Role of Leadership in Organizations

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Executive summary

Leadership in an organization is essential in ensuring that members fully understand the goals of an organization and that they are working towards them. This normally occurs when both the internal and external environment are incorporated. Transactional leaders ensure that the day to day activities of the organization occur while in contrast transformational leaders are crucial in enacting change and dealing with the long term strategic objectives.

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Leadership can be defined as a process by which an individual influences others to work positively towards common goals. (Chemers, 2002) Leaders are a necessity in today’s business environment owing to the fact that they create a sense of direction and also assist in managing change. In order to understand the role of leadership fully within an organisation, one needs to understand the various styles and types of leaders that exist. These shall be examined especially with specific emphasis on transactional as well as transformational leaders.

Role of leadership in organisations

There are several types of leaders that can exist in a company and these types of leaders all contribute differently towards their organisations. For instance, charismatic leaders are those ones with exceptional personalities and actually possess the ability to influence the actions of their followers through their personality. The major challenge with such an approach is that this is a natural talent that no one can create and not everyone can posses such a talent (Knowles, 2006). In certain companies, situational leaders carry the day where the latter category encompasses all those individuals who assume leadership roles for specific matters and this is often temporary in nature. Traditional leaders refer to those who influence others as a result of the positions that they hold. This differs from the appointed leader in that the former type of leader usually inherits their positions while the latter one usually gets such a position through managerial processes. More often than not, these two types of leaders are identified as being bureaucratic and rigid. Personality has a minimal role to play in influencing their actions. A functional leader is one who looks at the needs of an organisation and then changes his or her actions to revolve around those particular circumstances (Georges, 2000).

The reason for examining all the latter types of leaders is in order to find out what are the most important elements that are required for effective leadership. In other words, when a leader possesses only one or two traits without the entire package, then chances are that an organisation may not operate under its optimum levels. Sound leadership is more than just being appointed to a certain position or inheriting it from one’s kinsmen. Nonetheless, one cannot get by on personality alone if they do not possess the right position to exert their influence (Cecil, 2006).

A comprehensive role of leadership normally occurs when persons filling leadership positions are dynamic in that they do not adapt a rigid leadership style without considering what is going on in their surrounding. Besides that, proper leadership occurs when the person taking up such a role has a clear understanding of where the organisation is going or fully understands the goals and aspirations of that company. In so doing, that person will be moving in an organised direction rather than taking things as they come. Besides that, proper leadership needs to include the followers or the groups working towards certain goals. This is largely because more often than not, the organisation’s internal and external environments keep changing. This means that workers and employees will be influenced by these occurrences and so will their actions. Consequently, good leaders need to change their leadership approaches to meet the needs of their groups or the external environments that they could be operating in (Pielstick, 1998).

One can therefore assert that there are several parameters that must be considered in order to create effective leadership and these include:

  • Group members’ situations
  • Goals and tasks
  • Personality
  • Knowledge
  • Terms of skill

As it has been asserted earlier, there are several types of leaders existing in the corporate arena today and different types of theories have been formulated in order to provide greater insight into the concept of leadership. Transactional and transformational leadership have been studied by several HR experts and several explanations have been given on what they are. However, the paper shall dwell on one type of explanation for each type of leader. But prior to defining both transactional and transformational leadership, it is crucial to look at several contexts surrounding these types of leaders (Dasborough, 2006).

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Transactional leadership scenarios occur daily. Usually, transactional relations are those ones that are governed by mutual exchanges in which a requirement is given, a condition met and a reward or punishment dispenses. For instance, when a business man promises his employees a salary increment if they meet a twenty percent profit target, then such a relationship can be termed as transactional. It is possible for such relationships to exist between a leader and his or her followers. On the other hand, there may be certain scenarios in life where an individual does something for the other without demanding for any exchange in that the action is entirely sacrificial. Such relationships are synonymous to parents and their children as parents remain committed and dedicated to their young ones even if there may be no foreseeable material benefit to such a relationship. Transformational leaders are those ones that mimic such behaviour and put the interests of others before their own. In this regard, such individuals tend to inspire and motivate their group members to become the best that they can be.

Given these two perspectives then one can assert that transactional leaders are those leaders who engage in economic exchanges or cost related benefits with their followers so that they can obtain certain contracted services. In most circumstances, these exchanges revolve around the material or psychological needs of the employees as asserted by Bass (1990).

Burns (1978) explains that transformational leaders are those ones who recognise and use the needs of their followers and meet them; the transformational leader goes beyond surface needs and instead focuses on deeper ones that tend to engage the entire person in order to motivate them and cause them to reach their utmost potential.

There are several differences that arise between transformational and transactional leaders. First of all, transactional leaders tend to focus more on giving rewards for certain actions, on the other hand, transformational leaders mainly dwell on the emotions that cause certain actions to occur thus surpassing mere exchange type relations. Secondly, transactional leadership is short term in nature because at any one time, leaders are always dealing with a current issue. However, transformational; leadership is forward looking as it deals with underlying issues that have the capacity to go beyond prevailing circumstances. In this regard, subordinates tend to have new and different expectations from their leaders unlike in the former mentioned type of scenario.

Transactional leadership is characterised by standard arrangements in which similar punishments or rewards are offered to all members of the organisation. On the other hand, transformational leadership is characterised by tailor made solutions and influences so that all individuals are treated as unique in terms of their needs. More often than not, intellectual stimulation rather than punishment or rewards is utilised and this gives transformational leadership a more holistic approach. Numerous researches have revealed that in order for employees to be properly motivated then they need to be treated in a manner that recognises all their lower level as well as higher level hierarchy of needs; transactional leadership does not account for this (Posner & Kouzes, 2007).

Transactional leadership is characterised by in depth involvement of leaders in goal setting. Here, the latter individuals usually set goals, then promise their followers that they will deliver a number of rewards if those subordinates stick to the plan. On the other hand, transformational leaders usually create environments in which their subordinates participate in goal setting. The subordinates are also highly involved in problem solving as the tasks they undertake are opportunities to learn something new related to these aspects.

In transactional leadership, powerful leaders are those ones who possess an ability to get desirable results by reinforcing employees in the event that they complete a certain project successfully. On the other hand, transformational leadership encompasses those types of leaders who possess ability to bond with their subordinates. In other words, transformational leadership is all about having the right vision for one’s organisation and then employing sound management skills in order to achieve that vision.

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In transactional leadership, the major focus is on the needs of the employees. In other words, subordinates are usually self seekers who may not necessarily be concerned with the needs and challenges of the organisations. Transformational leadership on the other hand entails motivating subordinates to be able to look out for interests that are beyond their own (Bass & Avolio, 1985a).

Despite the latter contrasts, there are still some similarities that arise when looking at transformational or transactional leadership. For instance, both types of leadership approaches are required within the organisation. This is largely because transactional leadership ensures that all the routine tasks and obligations are met. This means that all the detailed aspects of project work are supported though this kind of arrangement. Transformational leadership is essential in adding new aspects of value into an organisation. Since transformational leaders tend to lead from the side, then there ought to be someone to lead from the front and this is ensured through transactional leadership. Different scenarios call for different types of leadership hence the need for organisations to posses both transactional and transformational leaders. This fact brings in the element of situational leadership where a leader moves from one leadership style to the next depending on the needs of the organisation (Bass & Avolio 1994b, Bass 1990).


Transactional and transformational types of leadership are summarised through three parameters. First of all, there is a need to look into the experience and skill level of the members in order to determine whether transactional or transformational leadership is more relevant. Secondly, such leaders must also consider the type of work involved; transformational leadership is more appropriate in creative set-ups while transactional leadership works best for routine like jobs. Lastly, in both leadership scenarios, leaders must consider the kid of environment that they are operating in. In other words, if it is highly stable, then transactional leadership would serve it well but if it is radical and highly adventurous, then transformational leadership should prevail.


  1. Burns, M. (1978). Leadership. New York: Harpe and raw Publishers
  2. Posner, B. & Kouzes, J. (2007). The Leadership challenge. California: Jossey Bass,
  3. Bass, M. & Avolio, J. (1985). Transformational leadership and organisational culture. New York: Free Press
  4. Georges, M. (2000). “Emotions and leadership.” Journal of Human relations. 53 (4), 145
  5. Bass, M. & Avolio, J. (1994). Improving organisational effectiveness through transformational leaders. California: Sage Publishers
  6. Chemers, M. (2002). “Social, cognitive and emotional intelligence in transformational leadership.” Leadership and multiple intelligences journal. 12 (5), 55
  7. Cecil, G. (2006). Leadership. Massachusetts: Addison Wesley Pielstick, C. “The transforming leader.” Journal of community college. 26 (3), 15-34
  8. Dasborough, M. (2006). “Cognitive symmetry in employee reaction to leadership.” Leadership Quarterly. 17(2), 170-179
  9. Bass, B. “From transactional to transformational.” Journal of Organisational dynamics. 4 (1990): 19-31
  10. Knowles, H. Personality and Leadership behaviour. MA: Addison Wesley, 2006

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BusinessEssay. "Role of Leadership in Organizations." November 11, 2021.