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What is Transactional Leadership?

Transactional Leadership is a behavioural leadership theory which focuses on the link between supervision, organisation and group performance. 

  • Transactional Leadership is a theory or style first discussed by sociologist Max Weber in 1947 and later expanded upon by Bernard M. Bass, who also played a leading role in the development of Transformational Leadership

Transactional Leadership is also often known as Managerial Leadership, due to its objective focus on supervision, organisation and group performance. 

The basic assumptions of Transactional Leadership are:

  1. People perform at their best when the chain of command is definite and clear.
  2. Rewards and punishments motivate workers.
  3. Obeying the instructions and commands of the leader is the primary goal of the followers.
  4. Subordinates require careful monitoring to ensure that expectations are met.

It is based on the simple behavioural tenet of motivators. Unlike models such as Transformational Leadership, which target individual development and freedom as a motivator, the main focus of transactional leaders is on specific tasks, using rewards and punishments as incentives and motivation. 

  • When employees are successful, they are rewarded and when they are unsuccessful, they are reprimanded.
  •  It is popular in environments such as sports teams and proves an incredibly powerful motivator for players from game to game. 

Also unlike Transformational Leadership, Transactional Leadership focusses on maintaining the status quo, rather than trying to shift the values or culture of the organisation. Leaders do not sell changes to their subordinates, instead, they dictate and assign tasks. 

Rewards and Punishments in Transactional Leadership

Transactional leaders view the relationship between employee and leader as an exchange

  • One offers the other something (e.g. a task) for something in return (e.g. a reward). 
  • Rules, procedures, and standards are crucial to Transactional Leadership, as any deviation from any of these must result in a punishment. Equally, good performance will be rewarded.

Transactional Leaders Clearly Define Organisational and Individual Objectives

Tasks and objectives are the focus of any Transactional Leader - the process is entirely about getting results. 

  1. Transactional leaders will carefully monitor and track the progress of their employees. 
  2. Carefully constructed performance management systems are crucial to ensure that employees are being rewarded or punished appropriately for their output, and for their accordance with the rules and standards of the organisation. 
  3. Rewards and punishments are at the discretion of the leader but must be standardised across employee performance.

Applicability of Transactional Leadership

Transactional Analysis is not about driving or developing new, pioneering visions for the future. Instead, its systematic and objective nature of it is suited to maintaining the status quo. 

Individuals are not encouraged to go above or beyond their role, just to efficiently and successfully perform their assigned tasks. These leaders are good at setting expectations and are often expected to clearly communicate roles and feedback on future and previous tasks in order to improve employee productivity.

Transactional Leadership is Most Suitable when Problems are Simple and Well-defined

Transactional Analysis does not encourage employees to look for new solutions to problems. Instead, they are encouraged to enact already-tested answers to regular, well-defined issues. 

  • It is often suitable in 'crisis situations' where everyone is required to complete their allocated tasks, and it is the leader or manager's role to maintain the status quo and to keep the ship afloat. 
  • As the model is designed only to maintain the integrity and performance of the group, it is often considered limited to helping individuals (both employee and leader) to achieve their full potential.


You should now be familiar with the concept of Transactional Leadership; its strengths, weaknesses, and when it is applicable in everyday and workplace scenarios. 

The key assumptions of Transactional Leadership:

  1. Individuals perform best when the chain of command is clear and well-defined
  2. Rewards and punishments can act as motivators
  3. Obeying instructions and commands is the primary goal for team members
  4. Employees require careful monitoring to ensure expectations are met