Transformational and Transactional Leadership


The concept of leadership is perhaps one of the most studied subjects in the field of management, and although leadership is as old as humanity, it is only in the last century that scholars have made significant attempts to derive theories around leadership (Huse, 2003). Initially sanctioned by the need to step up productivity in industries, especially in the manufacturing sector, great scientific researchers such as Fredrick Taylor recognized the role of leadership during the early 20th century. Since then, the quest to understand this invaluable concept has drawn more theorists into contributing to the existing literature on different leadership styles.

Although many researchers have examined this subject in detail, James McGregor Burns has stood out with many studies agreeing to most of his contributions to defining different styles of leadership (Huse, 2003). In this paper, I seek to explore the characteristics of transformational and transactional leadership. In addition, I shall attempt to relate Abraham Lincoln and Alan Sugar as the key leaders that demonstrated a strong sense of transformational and transactional leadership styles respectively.

Transformational leadership

A transformational leader has a strong sense of inspiration and effectively makes his or her followers achieve unique results from very ordinary circumstances. Usually, a transformational leader listens to the concerns of his followers and quickly seeks to offer solutions. He or she changes the way his followers perceive or view things, events, and problems. Simply put, transformational leaders focus on creating change by molding a new way of doing things that would be difficult in ordinary situations (Huse, 2003).

James Burns coined the term in 1978 when he first published his descriptive research that sought to examine political leaders. However, the application of this concept has since gained popularity in various fields, including management, human resources, and organizational psychology (Mujtaba, 2010).

Transformational leadership influences people through motivation to boost the morale and the productivity of his or her followers. To succeed in this journey, the leader deploys various mechanisms, including sharing the aspiration of the followers, identifying with the followers, and being a role model (Kaifi &Mujtaba, 2010). He or she is a change agent, and as such, takes ownership of everything that goes around him or her while comprehending the challenges, weaknesses, and opportunities that the followers can use to be better performers.

In his studies, Thomson (2011) captured four major components that explain transformational leadership. They included charisma, personal attention, intellectual stimulation, and inspiration.

  • Charisma: Also known as an idealized influence, charisma refers to the extent to which the personality of a leader influences the followers to emulate him or her. It can also be seen to be the degree to which one convinces his or her followers through the constant display of admirable character (Ismail, Mohamed, Sulaiman, Mohamad & Yusuf, 2011).
  • Inspirational: The power of the leader to articulate issues that are of concern to the followers and the degree to which these actions inspire the followers are the things that characterize a transformational leader. Such a leader inspires optimism and provides hope that anything is possible (Ivey & Kline, 2010).
  • Intellectual stimulation: The ability to persistently challenge situations makes it possible for the followers to find a reason for relating with the leader and share a common goal and the standards of practice that can be used to achieve the goals.
  • Personal attention: A transformational leader goes out of his or her way to listen to individuals’ concerns and provides solutions while appreciating the contributions of each person in a team. He or she makes every follower feel he or she is part of the success (Ismail, Mohamed, Sulaiman, Mohamad & Yusuf, 2011).

Transactional Leadership

It is a managerial leadership style, which focuses on the use of a reward system to motivate results. Transactional leaders influence outcomes by carefully using a cost-benefit model to cause the flowers to deliver high-quality services. It seeks to enforce or encourage compliance among followers. Unlike transformational leadership, this type of leadership focuses on the worker to find faults or good results in which the former attracts punishments while the latter creates incentives for the worker (Ivey & Kline, 2010). These leaders are not willing to change the existing structures, thinking, or behavior so long as they still make economic sense to the company.

To a greater extend, transactional leaders are more of managers than leaders (Kaifi &Mujtaba, 2010). They are involved in making sure that employees comply with the set rules ensuring that any person who doesn’t comply receives negative reinforcement, including threats or even being fired when the situation is dire. That being said, transactional leaders do not advocate for delegated power. Instead, authority is built around them, and such power is only exercised for the benefit of the organization and not the followers (Ivey & Kline, 2010).

Sir Alan Sugar as a Transactional leader

Sir Alan Sugar, an English business magnate who rose from a humble background to earn accolades as one of the most successful businessmen in the world is one of the renowned transactional leaders. He succeeded in creating a workforce that delivered maximum output through creative incentives to the workers in his company. As a transactional leader, he used his knowledge of cost-benefit analysis to establish a less costly, yet potentially productive group of workers that maximized returns for his companies. His reward model has been replicated in many leading companies. Although he initiated changes in his organization, Alan Sugar slowly adopted a policy to slowly change the status quo with a view to maintaining the company’s profitability—all of which are characteristic of transactional leaders (Kaifi &Mujtaba, 2010).

Lincoln as a transformational leader

Lincoln’s ability to appeal to the masses, their moral values, he became one of the world’s greatest leaders who transformed the war into a situation that eliminated slavery. He did this using his charisma, which was evident in his self-sacrifice and his successes in changing the mindset of the people to achieve a nation free of slavery (Ismail, Mohamed, Sulaiman, Mohamad & Yusuf, 2011). Significant evidence of his transformational leadership is the fact that he led a course that saw America and the world become freer than before. He has since been regarded as Father Abraham by many American’s, especially the soldiers.

What added value does each bring to their organizations?

Lincoln: As a leader, Lincoln brought a new sense of looking at problems that faced America and the world at large. The fact that he was on the front lines when it came to identifying problems and solutions makes him a good pacesetter in an organizational setting. Inspiration to derive good out of a seemingly bad situation is something everyone would like about Abraham Lincoln. Another invaluable thing is the sense of trust and loyalty that makes his followers show respect. These values are not easy to find in many leaders in the modern world.

Sir Alan Sugar: As noted earlier, Alan Sugar has exceptional managerial skills that border on his ability to influence high employee performance. The greatest value that Sir Alan brings to the organization is his ability to create the impetus for better performance even when the situation does not have the requisite components to achieve the set goals. His ability to carefully and with a high sense of wit, to seize the opportunity whenever it knocks on the door makes him an accomplished leader in his own right.

What conditions and organizational contingencies influence whether a transactional or transformational leadership style would be most effective?

Every leadership style has its unique circumstances in which it can succeed. Therefore, there’s sometimes no one-fits-all leadership style that can be applied across different scenarios. For instance, followers who are intrinsically motivated to succeed would need a transformational leader to provide a little impetus to set things running. On the other head, a transactional leader would be appropriate to lead or manage people who are resistant to change and lack internal motivation to deliver results on challenging targets. The nature of the task to be handled is a fundamental contingency that would determine whether a leader should adopt a transactional or transformational leadership style.

For instance, leading a team of soldiers into war requires a leader with a strong sense of inspiration, charisma alongside his ability to earn trust and loyalty from the troops. On the other hand, a company seeking to maximize results within strict deadlines may require a leader to set targets, define rewards and punishment and supervise work to ensure that objectives are met.

Considering your answer above, compare the effectiveness of both leaders you profiled in their given environments. Was their leadership style appropriate?

Whether a particular leader performed exemplarily or not for the leadership style applied may be a matter of debate. However, when examined under the lens of leadership theory, it can be said that both Abraham Lincoln, a former U.S president, and Sir Alan were effective in applying their respective leadership styles. On the part of Lincoln, the setting and the position of the nation at the time oscillated between two delicate situations. The solutions needed a leader that would draw confidence, trust, and support from all sides of the divide. In this situation, transformational leadership was the most appropriate to inspire the American people to rise to the occasion and embrace social, economic, and political changes that were needed by the U.S and the world.


As for Sir Alan, managing an organization with profit-making motives can be extremely difficult to inspire people without offering to share the returns that come as a result of their commitment. To succeed in such an environment, managers must use all means at their disposal to influence the performance of the employees. A reward system to help maintain a certain desired status quo is what can help any manager to effectively manage a team of employees to achieve its profit objectives. Since business enterprises operate in a crowded and competitive environment, Sir Alan needed to implement his transactional leadership skills to yield better results from his team.


Huse, T.D. (2003). Transformational Leadership in the Era of Change. Web.

Ismail, A., Mohamed, H. A., Sulaiman, A. Z., Mohamad, M. H., & Yusuf, M. H. (2011). An empirical study of the relationship between transformational leadership, empowerment and organizational commitment. Business and Economic Research Journal, 2(1), 89-108.

Ivey, G. W., & Kline, T. B. (2010). Transformational and active transactional leadership in the Canadian military. Leadership & Organization Development Journal, 31 (3), 246-262.

Kaifi, B.A., &Mujtaba, B.G. (2010). Transformational leadership of Afghans and Americans. Journal of Service Science and Management, 3(1), 150-159.

Mujtaba, B. G. (2010). An examination of Bahamian respondents’ task and relationship orientations: Do males have a significantly different score than females? Journal of Diversity Management, 5(3), 35-42.

Thomson, G. S. (2011). Breaking the glass ceiling: Female leaders in the global marketplace. IUP Journal of Entrepreneurship Development, 8(1), 51-64.

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