Pros and Cons of Transactional Leadership

I write about a new and increasingly popular form of management in my article titled, “Is Servant Leadership the Next Big Thing?” But for this article, I want to focus on a more traditional form of leadership called “transactional leadership.”

While transactional leadership is fading in many industries, it is still important to discuss, seeing as many companies still use this form of leadership. We will start by defining transactional leadership and will then discuss the pros and cons of the practice.

What is Transactional Leadership?

With transactional leadership, managers focus on organization, performance, and supervision with their employees. In other words, the company has a way of doing things, and employees must adhere to this. Managers closely supervise employees and give them rewards for hitting targets and punishments for missing them. This has been the traditional management style used in the United States for decades.

Pros of Transactional Leadership:

While transactional leadership is fading, it does have a couple of pros worth noting, such as:

• Easy to Measure Success: Since you have a set of targets and a specific way of doing things, you can easily measure whether or not employees hit their metrics.

• Easy to Stay Organized: While this method of leadership may not be the most effective (more on this below), it allows you to easily stay organized. After all, you have a set way of doing things that rarely changes, so there are fewer variables affecting your business.

Cons of Transactional Leadership:

Transactional leadership has many cons, including:

• Stifling Creativity and Innovation: With a set way of doing things and a strict organizational structure, employees are not able to use their breadth of creativity to innovate. In fact, depending on how strict the company is, employees may even be afraid to speak up and present ideas.

• Low Employee Morale: It is harder to enjoy your job and find meaning in your work if you are only a small piece of a strict hierarchy. This can lead to low employee morale and poor job performance.

• Can Lead to Micromanagement: Having a strict way of doing things can lead to the micromanaging of employees and, as mentioned earlier, the stifling of creativity and innovation.

About the Author -- Joshua Ferdman

Joshua Ferdman is a Los Angeles-based entrepreneur, specializing in technology, finance, and real estate. He started working in the mortgage business at the age of 16 and hasn't stopped since. Joshua always said that the most important job you can ever have is phone sales. He writes about entrepreneurship, leadership, and succeeding in the professional world.