Finding the best way to motivate a team of employees can be a daunting task for any manager. However, by becoming familiar with different styles of leadership, you will be able to choose the one that most appropriately fits your workforce.
Using a system of positive reinforcement with various incentives for quality work can be a great way to push your employees to shine. This system is known as Transactional Leadership.
Having exciting rewards for high achievers is a method that can be used to elevate the level of work that your team is doing. When the whole team can see the positive benefits of high performance, more people will aspire to that level.
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What is Transactional Leadership?
Just as it sounds, a Transactional Leader will treat management/employee interactions as a transaction. In its most distilled form, this style can be summarized by “do this, get that.”
Employees under this model will be incentivized to complete their work with rewards. This could be as basic as praise from management or go as far as a salary increase or promotion.
In certain circumstances, employees may also be punished for performing at a level below the standard.
The theory behind this Leadership style is that the desire for a reward and the fear of punishment will lead staff members to stay motivated and do quality work.
The extra compensation given by the Transactional Leader is known as a contingent reward. The expectations for the work that will be done, as well as the rewards for completing it are set before a task has begun. Therefore, the reward is contingent upon the employee completing the job given to them.
Another key feature of Transactional Leadership is called “management by exception,” which can be either active or passive.
Active management by exception is proactive. A leader using this tactic will be providing feedback to employees as they work and generally keeping an eye on progress as it is happening.
Passive management by exception is reactive. This leader will only address issues after the work has been completed. This, more hands off approach, is also known as laissez-faire leadership.
Origin
After studying styles of leadership, in 1947, Max Weber, a German sociologist, divided them into three categories.
His classifications were traditional, charismatic, and rational-legal. In the modern day, the rational-legal category is commonly known as Transactional Leadership.
This idea was expanded on by Bernard M Bass, who is known for his research on organizational styles and leadership.
In his book “A New Paradigm of Leadership: An Inquiry Into Transformational Leadership,” Bass explores the ins and outs of both Transactional and Transformational leadership.
As assessed by Bass, Transactional Leadership will have the best long term results when it is coupled with Transformational Leadership.
Characteristics of Transactional Leadership
- Result oriented
- Rewards will only be given after a task has been completed. Therefore, the result of an employee’s work is the main focus of this leader.
- Highly systematic
- The criteria for success and failure and the outcome of each are made clear for all parties involved. This must be a black and white system with no grey area. You have completed the task, or not.
- Reward and punishment driven
- Transactional Leadership relies on employees being motivated to perform by wishing to attain a reward. If there is a clear consequence for work that does not meet the standard of the leader, workers will do their best to avoid it.
Assumptions
- There is already a well established hierarchy within the organization
- A leader using this approach must not be responsible for the same type of work as their subordinates. Their main responsibility should be to assess performance and direct the workflow. They will be the only one deciding who receives rewards.
- Standard method for performance evaluations
- The method for distributing rewards should be standardized for the same work. Giving unequal praise will undermine the system and demoralize staff.
Pros
- Easy to implement
- This style of Leadership can easily be inserted into a company’s current work culture. The structure of work and rewards is straightforward and can be quickly understood by employees with no extra training.
- This style of Leadership can easily be inserted into a company’s current work culture. The structure of work and rewards is straightforward and can be quickly understood by employees with no extra training.
- A fair system
- Rewards and punishments are distributed systematically with clear cut expectations and guidelines for work. Different employees doing the same work must receive the same reward. This prevents the perception of favoritism in the workplace.
Cons
- Does not allow for creativity
- Because this style requires adherence to a specific set of rules, there is not much room for employees to find creative ways to solve problems. The leader has already set the goals.
- Different motivations
- Not every staff member will be motivated by the same thing. This can make it hard to have uniform rewards that will be enticing to every person. While one person may want more money, another may want more vacation time or better health insurance options.
- Can create a culture of competition
- While this may be a good thing in a company focusing on sales, it may not be ideal for other types of business. For many businesses, having a team that can collaborate will be highly beneficial for long term goals and innovation.
When is Transactional Leadership most effective?
- In a crisis
- Transactional Leadership can be an excellent way to jumpstart a team’s motivation to work extra hard. In a case when there may be a shorter than usual deadline or more work than normal, offering an incentive can help keep morale high despite the added workload.
- When there is a linear process to complete
- This style is well suited for a task that has a clear beginning and end point with a set method for completing it. Repetitive tasks are a good example of this.
- Jobs with quantifiable outcomes
- An example of this would be “sell x number of products this month,” if the results of the work are more esoteric in nature, or more difficult to quantify, this may not be the best leadership choice.
When should it be avoided?
- Tasks that require creative thinking
- With the efficiency and speed that are encouraged by Transactional Leadership, staff will not have the time to come up with creative solutions to potential problems or explore new ways of doing things.
- Long term projects
- A reward that will be received in 5 years may not appeal as well to workers as one that they can work to attain in a shorter period of time.
- Tasks with more subjective measures for success
- In cases where the work may be difficult to objectively offer feedback on, another leadership style will be more appropriate. Transactional Leadership requires the ability to assess every employees work with the same framework to ensure a sense of fairness.
How to implement
- Be flexible
- Listen to the needs of your staff. While some will thrive under the motivational reward system, others may require a different method of leadership to achieve their best.
- Express expectations clearly
- Employees should know what is expected of them, as well as the potential rewards or consequences. The ways in which their work will be assessed should be made clear before the work has begun.
- Provide training opportunities
- Making sure that your staff has access to information that will allow them to improve their skills is always a good idea. This can also help underachievers to become more confident in their work and perform at a higher level. Give your employees the tools that they need to succeed.
Examples of Transactional Leadership
Many professional sports coaches use this style of leadership. It is understood that if the players follow through with the plan set by the coach, they can win the game. When they are successful, there is the reward of victory, often accompanied by a monetary bonus.
Corporate work environments also utilize Transactional Leadership frequently. Employees are incentivized by gaining commissions or bonuses based on their work output. Failure to meet expectations can result in a lack of movement up the corporate ladder or other disciplinary actions.
This is a common technique used by the military as well. Over time, the highest performers are given promotions and higher pay, while those who cannot keep up are met with additional work or consequences.
Famous success stories
- Bob Iger
Starting his career in 1974 as an entry level worker at ABC, Bob Iger is certainly an example of starting from the bottom and rising to the top. Best known for being the CEO of Disney, he was able to expand the company’s worth from 48 billion to 257 billion in just 15 years.
During his time at ABC, Iger proved again and again that if given the opportunity, he would succeed. For his commitment, he was highly rewarded.
When he took over the position of his predecessor, Michael Eisner, the climate at Disney was hostile. However, through his ability to rally support with a positive attitude, Iger quickly became beloved by his subordinates.
He is known as being an extremely positive person. While discussing his leadership style, he has emphasized the importance of optimism. Recognizing how positive reinforcement will affect the work environment he leads has been a huge part of his success.
- Elon Musk
As one of the richest men in the world, Elon is no stranger to those in the business world. He owns several companies on the cutting edge of innovation.
He is not solely responsible for all of the new ideas generated by these companies. By creating teams that he can rely on to continuously strive for excellence, he has been able to become the successful businessman that he is today.
As a leader he keeps his teams at Space X and Tesla motivated to continuously push the boundaries of what private companies have accomplished in the past.
Those working for him that are able to produce the highest level of work he demands are met with big rewards and recognition.
Conclusion
There are many things that a manager can do to motivate their people. Knowing which will work best in a given scenario is a trait of a great leader.
A straightforward system of rewards and punishments is one of these methods, known as Transactional Leadership. By setting out the work expectations, as well as their contingent rewards before the work has begun, you have set a goal for your staff to aspire to.
Transactional Leadership can be a great way to spark your team into action to meet short term goals, or tackle a large workload. This standardized and fair system of positive affirmations can really show how much you appreciate peak performance.