Leadership Literature Review - Part 2

...continued from Part 1

2.5 Transactional & Transformational Leadership Theories :

The modern leadership theories of transactional-transformational leadership is considered one

of the influential leadership theories of the last two decades (Bass 1985, 1990 ; Burns 1978 ).

Transactional leadership is task-oriented while transformational leadership is relationship-oriented

involving interpersonal dimensions between leaders and followers. In the 1980s, research into

contingency leadership continued, but there was also a re-emergence of discussions on innate traits and

characteristics of individual leaders due to the argument that whilst there are many leadership styles

that can be learned and adopted by leaders, it is still undetermined as to how some individuals tend to

naturally come out as effective leaders.

Transactional Leadership

Transactional leadership is a directive of MacGregor's Theory X leadership such as the

authoritative leadership style. Transactional leadership underscores the significance of the relationship

between leader and followers, focusing on the concept of exchange between leaders and followers

Bass and Avolio, 1993).The transactional leadership style is frequently applied by managers. It focuses

on managerial skills such as rules and procedures to accomplish expectations . The leader motivates

followers by the prospect of rewards or the threat of penalization in return for task completion (Bass

1990). Cooperation with followers occurs as a result of negotiations and commitment is bought with

reward to the followers. Thus, transactional leadership clarifies expectations and provides recognition

when goals are met. A transactional leader is characterized as has someone with high confidence and is

usually commanding and more fixated on the task.

The main limitation in the transactional leadership theory is the assumption that, employees are

motivated by only reward and punishment, and hence they obey leader's orders. Although,

transactional leadership gives consideration to follower's needs, they do not provide opportunities for

obtaining follower's motivation, satisfaction or loyalty (Northouse, 2007; Nahavandi, 2006).

Irrespective of this disadvantage, transactional leadership is still remains a popular choice among many

managers. For example, transactional leadership is appropriate as Transactional leadership is suitable

in a crisis situation where urgent resolution is required (Nahavandi, 2006).

Transformational Leadership

The central concept of the transformational leadership is the ability of a leader to inspire greater

performance from the followers to surpass their own individual aspirations for the benefit of higher

organizational goal (Burns, 1978 ; Bass,1996). Transformational Leadership relates with MacGregor‟s

'Theory Y ' leadership style.Transformational leaders provide their followers with a sense of purpose

that surpasses the typical 'exchange of rewards for effort ' paradigm by inspiring their followers,

communicating and orienting followers around their vision, fostering creative ideas, and being sensitive

to the follower's needs (Bass & Avolio, 1993).

The transformational leadership theory revisits trait theory by underlining the impact of personality

characteristics of effective leaders and their role to appeal and transform their followers.

Transformational leaders are visionary, charismatic, inspirational and sensitive to individual needs

(Bass, 1985). The transformational leadership theory differentiated between leaders and managers by

introducing “vision” and “charisma” as an important leadership characteristic.Transformation leaders

use these two key attributes to inspire and arouse strong emotions among their followers towards the

goal (Bass, 1985).

• Visionary Leadership:

The key concept in transformational leadership is change, and the role of leadership in

envisioning and carrying out the change to transform the organizational performance.

Thus, the transformational leaders acknowledge a need for change, can create a vision,

communicate their vision to the followers and inspire them to achieve a desired change.

• Charismatic leadership:

The word ‘charisma’ means “an inspired and devine gift” (Nahavandi, 2006). Charisma

is an innate attribute which is a source of great power that has a profoun emotional effect

on their followers (Northouse, 2007; Nahavandi, 2006). Charismatic leadership has three

core behavioral competencies. They are vision, empathy, and empowerment (Choi,

2006) The envisioned behavior motivates the follower's need for achievement, empathy

motivates the follower's need for affiliation and the empowerment behaviour motivates

the followers need for power . Thus, according to Choi (2006), these three behavioral

competencies of charismatic leadership are the motivational factors for generating

personal commitment to the leader and transforming their followers to go past their selfinterest

for the benefit of the organization. It is acknowledged by many that the

charismatic leadership is a powerful model for influencing followers (Choi, 2006).

According to Bass and Avolio (1997), transformational leadership is based on four essential

attributes :

•  Idealized influence : It is the ability of the leader to engage the follower's emotions to emulate leaders vision and are committed to and make sacrifices for the leader’s vision (Bass and Avolio, 1997). For a leader to possess idealized influence, the followers must be able to see that the leader's vision as something they aspire to do . Leaders with these attributes are regarded as role models, are highly admired, have a high level of self-confidence, self-esteem, and self determination.

• Inspirational motivation: It is the ability to stimulate followers by building self-assurance and enthusiasm to give a sense of meaning to the followers that encourages them to accept implement the leader's vision . Leaders with these attributes provide emotional appeals to inspire and increase awareness of mutually desired goals (Bass and Avolio, 1997).

• Intellectual stimulation is the ability to challenge followers assumptions and encourage exploration of leader's vision. Leaders encourage followers to challenge their own values and beliefs and encourage to come up with creative solutions for problems, thus forcing them to discover and extending their capabilities (Bass and Avolio, 1997).

•  Individualized consideration is the leader's ability to pay special attention to followers needs, i.e., facilitate support, direction and encouragement, and acting as mentors to obtain enthusiasm for the leader's vision. Leaders with such attributes would foster mutual trust with their followers and contribute in the development of an emotional attachment between leaders and their followers.

The above four attributes in the transformational leaders can elevate their followers to a higher level of

needs defined by Maslow’s hierarchy of needs (Burns, 1978).

2.6 Conclusion:

A review of the leadership literature uncovers an evolving series of approaches used to

understand leadership, starting from the Trait based theories such as “Great Man “ theories to modern

leadership theory such as “Transformational” leadership theories. The early theories tended towards

viewing leadership in terms of 'trait' implying that leaders are born, whereas later theories began

viewing leadership as a 'process' implying that the leadership can be learnt.

Until the 1940s, trait based theories were the primary theory of leadership which sought to

identify the key innate characteristics of successful leaders. With the belief that people with such key

traits could then be selected and recruited as leaders positions. The problem with the trait approach

was that the results of the trait studies were inconclusive.There was little consistency on the exact set

of traits that made a successful leader, however, some traits did appear more frequently than others.

An alternate viewpoint to the trait theory for leadership was the “Behavioral “ Theories that

focussed on the study of behaviours of leaders as opposed to their innate characteristics. The

importance of concept in the behavior theories was that it suggested that leadership behaviors can be

learnt and adopted by individuals

Critiques of the behavioural theory, argued that the style approach ignored the situational

factors. Whilst behavioural theories can help leaders to adopt a particular leadership style, they give no

direction as to what represents effective leadership in different situations. This led to the development

of situational-contingency theories which suggested that the leadership style is dependent upon

situational factors such as the relationship with followers, the task structure, power of the leader and

other contingent variables.The situational-contingency approach to leadership is based on the

assumption that there is no one best way of leading and that a leadership style that is effective in one

situation may not be effective in others.

In the 1980's , the modern leadership theories of transactional-transformational leadership

were introduced which recognized the significance of the relationship between leader and the

followers. Transactional leadership is task-oriented and has been the traditional model of leadership

with its roots from the ‘rewards for compliance’ exchange model that obtains expected results from the

followers, whilst ‘transformational leadership’ is relationship oriented and introduced leadership

attributes that inspired greater performance from the followers to surpass their own individual

aspirations for the benefit of higher organizational goal , thus obtaining extraordinary results from the

followers. However, both transactional leadership style and transformational leadership styles are

needed (Bass & Avolio, 1993). Also, transformational leadership theories introduced “vision” and

“charisma” as the key component of the Transformational leadership, thus bringing back the

importance of traits to part of the modern leadership theory .

From the 1930’s to the present day, leadership theories has evolved substantially from the early

trait based theory to the modern transformational leadership theory. However, it is important to note

that all of the four generations of theory attempt to depict the behaviors of effective leaders, be it through the perspective of traits and innate abilities or skills are learnable.