Transactional Leadership vs Transformational Leadership: Differences between Transactional Leadership and Transformational Leadership Styles

Transactional Leadership

Transactional leadership focuses on results (outputs and outcome) by concentrating on the system and structure of an organization. Transactional leaders organize, lead, guide and control followers to work toward established goals and targets by exchanging rewards-penalty for their productivity. According to the leadership model (sometimes referred to as managerial leadership), managers provide followers with something they want in exchange for getting something they want. Transactional leadership theory is likely to succeed in a crisis or in projects requiring linear and specific processes.


In most cases, leaders in large institutions, public corporations, international projects and military operations are transactional leaders.  This style is useful for big organizations (public or private), such as Hewlett-Packard (HP company). Bill Gates is a transactional leader. Magneto from X-Men movies has the same leadership. These leaders try to keep order, rules and regulations to reach goals on time. This widely used style is often applied by all level managers.


The famous style of leadership was first explained by Max Weber in 1947 and then by Bernard Bass in 1981. The German sociologist divided leadership styles (authority) into 3 categories: traditional, charismatic and rational-legal, or bureaucratic.


Like theory X of Motivation by McGregor, the leaders take a pessimistic view of their followers. The subordinates have to be monitored to control to get the job done. Transactional leaders may not be a good fit for places where innovative ideas and creativity are requited and valued.


Transformational Leadership

Transformational leaders want to think out of the box and go beyond the system and boundary to change existing thoughts, techniques for extraordinary outcomes which bring better results and the greater good for the management and workers. Transformational leadership seeks to motivate and inspire (transforms) employees to attain remarkable results. Under the transformational leadership style, workers are given autonomy over specific tasks. Conflict is welcome and regarded as a normal phenomenon in their authority because it can encourage innovation and new ideas.  

The key features of transformational leaders are:

1. They are creative and looking for new things.

2. Hard worker and Empower its followers and delegate the tasks

3. They are communicative and keep followers engaged.

4. Visionary

5. Chiasmatic

6. Passionate and enthusiastic


Different researches confirm that transformational leaders are more effective, higher performers, more promotable. They can ensure higher levels of productivity, employee satisfaction, creativity, and corporate entrepreneurship. The term "transformational leadership" was coined by James V. Downton (sociologist) in 1973.


Examples: Richard Branson (Virgin), Steve Jobs (Apple), Jeff Bezos (Amazon), Nelson Mandela, Barack Obama, Martin Luther King Jr., MS Dhoni (former Indian cricket team captain), Mashrafe (former Bangladesh cricket team captain) 

Differences between Transactional Leadership Style and Transformational Leadership Style

Transactional and transformational leaders are different but they are related and essential in an institution.  Transformational leadership theory develops from the transactional leadership model. Both are Modern and Contemporary Theories. 

Transactional Leadership Style

Transformational Leadership Style

Favour rigid system and structured policies, procedures

Favour followers and innovation

Thrive on following rules and doing things correctly

Go beyond boundary

Focused on short-term goals

Look into long term goals



Change and conflicts are not welcome

Change and conflicts are considered normal.

Social exchange (give and take relationship)

Advice and guidance to the employees.

Reward and punishments (carrot-stick model)

Personal attention to the followers

Bill Gates

Richard Branson 



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