Why Effective Leaders Are Both Transformational and Transactional

The term “transformational leader” is trending on job descriptions and resumes alike. However, it is unlikely for an organization to seek a “transactional leader” and even more unlikely for someone to describe themselves that way. The ability to incorporate both styles is essential for effective leaders and organizational culture.

Additionally, the higher education landscape is littered with the wreckage of executives who misapply the concept of “transformational leadership” and make arbitrary and radical changes that wreak havoc on stable, well-performing organizations without understanding that transformation occurs through evolution. Unfortunately, instead of building on the existing strengths and assets of an institution, some leaders take a wrecking ball to current policies, practices, facilities, and human capital in the name of “transformation.” Authentic transformational leaders inspire trust and provide vision while simultaneously enacting transactional qualities to meet an institution where it is, and build on it, recognizing and appreciating the individual and collective contributions that propel the institution forward. They do not create radical changes overnight.

What Is Transformational Leadership?

James MacGregor Burns, who popularized the term transformational leadership, described it as a process of raising the level of morality and motivation in others. Transformational leadership “transforms” people, culture, and organizations through “an exceptional form of influence that moves followers to accomplish more than what is usually expected of them…often incorporating charismatic and visionary leadership,” says Peter G. Northouse in his book “Leadership: Theory and Practice.” Transformational leaders are those who have the skill and talent to influence, attract, and motivate followers towards something aspirational. This leads to cultural shifts, with new (often high) expectations and standards, rooted in moral, ethical, and higher-purpose goals.

What Is Transactional Leadership?

Transactional leaders are process managers, seamlessly and efficiently continuing the administrative tasks involved in running the business end of an organization. They ensure appropriate external and internal audits are taking place, that employees and vendors are paid on time, that facilities and infrastructure are in working order, and the policies and systems in place are all running smoothly. Transactional leaders provide stability and calm for staff so that they can apply their time and energy to productive reflection, community-building, personal and professional development, and consequently, the mission and strategic goals of the institution.

Alternatively, Karl W. Kuhnert explained in “Transforming leadership: Developing people through delegation” that transactional leaders exchange things of value with followers to advance their own and their followers’ agendas (in Bass & Avolio’s Improving Organizational Effectiveness Through Transformational Leadership). For example, a promise of overtime pay for those who work during a special event, or a professor who achieves a certain number of publications to receive tenure and promotion. Transactional leadership includes acknowledging staff achievements and providing recognition of special projects through external rewards or announcements in publications. This “transactional” type of exchange is imperative to overall employee satisfaction and contributes to the “transformation” of the organization.

What Does It Really Take To Be an Effective Executive?

According to George A. Pruitt, president emeritus of Thomas Edison State University, effective executives often possess these attributes:

vision emotional intelligence courage willingness to provoke intellectual talent strong values high standards executive experience excellent communication and interpersonal skills a demonstrated capacity to execute

Some of these traits can be learned, and some are innate. Authenticity is also a crucial component. It is unfortunate that people read about leadership and attempt to imitate the styles and characteristics they witness in effective leaders, only to end up in positions they do not have the capacity for. Being honest with yourself about who you are and what your personal values are, and consistently referring to those values in your leadership journey, creates clear expectations and reliability for those in your trust and care. Honoring personal values will directly influence how an executive handles complex organizational issues, human capital, and administrative tasks that contribute to alignment with the mission and vision of the institution over time.

Where Leaders Go Wrong

When executives accept a position for the perks of the job (power, influence, self-promotion, social capital) and not for the sense of calling, purpose, and desire to use the executive platform to make a positive contribution to the world, they sometimes create sudden and sweeping departures from established institutional patterns and norms motivated by their need to put their personal imprint on the institution. This is one of the quickest paths to failure. A well-intentioned, seasoned executive not only understands and innately possesses the attributes necessary for both transformational and transactional methods, they are also able to fluidly and simultaneously incorporate both styles depending on the circumstances and challenges at any given moment.

How a Mix of Transformational and Transactional Leadership Contribute to Effective Organizational Culture

In his 1985 book “Leadership and Performance Beyond Expectations,” Bernard Bass argued that transformational leadership motivates followers to do more than expected by (a) raising followers’ levels of consciousness about the importance and value of specified and idealized goals, (b) getting followers to transcend their own self-interest for the sake of the team or organization, and (c) moving followers to address higher-level needs. This type of leadership often results in a flourishing organizational culture. Individuals find purpose and value in working with like-minded people towards goals greater than themselves.

As noted in a 2013 journal article, “Cognitive Team Diversity and Individual Team Member Creativity: A Cross-Level Interaction” transformational leadership may help team members utilize cognitive resources associated with team diversity and has a positive relationship with creativity. Building and maintaining a unique culture for creativity and innovation to thrive not only affects employee motivation and happiness at work but also increases a sense of shared purpose and institutional sustainability. Additionally, as Dimitrios Bousinakis and George Halkos argued, “large projects require a plethora of knowledge, skills, and experiences that cannot be found in a single person. Therefore, accessing collective knowledge and collaboration is required.”

A positive consequence of a healthy mix of true transformational and transactional leadership is a sense of psychological safety among employees. When people unite under a common mission and vision embedded in a culture of high standards and creativity, they are motivated to solve complex problems in unique ways. When freethinkers are provided with a safe space to bring even the most outlandish ideas to the table with like-minded others, they have permission to take risk without fear of being chastised. This is one of the most important but overlooked aspects of innovative culture.

Positive reinforcement in the form of transactional rewards and acknowledgement also boosts staff morale. This type of environment develops a culture that attracts positive, intellectually curious, experienced people who will attract more of the same to a particular institution, further building and strengthening a pioneering culture.

If you apply one type of leadership without the other, the culture will eventually break down and those brilliant, resourceful people will move on, or worse, shut down, doing the minimum to collect their paycheck. It will not only affect their individual mental health, but the strength and vigor of the organization. The misapplication of these two concepts has practical and sometimes devastating consequences for institutional effectiveness and sustainability.

What Boards Need To Understand Before Hiring a Leader

One of the challenges facing higher education campuses and boards is that they do not understand the attributes and types of leadership behaviors required for an institution to grow and thrive. Or if they do, they do not search deeply enough for evidence of these attributes demonstrated in the experience of the candidates. The challenge for executive leaders and boards in selecting new leaders is to operate from an objective and accurate assessment of their institution’s current condition and have a clear-eyed understanding of the kind of leadership required to meet the moment.

The Bottom Line? You Need a Healthy Mix of Transformational AND Transactional Leadership

A leader cannot be effectively transformational without also being effectively transactional. These two concepts are not mutually exclusive. Leaders must rely on their personal values and attributes to determine which style is needed at different moments of institutional life, effectively combining the two styles and building an innovative culture in the process. The only way to determine whether a leader has the capacity to strike the right balance between transformational and transactional leadership is to examine past performance and experience.