Transactional leadership is a style of leadership in which subordinates seek motivation from their leaders via a combination of punishments and rewards in the workplace. For example, subordinates might receive a punishment if they do a task incorrectly. In contrast, a reward might be given to subordinates who accomplish their tasks correctly and in a timely manner. Max Weber, one of the founders of modern sociology, developed this leadership theory in 1947. Leadership expert Bernard M. Bass further expanded upon the original leadership model in 1981.
The main motivation behind transactional leadership is thought to be the self-interest of the subordinate. In this type of leadership, there is an exchange process that is meant to affect a subordinate's behavior in a positive way. Bosses in a business situation, for example, often implement salary increases for employees who meet all of their work requirements.
In addition to rewarding or punishing subordinates, transactional leadership also can include a motivational monitoring technique. Those who are assigned to perform specific tasks might be monitored to make sure that the tasks are efficiently completed. Alternatively, if it is deemed that subordinates work better alone, leaders might take an indifferent approach. Such a situation usually requires the subordinate to have good work ethics in order to complete required tasks without supervision.
Taking an indifferent approach is usually only implemented in transactional leadership when the subordinates have already proven themselves. Subordinates, then, can be free to make their own decisions, but become completely responsible for the outcome of their work. Despite this freedom, long periods of time without any leadership direction could become detrimental to the productivity of a business.
There is a contract negotiation pattern that many businesses follow when it comes to getting potential employees used to transactional leadership policies that might be in place. The potential employee has to agree to all aspects of a contract in order to become a paid employee. While a contract usually outlines the salary amounts, it also stipulates what an employee can and cannot do, with the benefits and ramifications of both situations.
Transactional leadership styles can improve worker efficiency, and can also benefit a business overall. When workers have ample motivation, their work usually improves or remains acceptable. This also allows business to potentially achieve greater profits.
Some leaders might abuse the this leadership style for their own gain. A leader might try to use punishments and rewards to get various employees to work under amoral standards. As a result, many people consider transactional leadership to only be effective for a short amount of time.