Transactional and Transformational Leadership in the Construction Industry


Innovation has become the basis of development for companies, and leaders have to adapt their management approaches as well. Transactional leadership is based on the belief that a leader can use two tools—rewards and punishments and employ them to the employees based on the tasks the latter completed. On the other hand, the transformational theory was developed to aid leaders who want to create a unified vision for their teams.

The construction industry has many specifics. For instance, it requires managers to work with multiple stakeholders and complete projects rather than tasks. Transactional leadership is well-suited to address these leadership needs. However, disruption and technological innovation have prompted managers to adopt more advanced leadership strategies that allow fostering creativity and creating a better organizational environment. From the viewpoint of definitions, transformational leadership is designed to drive innovation. This paper is a research proposal for a comparison study of transactional and transformational leadership that will review the study results on the two leadership approaches and reflect on the most suitable style.

Research Question and Objectives

Leadership impacts not only employees but broader company culture and effectiveness. The theory of leadership suggests that different types of subordinates and tasks they are exposed to require a different approach (Harrison, 2017). Some employees work best under close supervision and when consulting with their supervisor, while others need independence and freedom while they work. Thus, the leadership behavior that a manager uses affects the organization’s environment and affects the employees. The following forms the main research question for the study:

What are the effects of a manager’s transactional and transformational leadership behavior on a construction organization’s environment and employees?

Objectives of the Study

The main objective of the study will be to investigate the impact of a manager’s leadership styles on an organization’s environment and employees in a construction sector.

Specific Objectives

The following will be the specific objectives of the research:

  1. To determine the types of leadership styles and behaviors of managers in the construction sector
  2. To investigate the effects of the transactional and transformational leadership styles on the working environment
  3. To investigate the impact of the leadership transactional and transformational behaviors on the employees’ performance

Literature Review

This preliminary literature review examines the definitions of transformational instead of transactional leadership and evidence that prior studies have been located to support the research question. By definition, leadership is an ability of a manager to influence others and the organization in general (Harrison, 2017). Although the leadership theory defines eight distinct styles, this paper will compare only two approaches —transactional and transformational. This selection is informed by the significant difference between these approaches and their different focus on supervision, task completion, and fostering innovation.

Transformational Leadership

Transformational leadership depends on the manager’s ability to inspire their followers. Elyana et al. (2019) define transformational leadership as a system used to change and transform the employees. Transformational leadership was first introduced by Burns in 1978, and later the theory was developed by Bass in 1985 (Eliyanan et al., 2019). These leaders use their intellectual capabilities to create individualized approaches to management and apply charisma, inspiration, and motivation to affect their subordinates’ performance (Elyiana et al., 2017).

According to Elyiana et al. (2017), transformational leadership is well-suited to the modern, fast-paced, and diverse environments where innovation and disruptions often adversely affect firms that did not adapt to the changes. The article by Simmons, McCall, and Clegorne (2020) is relevant as they appropriately focus their study on leadership styles, specifically within the construction sector. However, the number of articles that relate specifically to this style of leadership and are based on the construction industry is limited.

Although this leadership method is employee-centered, some factors in the firm’s structure or industry specifics may adversely impact the benefits of this method. Studies by Al-Amin (2017) and Thomas (2017) show a notable influence that the transformational leadership style has on the performance of the personnel. Despite the positive impact of this style on the employee’s work, there are some organizational mediators, for example, a commitment that can either enhance or deprive leaders’ transformational approach.

For example, Elyana et al. (2019) cited studies by Almutairi (2016), which show the significance of this mediation. Hence, despite the positive influence of this style on the company’s environment, there are some factors that hinder its efficacy.

Transformational leadership is linked to innovation. Zuraik and Kelly’s (2019, p. 84) study on transformational leadership indicate that ‘CEO transformational leadership has a direct positive effect on organizational innovation and an indirect effect through innovation climate.’ The authors emphasize the close link between the CEO’s knowledge and capability of using transformational skills and the organization’s innovative climate. Zhang, Zheng, and Darko (2018) review the specific pathways through which transformational leaders inspire innovation.

Other subsets of studies have evaluated the benefits of transformational leadership through inspiring the creativity of the employees. Shafi et al. (2020) investigated transformational leadership and how it inspires employees to think outside the box. The mediators or the factors that have an impact on both variables, the leadership style, and creativity in this study are intrinsic motivation, the complexity of the employee’s tasks, and the support system in an organization. Hence, leaders using the transformational approach for the management of people with high levels of intrinsic motivation and supportive organizational environments inspire creativity.

Transactional Leadership

Transactional leadership is based on monitoring the tasks that employees complete and close supervision. Elyana et al. (2019, p. 144) define this approach as “managerial leadership, which prioritizes of the supervising, organizing, assigning, controlling and monitoring of each individual performance.” Hence, this style emphasizes motivating the employees, creating a strategic vision, or employing charisma to inspire people to work, which are the main characteristics of transformational leadership. The central task of a transactional leader is to monitor performance and give out rewards or punishments to the staff (Elyana et al., 2019).

Transactional leadership in its nature does not imply the process of inspiring employees or providing them with additional motivation, and it is based solely on the task completion and punishment or a reward for it. Hence, facts that were relevant for transformational leadership, such as creativity and work motivation, are less important with this approach.

Transactional leadership contributes to some of the essential elements of the construction work, such as safety. Liu and Chang (2017) and Grill et al. (2017) argue that this is the effect of continent rewards, while Lingard, Zhang, and Oswald (2019) argue that both transactional and transformation styles were linked to self-reported safety behaviors. However, Lingard, Zhang, and Oswald (2019) report that communication strategies and transactional approaches had a greater impact on the employees’ safety and health attitudes.

Furthermore, transactional leadership places little emphasis on vision and inspiration. For construction managers, Liphadzi, Aigbavboa, and Thwala (2016) state that although the construction industry is based on the necessity of contractors completing specific tasks, the current environment requires construction managers to adapt to the changing nature of the industry.

The effect of this leadership style on the organization’s environment is not always positive. Mekpor and Dartey-Baah (2017) note that these leaders tend to recognize and reward well-performing employees. However, personnel that fails to complete tasks is punished rather than led by the leader.

Moreover, the transactional approach to leadership has faced criticism over its focus. Majorly, scholars and practitioners have raised concerns that transactional leadership has a narrow focus. Liphadzi, Aigbavboa, and Thwala (2016) argue that because this approach emphasizes specific goals and completing tasks, the leaders may be unable to address complex issues. Hence, although transactional leadership is suitable for the construction industry, it does not allow the companies to prepare for the technological disruptions that are currently happening.

Construction Industry Context

The construction industry differs from others in the nature of the daily management and the overall organization of work. Unlike, for example, a service company, construction firms work on a project-by-project basis, have to engage with a variety of suppliers and construction managers, and manage expectations from various stakeholders (Liphadzi, Aigbavboa, and Thwala, 2016). Construction projects are often complex and long-term, which require the expertise and commitment of employees and contractors. Hence, project managers’ strategies in the construction business use have to be adjusted to these characteristics.

Transactional leadership is well-tailored to the needs of this industry but does not allow managers to prepare for technological disruptions. Elyana et al. (2019, p. 144) argue that “transformational leadership has a positive impact on people’s job satisfaction, organizational commitment, and performance.” However, the limitation of this article is that the authors used a sample of 40 respondents from different industries. Hence, for this study that specifically applies to the construction industry, the conclusions can be applied broadly and with caution.

The limitations of these studies are the application of qualitative methods that imply a certain bias. In contrast, the use of quantifiable metrics, such as the company’s performance and financial status would be more reliable. The proposed research fits into the existing literature since it aims to systemize the existing knowledge. Currently, there are a plethora of articles on the different leadership styles, the preferred styles used by construction managers, but there is a lack of a systematic study that would provide a structured review of the most appropriate leadership style for the construction business.

Another issue evident in the literature is that studies focus on the emerging leadership approaches and their application to the construction business, such as servant leadership in a study by Coetzer, Bussin, and Geldenhuys (2017), creating a gap in understanding how traditional leadership styles can be adopted and used by construction managers. Coetzer, Bussin, and Geldenhuys (2017) note that because construction is a labor-intensive field, issues such as burnout and turnover occur often.

However, Coetzer, Bussin, and Geldenhuys (2017) report that there are many mediating factors that impact the result of people-oriented leadership styles, which means that servant leadership is not the most suitable method. Simons, McCall, and Clegorne (2020) base their study exclusively on the leadership traits that are necessary for an individual working in the construction industry since the authors argue that engineering professionals and managers voice a need to have a framework for developing capacities specifically tailored towards the construction industry. This helps comprehend what qualities and skills a modern-day construction business leader should possess and further develop a solid theory.

Another gap in knowledge that is evident from the literature is that many leadership studies for the construction industry are country-specific. For example, Nidadhavolu (2021) focuses on exploring characteristics of construction leaders in India and concludes that there is an equivalent relationship between employee’s perception of the correctness of a leadership style and their job satisfaction and commitment. This study, however, is based on two companies, which implies that the results are subjected to cultural bias and small sample bias. Lawrence Nzekwe, Adogbo, and Kolo (2017) conduct a similar study in the context of Nigerian construction leaders. Hence, there is a lack of a generalized study that would render a best practice of leadership for construction managers.


Case Study Design and Method

Case study research methodology assists in the exploration of a phenomenon within a certain perspective using various sources of data. The method takes exploratory design through a selection of lenses to give diverse aspects about an occurrence. The method will be qualitative and exploratory. The procedure will involve the use of extensive literature available on leadership theories of transactional and transformational leadership styles.

The exploratory design will be more appropriate for investigating the effect of leadership styles on work environment and employee performance using data and results from previous studies (Saunders, Lewis, and Thornhill, 2019). The rationale for selecting this design is that research on transformational leadership in the construction industry is scarce.

This comparative study of the two leadership styles is based on the systematic literature review of studies published within the last five years. The ontology of the research is the researchers focus on the specific phenomena (Saunders, Lewis, and Thornhill, 2019). Here, the focus is on the most suitable leadership style between the two, transformational or transactional, for the construction business. The epistemology of this research or the assumptions about knowledge is based on the positivist’s approach, where observable evidence will be considered as facts.

To ensure the reliability of the findings, the criteria for inclusion should be defined during the early stages. For this study, the library database was used to locate papers through keywords “transformational leadership,” “transactional leadership,” “leadership styles in construction industry,” “leadership construction industry.” The systematic literature review is a qualitative research technique, which is “is a study of studies” (Conducting a systematic review, no date).

The goal is to collect existing evidence from the literature to answer the research question. In this case, the focus is on qualitative studies of transformational and transactional leadership, intending to determine which leadership style is more suitable for the construction industry. The eligibility criteria are the publication date and the method of research. The preferable research methods for this review include interviews and surveys. The time horizons for this study were limited to four weeks, which is why a systematic literature review was chosen as a method in favor of interviews, surveys, and other approaches. This timeframe allowed collecting 20 articles and analyzing their contents.

In terms of reliability and validity of qualitative studies, there are some limitations and potential for bias. To avoid this, this author aims to include evidence from multiple reliable sources that would come to similar conclusions. This is the main premise of a systematic literature review, and it allows combining evidence from multiple sources to cross-check the findings (Saunders, Lewis, and Thornhill, 2019). Hence, the results section should have consistent findings. In terms of ethics, this study does not imply the involvement of human subjects or any potential personal data disclosure. Among the different research methods, the systematic literature review is the most ethical strategy, which means that there are no ethical concerns.

Advantages of Using Qualitative Case Study

Using case study research design and qualitative exploratory method will be suitable for this study due to various factors:

  1. The design is effective in testing the theoretical models and the suitability in the real world context.
  2. The method would provide a more realistic response than a purely statistical research.
  3. Case studies are flexible and permit the introduction of unexpected results during the process and hence results in a new direction.
  4. Case studies will allow a focus on specific and interesting cases when attempting to test the leadership theories using typical cases.

Data Sources and Procedure

The researcher will use multiple data sources to enhance data credibility. The sources of data from case studies will be drawn from the previous studies and documentation. The data from the various sources on leadership styles and their impacts will be congregated during the analysis phase, and hence, each data will contribute to the understanding of the leadership styles and effects.

Analysis of Results

The collection and analysis of data in qualitative research will occur concurrently. The analysis will involve the development of opinions based on the various case studies. The data from the secondary sources will be collated into a manageable state which will then result in the development of a narrative around the secondary sources. Data from the identified previous studies will be matched and linked to the research hypothesis.


The development of the proposal has promoted my professionalism since I had to think about the practical implications of the theory I learned. I have developed an in-depth understanding of leadership styles and their contexts of application. Additionally, I improved my research competence and understanding of study design. To prepare the proposal, I had to read a plethora of articles and tests on the research methods, different approaches, and best practices. Therefore, I have improved in both the theoretical knowledge and practical research skills. In summary, this proposal outlines the objectives and methodology of a study that aims to compare two leadership styles—transactional and transformational in the construction industry.

Reference List

Al-Amin, A. (2017). ‘Transformational leadership and employee performance mediating effect of employee engagement’, North South Business Review, 7(2), pp. 28-40.

Buil, I., Martínez, E. and Matute, J. (2019). ‘Transformational leadership and employee performance: the role of identification, engagement and proactive personality’, International Journal of Hospitality Management, 77, pp. 64-75. Web.

Coetzer, M., Bussin, M. and Geldenhuys, M. (2017). ‘Servant leadership and work-related well-being in a construction company’, SA Journal of Industrial Psychology, 43, pp. 1-10. Web.

Conducting a systematic review (no date). Web.

Eliyana, A., Ma’arif, S. and Muzakki (2019). ‘Job satisfaction and organizational commitment effect in the transformational leadership towards employee performance’, European Research on Management and Business Economics, 25(3), pp. 144-150. Web.

Grill, M. et al. (2017) ‘Safety leadership at construction sites: the importance of rule-oriented and participative leadership’, Scandinavian Journal of Work, Environment & Health, 43(4), 375-384.

Harrison, C. (2017). Leadership theory and research. Hamilton: Palgrave-McMillan.

Lawrence Nzekwe, K. C., Adogbo, K. J. and Kolo, B. A. (2017) ‘Assessment of organisational leadership for knowledge management practice in the Nigerian construction industry’, Journal of Construction Project Management and Innovation, 7(1), pp. 15-25.

Lingard, H., Zhang, R.P. and Oswald, D. (2019) ‘Effect of leadership and communication practices on the safety climate and behaviour of construction workgroups’, Engineering, Construction and Architectural Management, 26(6), pp. 886-906. Web.

Liphadzi, M., Aigbavboa, C. and Thwala, W. (2016) Leadership styles of construction project leaders – a theoretical perspective. Web.

Liu, A. and Chan, I. (2017) ‘Understanding the interplay of organizational climate and leadership in construction innovation’, Journal of Management in Engineering, 33(5), p. 04017021. Web.

Mahmood, M., Uddin, M.A. and Fan, L. (2019) ‘The influence of transformational leadership on employees’ creative process engagement: a multi-level analysis’, Management Decision, 57(3), pp. 741-764. Web.

Majumdar, D., Banerji, P. K. and Chakrabarti, S. (2018) ‘Disruptive technology and disruptive innovation: ignore at your peril!’, Technology Analysis & Strategic Management, 30(11), pp. 1247-1255. Web.

Mekpor, B. and Dartey-Baah, K. (2017) ‘Leadership styles and employees’ voluntary work behaviors in the Ghanaian banking sector’, Leadership & Organization Development Journal, 38(1), pp. 74-88.

Nidadhavolu, A. (2021). Impact of leadership styles on employee job satisfaction and organizational commitment – a study in the construction sector in India. Master’s Thesis. School of Engineering and Applied Sciences.

Saunders, M. Lewis, P. and Thornhill, A. (2019). Research methods for business students. 8th edn. London: Pearson.

Simmons, D., McCall, C. and Clegorne, N. (2020). ‘Leadership competencies for construction professionals as identified by construction industry executives’, Journal of Construction Engineering and Management, 146(9), p. 04020109. Web.

Thomas, N. (2017) ‘Transformational leadership and performance outcomes: analyses of multiple mediation pathway’, The Leadership Quarterly, 28(3), pp. 385-417. Web.

Zhang, Y., Zheng, J. and Darko, A. (2018) ‘How does transformational leadership promote innovation in construction? The mediating role of innovation climate and the multilevel moderation role of project requirements’, Sustainability, 10, pp. 2-19.

Zuraik, A. and Kelly, L. (2019) ‘The role of CEO transformational leadership and innovation climate in exploration and exploitation’, European Journal of Innovation Management, 22(1), pp. 84-104. Web.

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