Many see a lot of flaws with transactional leadership and often compare it to the transformational leadership style as both are complete opposites of each other. But there are certain situations where transactional leadership is feasible, and in fact, work extremely well for the company.
Companies suitable for transactional leadership
Bill Gates is an example of a successful transactional leader. He is known to push his employees to their maximum potential. He follows a firm method and makes sure that everyone in his company follows the same. Despite this, he is admired by his employees and Microsoft clearly benefits from this style of leadership.
It all depends on the kind of organization you run – what your vision is, the brand image you wish to convey to the public, the kind of environment you want employees to work in. Most huge companies adopt a mixture of two or more different styles of leadership on various levels, and this has proven to be very effective. So it seems like a silly move to discard transactional leadership blindly without considering all its aspects.
If your company falls under any of the following categories, transactional leadership may prove to be beneficial for you.
- Transactional leadership works well in established, huge companies
Huge corporations that are well-established can benefit greatly from transactional leadership. In fact, a lot of these like IBM and Microsoft (as mentioned before) have successfully adopted this method.
One reason it is so suitable is because these companies already have a fixed, customary method of handling tasks that are proven effective through time. They do not need a changing landscape where employees contribute ideas and suggestions. This is in stark contrast to transformational leadership. Transactional leadership is also most suitable for companies that stress on highly professional and corporate work culture, which most well-established companies prefer.
- Transactional leadership is suitable for manufacturing companies
Manufacturing companies are supposed to follow set routines and strict methods of operation to get their work done. This is why transactional leadership works extremely well for them. They have a certain way of doing their work, which must be repeated time and again in the same manner.
In such cases, the nature of the work itself does not require creative or independent thinking. It only requires employees to follow instructions and a leader to make sure that these instructions are obeyed properly.
- Transactional leadership is used where strict training is required
In companies where it is mandatory for employees to undergo strict training, transactional leadership can prove to be very useful. As this style of leadership motivates people on the extrinsic level through the method of reward and punishment, employees are driven to do their best and achieve their targets so as to be rewarded. If they fail, they will have to face the consequences. This is why transactional leadership has proven to be very effective in the military too.
A key feature of transactional leadership is setting achievable, short-term goals. This makes it all the more suitable for training-intensive organizations, where certain targets and goals that have to be met within a specified amount of time are set for the employees.
- Transactional leadership is required when employees need constant supervision
For companies that have to meet strict deadlines or targets, a transactional leader can work wonders in improving productivity rate. Employees have to be constantly monitored and supervised to make sure that they are working properly. The purely professional nature of transactional leadership and the absence or prohibition of personal sentiments getting in the way of work can act as a huge advantage in such cases.
The reward and punishment method also plays a huge role in making sure employees give their all. They make sure that they work with concentration under strict management and supervision.
- Transactional leadership is common among athletic coaches
In any athletic team, whether football, basketball or any other sport, coaches often display traits of transactional leadership, much like military officers. They keep their team members motivated and driven by constantly reminding them of the importance of winning the game and the rewards and accolades that will follow.
Through harsh orders and instructions, these leaders instill a deep sense of commitment to the game that team members are willing to risk physical and emotional pain and torture. They are willing to risk anything to achieve a goal and avoid punishment.
- Transactional leadership works well in sales companies
In sales companies, employees are given a sales target that they have to meet within a given amount of time. If he/she meets his/her target or exceeds it, then he/she is rewarded with commission. Failure to meet the target means that a percentage of his/her commission will be lost.
The manager or leader adopts a transactional leadership style in such companies to set out and follow through these rules and regulations. Good performances from employees are recognized through monetary rewards, and this in turn, extrinsically motivates them to set a higher goal and work harder.