A leadership style is like a glass slipper – it is unique to one individual. While there is no doubt that there are many overlapping leadership behaviours and competencies, each leader has their own blueprint, which in turn becomes their leadership brand.

If you have been around the workplace for a few decades, no doubt you have been part of significant leadership change. You may have even seen the transition of senior leaders from top floor offices to making acquisitions in an open plan office. Perhaps you have noticed the shift from the manager leading from the front to discreetly moving to the back and empowering team members to seek forgiveness and not permission.

One thing that appears to be constant is the vast differences between transactional and transformational leadership. Arguably, there is no ‘right or wrong’, just the ability to apply the best style to the situation and the individual.

So what is the difference between Transactional and Transformational leadership?

In leadership training there will usually be a discussion on the best style. Clearly, there are times when a particular style might be wrong, but many thought leaders will suggest that there is a time and a place for both styles.

Most leaders will naturally gravitate towards one or the other but strong leaders understand that both have a place within their toolkit.

What is Transactional leadership?

Transactional leadership is about focusing on the task and the process to achieve the result. It is about a simple exchange between the leader and employee whereby there is a clear outline for a goal and a reward for achieving it. This becomes the ‘transaction’ and it is thought to be a successful style where there are multiple goals with tasks and milestones.

This type of leadership is effective in environments where a focus on output and measurement is key. For example, manufacturing success is reliant upon hitting quotas and targets so transactional leadership is effective where timelines and financial restraints are in place.

Transactional leadership tends to work best in situations where rules and processes are quite black and white and employees are working to clear guidelines and outputs. It is not ideal in workplaces where structure is not part of the norm or with individuals who thrive when motivated and who want to push creative boundaries.

What is Transformational leadership?

Transformational leadership is not about micromanagement and ‘transacting’ in the detail. It is about empowerment and fostering an environment where creativity and innovation can shine. This leadership style is known for motivating and inspiring employees to be the best versions of themselves and to always think outside of the box.

There are 4 well documented components to transformational leadership:

  1. Intellectual stimulation: leadership that seeks innovation, new types of learning, and encourages new experiences for employees.
  2. Individual consideration: the ability to provide meaningful mentoring, coaching, support, and inspiration to an employee’s personal development.
  3. Inspirational motivation: leadership that shares a vision for the business success in a way that encourages employees to make it their own.
  4. Idealized influence: this is where leaders role model the actions, behaviours and values that show employees what is expected and inspires them to repeat.

Transformational leaders are memorable for all the right reasons. They can harness motivation and inspire workers to be more innovative and adaptable. This style is well suited to organisations who need to adapt to change and where there isn’t rigidity in structure and process. It is a preferred style in new businesses or industries that need to constantly think laterally and creatively.

Which style is better?

It is not as simple as one style being ’better’ but rather that each style is suited to different environments and situations. Sometimes a blended version is most effective, but leaders commonly find themselves in positions where the scales are tipped in one direction.

Leaders that need short term results where productivity and output is key tend to adopt a transactional style, but those that wish to make more of a long term impact and to foster innovation are more suited to transformational.

Transactional leaders can be found in the military, medicine, and transient workforces such as fast food, production. But even some CEOs are considered transactional. Transformational leaders have the ability to be visionaries and they want to empower team members to come up with better and more innovative ways to do the job. For example, a transactional fast food leader is all about quantity and food wastage; while the fast food transformational leader is looking at what could make the burger better and what the customer might be looking for next.

Choosing your style

In both theory and practice, these two leadership styles are the opposite from one another. However, this does not mean that you need to choose. When faced with different workplace scenarios, it is recommended that elements of both styles are embraced to ensure output and precision are balanced with innovation and strategy.

Further assistance

Ai Group offers a range of short course management and leadership training programs that have been designed to assist the development of participants through their management and leadership journey.

Check out our Leadership Course Creator for further information or call the Ai Group Workplace Advice Line on 1300 55 66 77.

Georgina Pacor

Georgina is Senior Content Writer and HR Specialist – Publications at Ai Group. She is an accomplished Human Resource professional with over 25 years of generalist and leadership experience in a broad range of industries including financial services, tourism, travel, government and agriculture. She has successfully advised and partnered with senior leaders to implement people and performance initiatives that align to business strategy. Georgina is committed to utilising her experience to create resources that educate and engage and is passionate about supporting members to optimise an inclusive workforce culture that drives performance.