Transactional Leadership Styles

Quick Navigation:


Transactional leadership is a term used in management sometimes also called ‘transactional management.’ It is a stand-alone leadership style that makes up part of the larger leadership model known as full-range leadership. In this article, you’ll learn about transactional leadership and the different techniques of a transactional leader in comparison to other styles.

What is transactional leadership?

Transactional leadership is a management style that uses a familiar reward and punishment system to attain compliance and task completion. Rather than focusing this method on a workplace culture of innovative, forward-thinking behaviors, transactional leadership works best in office environments that are task-oriented. 

Dealing mainly with the most basic needs of employees, transactional leadership is often a practice used with employees who haven’t reached the management level. As employees evolve through their careers, they are likely to experience a spectrum of management styles used to develop them at different levels, including higher-level techniques like transformational leadership that can produce greater efficiency in the workplace.

Common transactional leadership styles

The goal of transactional leadership is measurable results. There are generally three disciplines of transactional leadership that managers use to achieve desired goals. 

The first type of transactional leadership discipline is focused on rewarding desirable behaviors and results. These types of leaders might use a monetary bonus system to reward sales agents who perform 10% or more above their sales goals for the year.

Next, there are some leaders who use a passive punishment system. It’s passive in that these leaders don’t actively evaluate and monitor employee performance and results for areas of improvement, but when problems arise a punitive approach may be adopted to prevent future occurrences. For example, a manager could issue a write-up for excessive tardiness that goes into the employee’s performance record.

In the last type of transactional leadership, managers apply an active punishment system where employees and production are regularly reviewed and goals are assessed. Punishment might occur if employee conduct, behavior or performance reveals the opportunity for improvement.

What are the traits of a transactional leader?

Here are some of the traits that transactional leaders use in the workplace:

  • Being practical. Due to the nature of transactional leadership being about producing practical results, these managers often think in very pragmatic terms.
  • Emphasis on external motivation. This system relies on a punishment and reward system. These are external motivators. Dedicated employees with solid job skills usually respond positively to this kind of motivation.
  • May seem resistant to make big changes. Because transactional leaders are looking for task completion and not transformation, they may resist making sweeping changes that might do things like impact production.
  • Rewards top performers. A transactional leader will reward top performers with incentives like gifts and bonuses.
  • Directive-driven. These leaders issue directives for other employees to follow through on.
  • Uses a hierarchical model. A transactional leader exists on a hierarchy where they manage employees and may be managed by other higher-level directors.

Transactional leadership vs. other leadership styles

Here’s how transactional leadership differs from transformational and laissez-faire leadership styles:

Transactional leadership vs. laissez-faire leadership

Transactional leadership is very different from laissez-faire leadership because, in the latter, employees are left to their own devices for decision-making. Laissez-faire leadership is a very hands-off approach to management that assumes employees are capable and competent to make decisions about the workplace and their jobs without much direct oversight. This is also largely considered the least efficient leadership style. 

Conversely, transactional leadership is heavily focused on managers issuing directives and evaluating results, versus allowing employees to work independently, without specific goals.

Transactional leadership vs. transformational leadership

Transformational leadership is also quite different from transactional leadership in that it focuses on long-term vision and shifting paradigms over time. While the goal of transactional leadership is usually production or some other measurable outcome, transformational leadership seeks to develop the employee into someone who upholds the company values and mission. This type of change is a longer one that is harder to measure but results in high-efficiency and high-engagement.

Transformational leadership is often used when developing managers into employees who can innovate the strategic vision of a company to achieve results, while transactional leadership is more likely to be used on employees who complete daily routine tasks without thought given to things like production strategy.

Transactional leadership is part of a larger leadership model established to relate it with transformational and laissez-faire leadership styles. This model is called the full-range leadership model and it evaluates the leadership styles in terms of efficiency and engagement.