16 Advantages and Disadvantages of Transactional Leadership

Transactional leadership is a leadership style that values structure and order within each relationship. It is the most common type of leadership style used in large corporate environments, international agreements, and military operations.

Transactional leadership requires specific rules or regulations be followed to complete stated objectives. It moves people and resources in an organized fashion to ensure that specific results can be achieve along a typical timeframe.

It is a leadership style which requires people to be self-motivated at all times. Team members with a transactional leader must be able to work within a directed environment that is highly structured. It focuses on producing results above anything else and motivates people to achieve them by offering clear rewards or consequences.

Here are some of the key advantages and disadvantages of transactional leadership to consider.

List of the Advantages of Transactional Leadership

1. It can effectively motivate team members to maximize productivity.

People stay employed because there is a reward in doing so that they find to be valuable. Workers might be passionate about what it is they do. They might enjoy working for a company that can positively influence the lives of others. Even something as simple as earning a paycheck to support their family can be a primary motivator.

Transactional leadership structures specific rewards for success that have clearly defined parameters. Workers know when they’ll reach that reward and what they’ll receive when they do. Simultaneously, workers also know that their team leaders are supervising them to ensure outcomes, good or bad, are distributed.

2. It creates achievable goals for individuals at all levels.

Within a creative or innovative environment, it can be difficult to create achievable goals. A goal can only become achievable when there is a defined ending point. Transactional leadership creates these end points as part of their overall organizational structure. That means workers can grow in confidence as they progress toward goals because every step they need to take is outlined for them.

That is why transactional leadership struggles in creative environments. There is no wiggle room. Workers either follow the mandated instructions or they do not. People are expected to follow the rules at all times.

3. It eliminates confusion within the chain of command.

A transactional leadership style creates a clear chain of command that is easily recognized by the entire team. Structures within a team are implemented with precision. Everyone knows, before they start working, what will be expected of them. They also know where they fit into the organization chart or command structure, which allows them to access the proper channels should a problem arise during the work phase. This type of structure prevents workers from “going rogue” by attempting to assume leadership roles that they have not earned or to which they have not been assigned.

4. It reduces costs while improving productivity levels.

Transactional leaders are typically focused on production improvements while exercising cost-savings measures. Think of it as a “lean and mean” philosophy. Employees typically work harder when short-term, achievable goals are presented to them. Successfully reaching a goal creates internal rewards, such as a feeling of confidence, that makes them want to repeat that process a second time.

Motivators are often used to encourage high productivity as well. Incentives are given to works who figure out new ways to complete their work in a shorter time period. Various rewards are also built into the system to encourage top performers to continue working at their peak output levels.

5. It is a simple process to implement.

Transactional leadership is straightforward and simple. It does not require a manager to have extensive training, a high emotional intelligence, or specific personal leadership traits. All a manager must do in this type of environment is be a rules enforcer. That means there is no need to balance the complex needs of a diverse team with a leader who can be inspirational and charismatic. It requires someone who is willing to confront non-conformists and get rid of people who are unable to meet their assigned tasks.

6. It creates a system that is easy to follow.

Team members within a transactional environment can quickly implement the instructions they are given. There is rarely any room for misinterpreting the instructions that are offered. Regulations are rarely ambiguous. People know what they must do. It is up to them as to whether or not they will decide to implement what they have been told to do.

7. It allows workers to choose the rewards they want to achieve.

In the typical transactional environment, the workers are allowed to choose which rewards they value the most. Company management and team leaders should allow workers to have some kind of control over the rewards they are able to learn. Incentives can come in a variety of formats. That way, workers who want a bigger paycheck can feel satisfied. Workers who want more vacation time can also feel satisfied.

List of the Disadvantages of Transactional Leadership

1. It eliminates individuality from the production process.

Transactional leadership is defined by a strict set of rules and regulations. There is no room to bend or break these rules for any reason. They are considered the best practices for the team to follow. People who come from a creative mindset struggle to produce under such a leadership structure because creativity is usually produced through freedom of movement.

Under this leadership style, violating policies or refusing to follow instructions can often lead to the termination of a worker. Workers are expected to fulfill their duties without complaint. Without individuality, there is no flexibility, which means this leadership style can fail under certain conditions.

2. It limits the amount of innovation that is achievable.

Transactional leaders are rigid and unyielding. They don’t bend the rules because the rules are there for a good reason – even if that reason is not known to them. This attitude limits innovation because team members stay focused on assigned tasks. Structured policies dictate actions instead of common sense interactions with the regulations.

Even when creativity is permitted within the regulations of a company, regulated creativity does not produce the same results as free creative thinking. That is often why this structure ultimately fails. It is difficult for individuals to be creative when their creativity is being dictated to them.

3. It creates more followers than leaders.

Companies can struggle when they focus on transactional leadership above anything else. If the leader leaves the company, then the rest of the team may not know how to complete their next assignment. Transactional leadership puts all leadership responsibilities in the hands of the team leader. It expects team members to be followers, offering input to the productivity process only if they have been invited to do so.

To counter this issue, many teams create an “assistant” that steps in when the leader or manager is away for some reason. Even then, the assistant is more of a follower than a leader. They must follow the direction of the regulations. They must follow the direction of their supervisor. And, when they are not acting in a management role, they must follow the production requirements their position demands.

4. It tends to focus on consequences instead of rewards.

Although rewards are part of the transactional leadership process, most leaders focus on the consequences of failure instead. It places the blame on the people who are assigned a task, rather than placing blame on the leadership in the first place. That blame leads to disciplinary actions, which then leads to higher levels of employee dissatisfaction.

Even if rewards are possible, the overall attitude of the transactional environment is that team members are being paid to do their jobs in a specific way. Rewards feel transactional, which reduces the value of them when received. Instead of focusing on employee welfare, the structure of the organization focuses on profitability and success instead. It is for this reason that many teams in a transactional environment tend to have low levels of morale.

5. It places zero value on empathy.

Transactional leaders are also working under rules and regulations that cannot be changed. That means their emotions are not considered to be essential to the production process. That attitude is then transferred to their direct reports. As long as the work is being completed, the transactional environment does not care how people think or feel.

Over time, these creates an insensitivity within the average worker to anyone but themselves. They focus on their assigned tasks only. If someone needs help, then that means they are a failure and should be removed from the team.

6. It does not motivate some people toward higher productivity.

There are many ways for workers to feel motivated by their job. Rewards may not be something that motivates a person. Some workers are motivated by internal triggers, like wanting to be away from their home for some time each day. Some workers might be motivated by social interactions they have with customers. When a team member is not motivated by the rewards that are offered in the transactional environment, then there is no incentive to increase their productivity.

7. It places more value on efficiency.

Transactional leadership places the highest value on the efficiency of each worker. That is why it rewards workers who can improve their set routines or their production methods. At the same time, however, experimentation with new methods is rarely encouraged – unless it happens on a worker’s time outside of their assigned working hours.

Some transactional environments may have a set process in place for developing new products. Far too often, the structure discourages those who could innovate new processes by demanding compliance with the current system. Instead of working smarter, it wants people to work harder.

8. It places success within the hands of the leadership only.

Transactional leadership can only be successful when there is an experienced leader at the helm of a team. The leader must be familiar with the transactional style. They must also be comfortable implementing this style with each of their direct reports. Most people who can be successful in this role have dynamic personalities who are not worried about the culture of their team or the vision of their company.

9. It makes leadership incompetence difficult to counter.

Under the structure of a transactional environment, subordinates who do not complete an assigned task as indicated are held responsible for their lack of productivity. What if their lack of activity is because of inadequate leadership instead of inadequate skill?

With transactional leaders, that does not matter. Companies place more value on the productivity of the worker than the effectiveness of the leader. It is because of this issue that high-skill employees often shun the transactional environment, as their success is ultimately determined by the competency of their supervisor.

The advantages and disadvantages of transactional leadership show that this management style can create fast results that are predictive. It can also create low morale levels within teams, limit creativity, and ultimately put a company at a disadvantage should certain leaders leave. In most situations, a hybrid style of leadership is the most effective approach to use. There are times when transactional leaders are necessary… and times when they are not.