<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=846053266917356&amp;ev=PageView&amp;noscript=1">

Transactional vs. Transformational Leadership, Explained

By XINNIX | December 1, 2022 | Training

In the workplace, there are two main leadership styles: transformational and transactional. Both types of leaders are goal-oriented and know the outcomes they want from themselves and their employees. Furthermore, we found that effective leadership development led to a 388% average increase in team performance, making it a critical part of every workplace.

So, which one should you strive to be? Is there a right or wrong answer?

The short answer? Both are viable, but their effectiveness varies based on their environments.

We explore examples of transactional vs. transformational leadership in greater detail below.

What Is Transactional Leadership?

Transactional leaders, as the name suggests, focus on rewarding or incentivizing those around them for excellent performance. Some transactional leadership examples are: 

  • Order and structure
  • Rules and regulations
  • Meeting objectives on time

Transactional leaders are well suited for leading military and international operations and managing large corporations. In general, transactional leaders struggle in environments where creativity and innovative ideas take precedence.

Transactional leadership is sometimes compared to transformational leadership, though there are some key differences.

What Is Transformational Leadership?

While transactional leaders use an extrinsic reward system to motivate employees, transformational leadership characteristics focus on intrinsic motivation to inspire those around them.

Transformational leadership styles prioritize:

  • Creativity and innovation
  • Independence from their employees
  • Individual empowerment

This doesn’t mean that transformational leaders aren’t ambitious or focused on specific goals. Rather, they understand the significance of making revolutionary changes, even if that means being wrong or failing. Successful transformational leaders have tremendous courage and determination because they know there is always an opportunity to win. They just have to keep trying.

By creating visions and setting goals that appeal to emotion and ambition, transformational leaders value creativity and innovation more compared to transactional leaders. But this doesn’t mean that transformational leadership is better than transactional by default. Each workplace needs one of these styles, depending on the nature of their business.

When To Use Transactional vs. Transformational Leadership

To show the differences between transformational and transactional leadership styles, here are two different work environments where both succeed.

1. Growth in an Innovative and Creative Environment

Transformational leadership styles and characteristics cultivate different perspectives and skill sets from their employees. This can be effective in creative environments where it’s encouraged and necessary to be bold to succeed.

Transformational leaders understand that their employees might emulate their style. So, they often steer their employees in a general direction but still allow them to develop into becoming transformational leaders themselves.

2. Growth in an Efficient and Results-Driven Environment

Transactional leaders operate best in an environment driven by results and efficiency. Because this leadership style likes to maintain the status quo and uses rigid structures, it can be very productive and linear. 

Transactional leadership inspires results-driven attitudes in their employees and has a no-nonsense approach to their goals. 

The only downside to this leadership style is that it limits creativity, which dismisses different perspectives and insights.

So, Which Style of Leader Should You Be?

Each leadership style has an ideal environment where they flourish the most. If you work in a creative environment that needs innovation and fresh ideas, a transformational leadership style might be best. But that doesn’t mean a transactional leadership style won’t work in that environment, just like a transformational leader could work in a goal-oriented, rigid environment that values the status quo. However, transformational leadership methods have shown to be more effective than their counterpart style.

When considering both styles, account for what type of leader you want your employees to follow and what type of leader you want them to be. The type of leadership you establish could be what shapes your company for years to come.

Perfect Your Leadership Style With the Right Tools

Regardless of which style you gravitate to, you’ll need the right tools to maximize the potential of both you and your employees.

Inspired by many decades of experience, XINNIX®, The Academy of Excellence, developed a leadership program that taps into the potential of each employee to extract their best qualities and make them the most effective leaders.

Interested in learning more about your leadership style? Find out more about our Leadership Program and how it can evolve the way you grow leaders in the workplace.