions based on the exceptions (performance) of the employees. Steve Jobs categorised his followers as either “geniuses” or “bozos”, and quickly firing those who fall in the latter camp (Greene-Blose, 2012).

Another characteristic of transactional leadership would be the desire for control which is typical Steve Jobs’ style. His favourite presentation tools were a whiteboard and a Magic Marker, which gives him fully control in the conference. After his reinventing Apple, Jobs had several weeks of product review sessions. Finally he run out of patience and shouted the team to stop, grabbed a Magic Marker to the white board and wrote down four words: Consumer, Pro., Desktop and Portable. Then he said:”Here is what we need!” (Isaacson, 2012)

This is Steve Jobs, full of power and passion, who gave clear incentives and strategies to his followers with his wisdom and visions.

Richard Branson as Transformational Leader

Transformational leaders’ characteristic behaviours are: (Barbuto, 2005)

Idealized influence

Richard Branson has become a role model for his followers inside or outside of his “Virgin Empire” by his own passionate and fearless life style. With his own words, “You want to create something you are proud of… That has always been my philosophy of business” (Branson), Richard Branson broke many world records such as the fastest recorded Atlantic crossing by boat, the first Atlantic crossing by hot-air balloon, etc. He proved that anything is possible to his followers and the rest of the world with real examples. (Ocker, 2008)

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Inspiration motivation

Richard Branson is a visionary leader with dreams and relentless work attitude which make those dreams come true. At the early stage of Virgin Group business, he once said:”I want Virgin to be as well-known around the world as Coca-Cola”. (Branson) After decades of time, the brand of Virgin have become world well-known, and covers many different areas of business which Coca-Cola wound not dare to try. Those kinds of ambitions and courage ties his group together and close, and leads him to keep on improving Virgin Group services and productions.

Individualized consideration

Richard Branson’ business maxim is staff first, customers second and shareholders third (Locke, 2009). One of his most famous and interesting story would be the lawsuit against British Airways for its protracted libel actions and ended with a settlement of about £600,000 total. After Richard Branson got the money, he divided it to all his employees for their hard working. It was not only a reward, but more like sharing a triumph.

On the other hand, the major reason of Richard Branson’s business success is that he takes care of customers’ needs with innovations and consideration, such as placing a rubber ducky in each bathroom of Virgin-owned hotels in order to make guests feel ate home, putting Listening Posts in their record stores and allowing customers to listen to entire CDs before purchasing. (Richard Branson Virgin)

In general, transformational leadership style is considered more as a friendly and flexible way to organize a company, while transactional leadership is considered more tough and efficient. It is hard to say which one is better. All the good leaders all over the world (include the two above) have the characteristics of the both leadership styles., such as Steve Jobs’ charismatic characteristics and spiritual motivating speech skills (Transformational), and Richard Branson’ strict management ways on the lower level positions in the organisation (Transactional). Transformational leadership does not replace transactional leadership but improves the effectiveness of transactional leadership from a different angle. (Bernard, Bass, & Riggio, 2005)

Incremental Changes VS Radical Changes

Changes are inevitable in human lives as well as in business operations. Incremental change takes place over a long time period for development purposes, while radical change is more often triggered by a crisis or a business opportunity.

There are several differences listed in the following table.

Incremental Changes

Radical Changes

Reasons

Business development

Expansion

Dealing with crisis

Seizing a significant business opportunity

Period

Long period of time

Short period of time

Examples

Improvement

Such as TQM, new system implementation

Revolutionary changes

Such as restructuring, merger, take-over

Approaches types

May be small, slow, on-going

May be onetime events, quick

Respond and effect

Hardly noticed by the management level

Immediately adapt

May cause resistance to changes

Steve Jobs – Incremental Changes

Example1: Pixar

In 1986, Steve Jobs bought “The Graphics Group” from Lucasfilm for $10 millions, changed the name to “Pixar” and started his career in animation manufacturing. With his visionary plans and technology support from his computer company NeXT, Pixar developed a software package called RenderMan (which has been widely accepted and used in filmmaking industry). RenderMan was implemented into the existing Pixar production line slowly in order to improve quality of the products. After ten years time, Pixar finally achieved an amazing success in the animation filming industry. It kept producing a series of animation films, beginning with Toy Story (1995), which led Pixar’s worth to over $1.5 billion.

It took 10 years to implementing and perfecting the new software into production and transferring Steve Jobs’ leadership style into Pixar’s existing operation, and achieves a remarkable improvement at the end. This is an incremental change made by Steve Jobs.

Example2: Digital hub strategy

After Steve Jobs returning to Apple in 1997 as an “interim” CEO, he successfully brought Apple back to profitability with a amazing consumer desktop computer – iMac. By facing negative predictions about proclaiming PCS would disappear within a couple of years, Steve Jobs continuously led Apple to keep on perfecting “i” products with the meaning of “internet, individual, instruct, inform and inspire” as the same way Apple always do. (Steve Jobs’ introductory 1998 iMac slide show)

In 2001, Steve Jobs unveiled the Digital Hub Strategy to the public and in the next 10 years time he kept on launching a series of new products which extremely changed and led the trade of the whole world. (Kurian, 2012)

There was an interesting event that Steve Jobs called himself as the “iCEO” of Apple instead of “interim” CEO humorously which entertained the public very much (Macworld San Francisco 2000). It was also a smart way to promoting “i” products while teasing with the board of Apple for rehiring him as a temporary executive officer.

This huge successful change took 10 years to be accomplished followed by Steve Jobs’ leadership piece by piece. It maintained the old producing direction and improved production qualities. It was a long period on-going process of implementing Jobs’ wisdom into Apple Company.

Example3: Retirement from Apple

Steve Jobs was diagnosed with pancreatic cancer in 2003, but he kept on denying any serious problem. That is why everyone was surprised when Apple announced that Steve Jobs would not go on stage for the Macworld keynote in 2009, and he took six months off at the same year. Jobs finally resigned as CEO of Apple in 2011 but remained as the Chairman of the company’s board, and he passed away after 6 weeks. (Kurian, 2012)

There may be some radical changes involved for damage control purpose, but in general, Steve Jobs took care of his retirement carefully and smoothly to avoid negative impact within 3 years time. For instance, he distributed his responsibilities to other executives step by step, and before his final resign, he strongly recommended Tim Cook in written, that letter was released to the public later in order to retain faith. The whole process was carefully planned and implemented in a long time step by step. In my opinion, it can be an incremental change.

Steve Jobs – Radical Changes

Example1: Macintosh VS Lisa

In the early 80s, Apple was creating a business-oriented computer named Lisa under Steve Jobs’ supervising, but later after that, Steve Jobs thrown out of the Lisa project because of his bad temper. He was so angry and decided to take revenge by developing a small project called Macintosh in order to destroy the sales of Lisa. (Kurian, 2012)

It was a radical strategy. Macintosh had user-friendly interface (point-and -click) which inspired other computer manufactories and changed the direction of computer industry since then, but it was not as welcome to the market as Jobs expected though. At that time, IBM’s PC was more compatible with its cheaper price.

Because this action was taken rapidly without well planning and careful market researching, Macintosh project failed.

Example2: Staging a Coup

There was another revenge taken by Steve Jobs after his removal from Lisa project, he tried to stage a coup. As we all know, he failed again. (Kurian, 2012)

It was a restructuring plan, and he took actions rapidly. But without endorsement from Apple’ board of directors and support from other colleagues, he got fired from his own company.

Example3: Reinventing Apple

By 1996, Apple rehired Steve Jobs as an “informal adviser to the CEO”. At that time, Apple was keeping on losing money and Steve Jobs staged another coup. He successes this time and became an “interim” CEO in 1997.The first thing he had done after his promotion is cutting off the production lines and focused on four products. This effective decision brought the lost confidence back to the Apple community (Kurian, 2012). In the meantime, Jobs took other actions such as announcing a new slogan “Think Different” and launched an amazing project which brought Apple’s resurgence lately, the iMac. (Edwards, 2008)

Those actions and decisions above are radical changes (restructuring and redesigning the production processes). They were new strategies to the company for solving a financial crisis in a short time period.

Richard Branson – Incremental Changes

Example1: Virgin Atlantic

There are some unique features Virgin Atlantic has while other airways may not have can be considered as incremental changes. Such as, serving a cup of ice cream while passengers watching movies during travelling in order to provide a better service. Virgin Atlantic does not provide meals for short distance flight in order to reduce ticket price. This kind of services is provided for improving quality of service.

Example2: Virgin Group

Because Richard Branson received a lot of support from his family and friends during hi early period of business stage (borrowed money from his auntie and supported by John Lennon), the whole Virgin Group services can be considered as a long term process for implementing Richard Branson’s plan of giving back to the society and helping those people who has ambitious but doesn’t have opportunities. Such as, Virgin Money provides a set of formalised documentations help people who need loans. Although Virgin Money U.S. did not work well in USA, Richard Branson helped millions of people with his good heart in UK. Those actions can be considered as Incremental Changes.

Example3: Eco-friendly efforts

In 2007, Richard Branson launched Virgin Earth Challenge dedicating in to environmental issues. He made several decisions that supervised the whole world, such as a $25 millions prize for inventors who comes up with a viable solution for scrubbing carbon gases from atmosphere. He also pledged to reinvest all profits from Virgin transportation business over the decade into developing ecologically benign fuels.

This kind of actions may not affect other Virgin companies, but they will improve Virgin Group’s reputation, it is also a long time period project.

Richard Branson – Radical Changes

Example1: Virgin Records Shop

At the beginning, Richard Branson started his records business as mail ordering company in London, and it went well. After a postal strike, the mail order business was crippled. Richard Branson was forced to seek new outlets and he opened his first retail store in Oxford Street in 1971.

This was a strategy for dealing with a crisis situation, and operated immediately. It changed Virgin Record’s business process and structure.

Example2: Selling Virgin Music Group

Selling Virgin Music probably would be the hardest decision Richard Branson has ever made in his whole lifetime. This decision was made in order to get money to take Virgin Atlantic back into private ownership (Vinnedge, 2009).

This change was forced by a financial crisis and included restructuring process.

Example3: Closing Virgin Money U.S.

Richard Branson launched a loan servicing company called Virgin Money U.S. in America in 2007, and began its withdrawal after 2 years (Lepro, 2010). Its social loans were transferred to Graystone Solutions. This time, Richard Branson misjudged the market and had to make the decision in order to limit the damage. Other reasons of this collapse might be the bad economy and different culture in America. This change included restructuring and take-over in a short time.

To sum up the above examples and explanations, incremental changes are normally well planned and taken over by pieces, there is less possibilities of failure. Radical changes are immediate responses for a crisis or significant opportunity, there are chances of failure.

Change Management in Virgin Group

Story of Virgin Mobile

In 2007, Virgin Group announced the completion of its biggest challenge which brought over 10 million customers and 13,000 employees – merger of NTL, Telewest and Virgin Mobile under the Virgin Media brand. It is known as the largest Virgin Company in the world.

This operation took more than two years to complete the whole the merger, and Virgin Group handled it carefully, especially on employees’ resistance.

Reasons of employees’ resistance to this change and strategies

It is necessary for leaders to understand that resistances to changes are normal. In order to deal with those obstacles, leaders have to identify reasons of employees’ resistances firstly and develop different strategies for different situations.

Some common reasons are following:

Fear

Mostly, employees’ fear comes from uncertainty about their career. In this situation, employees were worried about if there would be a layoff or if they were qualified for the new company.

Strategies: Virgin Group kept employees involved during managing changes. The high level of the management went done to the front line staff and listened to the staff’s ideas and problems, and shared their own experiences. Richard Branson took care of individual needs carefully. Meanwhile, he also announced that if the employees no longer have the enthusiasm, they would be better to find a new job. As long as the employees performed with full responsibilities, they would always be considered as a part of the company. This kind of instructions increased the sense of the urgency, and motivated employees to move on positively.

No faith in new process

Former NTL and Telewest employees might have uncertainties about the new process of Virgin Group. Because NTL and Telewest Company had several years of struggling with the bad economy environment, they could not be sure whether the new company would lead them to improve the organisational performance.

Strategies: Richard Branson gave responsibilities to his employees, and went to the front line personally to inform clear instructions. Establishing clear instructions and explanations, and demonstrating a picture of a better future would increase employees’ faith and certainty of the new process.

Comfort & personal preference

Former NTL and Telewest employees had their own ways of daily operations, and the new company brought its new ways of doing business, so they might have the difficulties to adopt the new culture. Such as, those staff had their old way of dealing with customers’ calls by following the instructions and scripts strictly, while Richard Branson believes that each customer would have his/her unique problem, staff should help different customers differently.

Strategies: Richard Branson threw away all the scripts and told call-center employees to help customers within one call if possible. In order to support their work, he allocated necessary resources to the font line.

Lack of knowledge

Although some former NTL and Telewest employees were expert in their old company, they might need to start from the beginning since the new company had its unique ways of doing business.

Strategies: For this kind of anxiety, Richard Branson responded with three words only: “Live and Learn”! He provided resources and training programs for employees in order to create a positive learning environment, and he also encouraged communication among different levels of the management to understand individual difficulties.

Lack of trust

Virgin Group has different diversity of businesses and it used to prefer small piece of business, whether Richard Branson has the ability to lead the large company to make profit and keep growing would be unpredictable. This is the reason that some employees might have difficulties to adapt the changes.

Strategies: Richard Branson kept developing new products and services, and led the company to profitability, such as more packages of Virgin Broadband, more channels and TV programs for Virgin Media Television, and etc. Those successes brought back the trust in several years, not immediately.

Application of Kotter’s Change Model

Create Urgency

At this stage, it is necessary to deliver a message that the whole company really needs this change. The company has to provide solid reasons and convincing dialogues support this decision. To Kotter’s belief, this stage is the most important stage; lack of preparation would easily lead to a project failure.

In Virgin Media’s case, leader should show people NTL and Telewest’s poor performance reports and most importantly, the potentials, because no one will have faith in a failed business. With a brief introduction of development scenarios, leader should emphasise the opportunities and benefit from this merger.

Form a Powerful Coalition

In order to influence people to accept the change, leader needs a group of key people from different department to support the change management process. They don’t necessary have to be who has legitimate power, but also can be expert, and other influential people.

In Virgin Media’s case, leader should select powerful and influential people from ex-NTL and ex-Telewest Company, and select good communicators from Virgin Mobile, in order to organise a supportive team. Once organised, the team needs to work together and continuing to create urgency in their own working areas.

Create a Vision for Change

The next step would be generating an overall vision about the change, including values and reasons of the change, short summaries, and strategies to execute that vision.

In Virgin Media’s case, leader should have a clear idea about what to do with ex-NTL and ex-Telewest, and why Virgin Mobile needs to conduct a merger with them. As the matter of the fact, Richard Branson was trying to build the first “quadruple play [1] ” media company in UK, and after couple of years hard working, he did it.

Communicate the Vision

After creating the vision, leader should deliver the message to the team members, and with their help, the message can be distributed to all aspects of the company. The message should not be sent through meetings only, most importantly through daily communications among the whole company.

In Virgin Media’s Case, Richard Branson tried to communicate with employees as much as possible and motivate them to maintain in a positive working attitude. Those ideas and visions were implanted into employees’ mind during those communications.

Remove Obstacles

In order to ease employees’ resistance to changes, leader should avoid having resistance to employees’ resistance. Leader should be willing to listen and understand employees’ difficulties and find a way to help them walk through it.

In Virgin Media’ case, Richard Branson provided clear instructions to all employees, and went to the front-line in person to listen to employees. He allocated necessary resources to them and tried to create a learning environment, in order to improve performance.

Create Short-term Wins

Celebrations for short-term wins would be the easiest and most efficient way to prove that “we are doing the right things and we are doing things right”. It is not only for motivating employees’ passion of working, but also for gaining trust.

In Virgin Media’s case, leader should recognize and reward people for their excellent performance and making changes happen, and encourage them to keep on working positively.

Build on the Change

Kotter believes that it is very important for leaders to avoid celebrating too early and being complacent about current short-term success. There would be always rooms for improvement.

In Virgin Media’s Case, Richard Branson kept on producing and developing new products and services, and tracking on employees’ performances all the time. He went through daily operations in details in person to seek for ways of improvements.

Anchor the Changes in Corporate Culture

Formalising the changes and including them as part of organisation’s culture would be the last step of change management process. This step can be considered as a closure and promotion.

In Virgin Media’s case, Richard Branson announced Virgin Group’s success to the public all the time through different kind of channels, such as TV, radio, Virgin websites, blogs, magazines and etc.

Conclusion

After researching on Steve Jobs and Richard Branson’ life stories as a leader, this essay is conducted in order to gain a better understanding about the concepts of being an excellent leader.

Leadership Style

Steve Jobs was considered as a tough and strict (even “dictatorial”) leader, but he was also a respectful leader who could inspire and motivate followers by using his wisdom and charismas. Richard Branson is considered as gentle and flexible leaders, but he is very strict on day-to-day operations. As a leader, being transactional can improve employees’ performance while being transformational can improve effectiveness. Therefore, there is no one simple leadership style for one organisation. Both of the leadership styles are crucial to a business’ success.

Types of changes

Incremental change may takes place over a long time period for development and improvement purpose, while radical change may be triggered by a crisis or a business opportunity and generated in a short time period.

Because incremental changes are normally well planned and taken over by pieces, there is less possibilities of failure. Radical changes are initiated immediately after realising a crisis or significant opportunity, so without a careful plan and on-going monitoring there are chances of failure.

Change Management

It is important to understand that employees’ resistance to changes are natural, but how to manage those negative feelings are critical. In general, leader should keep employees involved in the decision making, address their problems and seek for solutions, create a positive learning environment and make the change happen by working with employees as an example.

Change management processes should be carefully planned and operated, especially the preparing stage (Create Urgency). A powerful coalition’s positive support would make the operations accomplished smoothly, that is why selecting the right team member is very important. Leader and coalition should lead by examples, communicate with employees and deliver visions as much as possible. Do remember celebrating on short-term wins and establish big victory formally as company’s culture.