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Transactional Leadership Theories

The hallmark of the transactional leadership theories is the idea of equitable exchange. Every day, individuals engage in an exchange process whereby one valued benefit, resource, or commodity is exchanged for another. A mechanic fixes a car for monetary compensation, a student completes a thesis to receive a degree, or a supervisor praises an employee for securing a lucrative contract. The transactional approach characterizes effective leadership as a reciprocal and mutually beneficial process of give and take between leaders and followers. Leaders manage valued resources (e.g., information, support, consideration) and provide rewards or punishments to assist followers to achieve goals. In return, followers reciprocate with loyalty and compliance to the leader's requests while bestowing status on the leader.

Historical Background

Early studies of leadership did not consider the role of exchange in leaderfollower relationships. Instead, attempts were made to unearth a successful profile of a leader in terms of personality traits. In 1948, Ralph Stogdill conducted an influential review of traits research and concluded that traits alone could not fully explain the leadership phenomenon. Thereafter, the traits approach lost momentum and other approaches to leadership soon emerged. By the 1950s, social scientists began to explore new territories to explain the important role of leadership in groups.

Using what is called the behavioral approach, researchers at Ohio State University and the University of Michigan studied effective leader behaviors. Their studies helped initiate the development of the contingency approach, which jointly considers leadership behaviors and situational factors to explain effective leadership. Around the same period, the transactional approach was developed to explain leadership in terms of the transactions between leaders and followers as a means of bidirectional influence. The transactional approach is evident in a variety of leadership theories developed before the 1980s. It also later became a theory of leadership in its own right.

Early Transactional Approaches: Idiosyncrasy Credit

One of the first transactional theories of leadership, the concept of idiosyncrasy credit, was put forth by the social psychologist Edwin Hollander in 1958. Drawing on social exchange theory, Hollander held that group members are bonded in a relationship in which they give and receive credit from one another. Each group member accrues credits to the extent that his or her behavior conforms to group norms and positively contributes to the group. As a result of earned credits, group members gain trust, status, and influence potential in the group. Leaders are assumed to possess a relatively large account of accrued credits. In return, their credits give them leeway to diverge from group norms. This leeway is referred to as idiosyncrasy credit. Leaders are expected to spend some of their idiosyncrasy credit to bring about change and innovation in the group that may be contrary to the status quo. The leadership position, however, still requires successful fulfillment of role obligations and conformity to group expectations. As such, leaders should ideally use their idiosyncrasy credit wisely, that is, to bring about change while still demonstrating successful performance. Otherwise, they may bankrupt their accrued credit and jeopardize their leadership position.

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