Transformational vs Transactional Leadership

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Leadership Styles, High-Quality Leader-Follower (LMX) Relationships and Job Performance The current globalized economic environment is becoming increasingly dynamic and competitive forcing organizations to improve their business practices to overcome greater challenges with more flexibility, efficiency and innovation in products and internal processes (Walumbwa et al. 2005, p.235). Certainly, there is fundamental evidence of the positive association of leadership style and the influence on follower’s behaviour as a consistent way to improve job performance and organizational outcomes (Vaccaro et al. 2010). The aim of this paper is to demonstrate the impact of transformational and transactional leadership styles on leader member exchange relationships, job performance and job satisfaction. By using theories such Weber’s conceptualization of charismatic leadership, Burns’ transactional leadership and Bass’ Four I’s of transformational leadership, this paper acknowledge the superiority of transformational over transactional leadership style in developing high-quality leader-follower (LMX) relationships, increasing followers’ job performance and Job satisfaction. Recalling previous studies which asserted the dependence of leadership effectiveness on culture and organizational size (Paul et al. 2001), it seems clear that transformational leadership is a more suitable leadership style for small, large and complex companies across cultures facing the challenges of globalization of markets. The superiority of transformational leadership style in building high-quality leader-follower (LMX) relationships is given to the practice of one or more of the Four I’s leadership behaviour. Firstly, Idealized influence through a charismatic behaviour will illustrate the positive influence on followers and their performance. It is followed by the ability to motivate team work and the achievement of general goals that produce personal satisfaction and commitment with the company (inspirational motivation). Furthermore, intellectual stimulation will certainly demonstrate how innovation and creativeness is promoted and their impact on organizational results. Finally, individualized consideration in hand with LMX theory will provide an example of the undoubted benefits of dyadic relationships in ‘in-group’ such greater loyalty and commitment.

Leadership styles, high-quality leader-follower (LMX) relationships and Job performance. Focusing in the work of Burns (1978) and Bass (1985) on leadership behaviours, transformational and transactional leadership have been the objective of various research in order to capture the extent to which leaders influence subordinates by involving them in the organization’s goals, or by specifying the rewards that will follow the accomplishment of those goals (Rubin et al. 2005; Yammarino et al. 1997)

According to Podsakoff et al. (1990) a fundamental characteristic of transformational leadership behaviour is the ability to create a compelling vision for the organization, providing an appropriate model consistent with that vision, stimulating the acceptance of group goals, expecting high performance, providing individualized support and intellectual stimulation. In contrast, transactional leadership is primarily concern with gaining compliance from subordinates by using a contingent reward dimension or a passive form of managing by exception. The leader specifies what is expected from organizational members and the subsequent reward for its accomplishment (Bass and Avolio 1990).

According to LMX theory, a high-quality leader-follower (LMX) relationship, usually associated with dyads in the ‘in-groups’ of the organization, emphasizes in fundamental levels of loyalty, commitment, respect, affection, mutual trust and the possibility of mutual linking between leaders and followers (House et al. 1993). Transformational rather than transactional leadership is more likely to achieve this superior level in the...
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