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Understand the Pros and Cons of Transactional Leadership

Learn what transactional leadership is and how to know if it’s the right leadership style for your business.

Every workplace has a leader. The leader is the person you report to and typically go to if you have any questions. They lead the group discussions and usually have the final say. But the leader of an organization or office can heavily impact the work environment and company culture.

There are many different leadership styles, from transactional leadership to transformational leadership. Figuring out which type of leadership style is right for your place of work can be tough. You want to choose a leadership style that is motivating and encouraging but also one that promotes a structured environment. One leadership style that we often come across in work environments is transactional leadership.

But what is a transactional leadership style, and how do I know if it's right for my business?

In this article, we'll discuss what transactional leadership is, how it differs from transformational leadership, and more. Continue reading to learn the pros and cons of the transactional leadership style and how to determine if it's the right leadership style for your business.

What is transactional leadership?

Transactional leadership is a leadership style based on rewards and punishments for certain tasks and jobs being completed. For example, if your job is to send transactional emails to generate sales, and you successfully do so, you'll receive a reward. If you do not successfully complete the task, you'll receive a punishment.

This positive and negative reinforcement is meant to motivate employees to perform their best and complete their tasks on time. However, this does not always make way for a positive work environment.

Some of the most notable characteristics that are often embodied by someone who is a transactional leader include:

  • Less flexible: Transactional leaders are known to be less flexible than transformational or creative leaders. They may also be more opposed to changes in the workplace.
  • Short-term oriented: Many transactional leaders are more likely to focus on short-term rather than long-term goals that involve individual employees, as employees are constantly reevaluated for optimal output and productivity.
  • Structured policies: Transactional leaders need to have structured policies and procedures in the workplace for them to feel comfortable and thrive.
  • Appreciates efficiency: It is not rare for a transactional leader to thrive on workplace efficiency. The more efficient an employee, team, or workplace is, the happier a transactional leader will likely be.
  • Left-brained management styles: Working with transactional leaders means working with those who are left-brained or extremely analytical in their thinking styles.

Transactional leadership vs. transformational leadership

In the workplace, there are many different leadership styles. The transactional leadership style relies on workers who perform their tasks accordingly in order to run as smoothly as possible. But another type of leadership approach that has become increasingly popular throughout many workplaces includes transformational leadership.

With transformational leadership, the workplace is much more open and receptive to new ideas and "out of the box" thinking. Transactional leaders, however, are not so agreeable to employees stepping out of line or conducting their own experiments on company time and will likely react and respond accordingly.

While both transactional and transformational leadership have their roles in the workplace, it's important to understand the difference between them before choosing a workplace that is suitable for you.

Some transactional leadership examples in the workplace might include:

  • An internal rating system that monitors the level of quality that is submitted by each individual employee.
  • A timing system to keep track of employees and their individual tasks (as well as how long it requires them to complete each task).
  • A contingent reward tier system with rankings incentivizes employees to work harder and more efficiently in exchange for a reward.

History of transactional leadership theory

The history of transactional leadership can be traced all the way back to the 20th century when a German sociologist named Max Weber determined that there were three main styles of leadership. The three main styles of leadership Weber studied and described included bureaucratic, charismatic, and traditional.

The bureaucratic leadership style, also commonly referred to as the rational-legal style of leadership, would later be defined as "transactional leadership".

Ultimately, the leadership style became the status quo in many industries that thrive in a stakeholder economy. Today, transactional leadership is known as the "exercise of control on the basis of knowledge", which is a fitting summary for those curious about how transactional leadership works.

Pros of transactional leadership

Before deciding whether or not transactional leadership is right for your business, consider the advantages of what transactional leadership has to offer.


Implementing a structure in the workplace is extremely important for productivity and overall efficiency. Having a set routine in place will help employees to stick to their designated tasks while minimizing disruptions and distractions, especially with a reward and/or tier system in place.

Clear expectations

Transactional leadership focuses on establishing clear expectations of your employees. Defining the performance standards you have of your employees upfront can go a long way. When employees know what is expected of them day in and day out, they are less likely to slack on delivering their assigned tasks.

Reward system

Creating a reward system is a great way to get your employees engaged and motivated. By integrating a reward system with tiered rewards, you can also incentivize your employees to go above and beyond each day on the job.

Reward systems can include promotional opportunities, raises, bonuses, and even vacations or other prizes, depending on the structure of your business.


Utilizing a transactional leadership style is extremely beneficial for those who favor accountability in the workplace. With a fully integrated tracking system to monitor the productivity of the individual, keeping an eye on accountability among peers and employees has never been easier.


Motivating your employees is also extremely important in maintaining the status quo at the workplace, especially when productivity and workplace efficiency matter to you most.

To keep your employees working hard, a tier system with rewards can keep them motivated and excited about their work. The use of a reward and tier system can help employees to better stay on track with their goals at work while also providing the guidance and incentives they may need to pass the finish line during their next project.

Cons of transactional leadership

As with any leadership style, there are also drawbacks. When it comes to transactional leadership, there are a few cons that may interfere with the overall happiness and satisfaction of the workplace.

Lack of innovation

Unfortunately, while there is plenty to offer regarding accountability and motivation when it comes to transactional leadership, the system itself is a rigid structure that's not open to innovation.

If you are an innovative leader and prefer to lead with an open mind and out-of-the-box ideas, working as a transformational leader may be better suited for you and your personal style.

Limited flexibility

Those who prefer a transactional style of leadership are typically left-brained and prefer to have everything in order at all times.

While this can be extremely advantageous to those pushing for maximum productivity, it can also leave you with limited flexibility altogether. Keeping an open mind will allow for more flexibility, but it may not align with traditional transactional leadership moves.

Short-term thinking

With transactional leadership, leaders are typically less concerned with the long-term future and more focused on the short-term. While this is optimal for those seeking results as quickly as possible, the immediate demand for results can leave leaders blind to the possibilities and potential risks of the future.

Dependence on the leader

Depending on your leader at all times will often lead to the demise of a particular job, task, or company as a whole.

Using transactional leadership requires all employees in the workforce to pay attention to those who are in charge at all times. This means listening to a hierarchy of those who are in control, even if the employee is not satisfied with the job or task at hand.

Depending on leaders without the ability to share input can ultimately become detrimental to any type of business, big or small.

Doesn't always work in complex situations

For larger companies and those that work in creative sectors, a transactional approach to leadership may not be the best path. Implementing transactional leadership in complex situations can ultimately deter from obtaining specific goals or meeting the needs of a particular client or consumer.

Whenever you are evaluating the type of leadership style that's right for your workplace, it's important to envision the long-term use of that leadership style and how it's likely to impact you and your employees.

Is transactional leadership right for your business?

Determining if transactional leadership is right for your business will greatly depend on your existing goals and the business model or structure you currently have in place.

Whether you are currently hiring employees or looking to improve the customer experience overall, there are many different factors to consider when determining if transactional leadership is the right course for your business.

Consider the size of your business, the number of employees you have, your goals, objectives, and current business structure. Taking these factors into account can help significantly when it comes to choosing a leadership style that is not only suitable for you but, ultimately, beneficial for those who work for you.

For example, transactional leaders tend to focus more on numbers, data, and collected statistics to push for more productivity and workplace efficiency. If you enjoy discussions and group input while implementing creative solutions, you may be better suited for transformational leadership.

Choose the best leadership style for your business

When it comes to choosing the best leadership style for your business, keep in mind that transactional leaders focus on task-oriented monitoring and statistics, whereas transformational leaders spend more time focusing on open-minded solutions that benefit the group as a whole.

While determining which leadership style is right for you and your workplace, you can create a customer journey map using Mailchimp to learn more about your existing and target audiences. With Mailchimp, you can optimize your digital campaigns, learn more about your customers, and execute your preferred leadership style throughout your next marketing campaign to set your organization up for future success.

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