Transformational and Transactional Leadership The global market place that is today's business environment is highly competitive, and organizational survival is increasingly perceived as being dependent upon the efficiency and effectiveness of its leadership. Changes such as the online markets and workforce, alteration of ethical and legal issues, demographic and social trends (global 'graying' of the populace), technological advances and increased globalization mean that leaders of businesses must re-evaluate and alter their styles as necessary to bring about and maintain success. Competitive advantage is the predominant goal of most business strategies - how to sustain it once achieved, and how to achieve it in the first place. Thus, understanding the effect(s) of leadership, its role in an organization, and how leadership style impacts an organization is fundamentally important. As stated by Ekuma (2014) the manner in which a company is directed affects its internal and external ethics as well as the morale, level of engagement by employees, and overall performance by those employees.

While effective management is comprised of a variety of factors, perhaps the most important is leadership. As discussed by Odumeru & Ifeanyi (2013), the general well being of nations and organizations is dependent upon, or at least highly influenced by leadership. Aspects of an organization, such as its communications, climate, and culture are all influenced indirectly and/or directly by the leadership at each of the different levels. Indeed, a significant factor in terms of an organization's communication comes down to the style of leadership that is used and the overall 'tone' which this sets for the organization as a whole, and for employees at every level.

Leadership Styles & Theory

From the perspective of 'leadership theory', there are a variety of different leadership styles. Our focus in this work is initially to review four of these: (a) Situational Leadership;(b) Transactional Leadership;(c) Transformational Leadership; and (d) Multifactor Leadership. From this analysis, we will then focus on the single 'best' leadership style.

Situational Leadership:

As discussed by McClesky (2014), situational leadership theory is based upon specific situations and 'situational response' as needed and as appropriate, rather than being a style that depends on a leader's personal charisma. The evolution of SLT, situational leadership theory, is derived from a focus upon task completion rather than an employee- or people-orientation. Some have viewed this as a continuum with tasks at one end and employees/followers on the other and the role of the leader being to move along that continuum as necessary for the good of the organization. McClesky (2014) points out that Hershey and Blancard originally described SLT with an emphasis upon employee maturity as a factor in appropriate leadership style. Other authors consider SLT to be a contingency and/or behavioral theory, with the net focus of the leader being either 'task' or 'people', depending upon the type of followers/employees involved in the given situation. Psychological and job maturity are considered as determining factors for appropriate style of leadership, based upon the training and educational level of the employees. As McClesky (2014) states, there are criticisms of SLT as well.

Transformational Leadership:

Charismatic and/or transformational leadership have been 'popular' since approximately the 1980s. This approach has been viewed as highly effective and has been studied extensively. Transformational leadership is based upon creation of a 'bond' between followers and the leader. As well, such leadership is said to engender "empathy, compassion, sensitivity, relationship building, and innovation" (Rita-Men, 2014). Essentially, transformational leadership is an approach that works to convert employees into 'followers', and then appeal to what are called 'higher order needs' of these followers. Specifically, this involves inducing employee/followers to place organizational/group needs above their own personal needs. In general, transformational leaders encourage development and confidence of the individual, engender trust, and are individuals who are genuinely interested in their employees' well-being. This is likely to include the fostering of closer interpersonal relationships with employee/followers, which results in better handling of both task and personal needs. Followers are generally empowered to make decisions by a transformational leader, who delegates significant authority and seeks to decrease dependence and increase independent action; this includes power sharing. The communication style of the transformational leader is empowering, passionate, caring, visionary, and interactive (Rita-Men, 2014). To date, transformational leadership is the concept that has been most fully studied; it demonstrates a straight-forward and logical path to successful achievement of outcomes for both the organization and the employees as teams and individuals.

Braun and colleagues (2013) conducted a study with respect to leadership styles, focusing on team performance, job satisfaction, team/supervisor trust, and the correlation of these factors with transformational leadership. This multilevel...

Results from the study by Braun et al. (2013) indicated that team performance, team satisfaction, and individual satisfaction were all positively related to transformational leadership, with trust in the team as well as trust in the supervisor/leader mediating the individual's perceptions. There was not a direct correlation to trust 'in the team', however. This study showed that the role of the transformational leader was important in terms of both team performance and job satisfaction for teams and individuals. One actionable conclusion was that training in transformational leadership would be valuable at a variety of organizational levels, both for teams and individuals, to enhance skills of team supervisors (Braun, Peus, Weisweiler & Frey, 2013).
Transactional Leadership: In contrast to transformational leadership, transactional leadership does not use the personal 'charisma' of the leader, but rather focuses on the task. We can consider this to be on the 'task end' of the continuum discussed for situational leadership. The manner by which a transaction leader functions is to provide rewards and recognition for performance, to specify specific task expectations, to negotiate contracts, and to clarify responsibilities. As discussed by Liu et al. (2011), transactional leaders provide rewards when followers successfully carry out assigned tasks; followers/employees must comply with expectations of the leader, and are not only provided with rewards but are aware of the potential for negative interactions such as discipline if they fail to achieve assigned goals. Thus, in contrast to the transformational leader, a transactional leader is more likely to operate according to the 'status quo' and less likely to institute or originate change. The transactional leader is far less likely to exhibit a 'laissez-faire' attitude, but rather is closely attentive to any performance deviations as well.

Thus the interaction process between the transactional leader and the follower/employee is more like an exchange or 'transaction', where positive job performance receives a reward and negative job performance receives discipline of some sort. There is less encouragement to surpass expectations, and no real motivation to innovate or explore positive organizational options. Given the increasingly critical role of innovation for business success, and in particular innovation as a part of team work, this means that transactional leadership is less likely to help an organization to move forward. In the work of Liu and colleagues (2011), team innovation in the context of transactional leadership was explored: if 'emotional labor is high' then transactional leadership depressed innovation for the team; conversely if 'emotional labor was low', this leadership style had a positive effect. The term 'emotional labor' specifically relates to jobs such as flight attendant, social worker, teacher, call center worker, store clerk, doctor, nurse, daycare worker, etc., where employees must interact with customers and/or clients. Thus, organizations for which emotional labor is an important component do not do as well when the leadership uses a transactional style. Furthermore, with a shift from manufacturing to service jobs, it is also obvious that a shift away from transactional leadership may be beneficial to organizations. Clearly the 'carrot and stick' approach of transactional leadership can be effective, however it turns out to be far more situationally related than is the case for transformational leadership (Liu, Liu & Zeng, 2011).

Comparative Evaluation of the Transactional & Transformational Leadership:

Some theorists consider transactional leadership to be a different type of transformational leadership (Odumeru & Ifeanyi, 2013), while others feel that the two are distinct. As discussed in the section on Corporate Social Responsibility (vide infra), recognizing that one is inspirational while the other is practical, reveals that each leadership style might be appropriate in different situations and settings, as well as with different groups of employees. Some suggest simply that transformational leadership enhances and/or augments transactional leadership, leading to higher employee achievement as well as job satisfaction. As discussed by Odumeru & Ifeanyi (2013), the transactional leader establishes 'transactions' with employees - a reward for loyalty and performance. This is in contrast to transformational leaders, who inspire employees and may often elicit innovation and change as well as encouraging collaborative or group interactions that benefit the organization without providing direct benefits to the employees.

Transactional leaders are more focused on tasks, performance, and outcomes, whereas transformational leaders are more focused on people, visionary attitudes, and innovation.

Transactional

Vs. Transformational

Responsive Leadership

Proactive Leadership

Works from within culture of organization

Works to transform culture of…