Transaction means, ’exchange, settlement, negotiation ’
From these simple definitions it is easy to understand that they are indeed different. Should a person transform something then it is expected that they change it greatly. If a person carries out a transaction then it implies that a deal is done that has mutual benefit for those involved.
These very basic definitions are the basis of two types of leadership that are described in contemporary leadership literature. Indeed Daft (2005) describes leaders as transformational when they operate as change agents and induce people to;
“transcend their personal interests for the good of the organization” (p 63) James Mc.Gregor Burns (1978) describes Transactional leadership as,
“a barter, an exchange of wants between leader and follower.” (p 63) The definitions of transformational and transactional leadership support the basic dictionary definitions , however much greater analysis of the literature pertaining to these leadership types is necessary to fully comprehend what they mean and how they are reflected by leader behaviour. More in depth analysis will also reveal greater differences between them. This essay will compare and contrast contemporary perspectives about Transformational and Transactional leadership by describing attributes of both in detail and making comparisons between them.
(Houghton and Yoho, pp 69) state;
‘Transactional leadership focuses on the creation of reward contingencies and exchange relationships resulting in a calculative compliance on the part of followers.’ Thus Transactional leadership is a style of leadership where the leader, being aware of what the follower wants or needs, barters with the follower so that the follower will provide what the leader wants. In a factory situation an example would be when a person in a power position such as Production Manager offers a monetary incentive to workers to increase production output. This will only occur should the incentive be deemed to be enough by the workers. That is, when the incentive is deemed to be worthwhile for the extra effort to be put in. The basis of this management style is termed Contingent Reward by Barbuto Jnr (2005) as it represents behaviour that is reciprocal in nature. It also involves reward systems that are tangible and are usually predetermined. Transactional leaders thus, clarify objectives, operating procedures, rules and processes and develop worker confidence by rewarding those who follow them.
There is however more to Transactional leadership than Contingent Reward and, according to Barbuto Jnr (2005) citing Bass (1985), Transactional Leadership also has Laissez-faire and Management by Exception as key types of leadership. He does however indicate that Laissez-faire leadership should not be included as it is really an absence of leadership. To further support his argument, Barbuto further cites Bradford and Lippitt (1945) who describe Laissez Faire leadership as a,
‘leader’s disregard of supervisory duties and a lack of guidance to subordinates.’ Management by Exception, Barbuto Jnr (2005) is a style of leadership where the leader intervenes when followers fail. Failure by the follower brings sanctions and punishments from the leader, These sanctions are usually predetermined and can include corrective action to limit the same actions being repeated. Within this leadership style, the leader can actively pursue failure and create systems to indicate failure or the leader could be passive and only intervene when failure is indicated. Management by Exception leaders only provide negative feedback as they only need to reinforce failure to achieve pre determined goals. Barbuto (2005) points out that workers within a Management by Exception environment are not encouraged to problem solve nor develop decision...