Transformational and Transactional Leadership

Leadership researcher James MacGregor Burns in 1978 wrote a book entitled simply Leadership. In this Pulitzer Prize-winning book, Burns made an important distinction between two types of leadership orientations: transformational and transactional. On the surface the distinction appeared to be simple enough. Some leaders “transact” with followers to get things done, setting expectations and goals and providing recognition and rewards when a task is completed. Burns linked transactional leadership to what he observed through the years in many politicians' behavior in terms of how they “got things done.” Transactions were typically based on satisfying both the leader's self-interest and the self-interest of his or her followers.

Burns observed transformational leadership in leaders who did the opposite of transactional leaders, initially defining transformational leadership as the opposite of transactional leadership. According to Burns, transformational leaders engage followers not only to get them to achieve something of significance, as he described them as visionary change agents, but also to “morally uplift” them to be leaders themselves. Central to Burns's theoretical distinction was the fact that he described such leaders as being morally uplifting and being more concerned with the collective interests of the group, organization, and society as opposed to their own self-interests. Although political scientist James Downton (1973) had referred to transformational leadership in an earlier paper on rebel leadership, Burns solidified the distinction between these two leadership orientations. His work significantly marked the course of leadership research for the next twenty-five years, resulting in transactional leadership and transformational leadership being the most widely researched constructs in the leadership literature throughout the 1990s and into the next millennium.

Industrial psychologist Bernard Bass (1985) picked up on Burns's work and expanded the distinction that Burns made between transactional and transformational leadership, defining each of them as higher-order (more encompassing, containing individual constructs) constructs comprised of specific lower-order (more specific or individual level) component constructs. Bass set out to define the component constructs of transactional and transformational leadership while also identifying the behavioral indicators associated with each leadership construct.

Downton referred to transactional leadership as “a process of exchange that is analogous to contractual relations in economic life [and] contingent on the good faith of the participants” (Downton 1973, 75). Downton also described transactional leadership as representing the fulfillment of contractual obligations, which over time creates trust and establishes a stable relationship where mutual benefits can be exchanged between leaders and followers. He referred to positive and negative transactions that are either reward based or coercion based, with the latter representing some form of punishment for noncompliance or the corrective transactional leadership described by Bass as “management-by-exception.”

Building his model based in transactional leadership, Bass first focused on previous literature in psychology pertaining to the use of “contingent rewards” as the basis for describing how leaders set up contractual exchanges with their followers. Specifically, transactional leadership is based on the assumption that “if you produce the desired behavior” then you will receive the “contracted award.” The quid pro quo (something for something) relationship represents a psychological exchange in the sense that the leader clarifies the expectations, and the follower delivers, receiving the contingent reward. On the negative side, if the follower does not deliver, and if the leader spells out the penalty for not delivering in advance, then contingent reward becomes contingent punishment.

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