Although current leadership theory emphasizes the distinction between transactional and transformational leadership, in fact, most leaders have a mixed profile of the full range of leadership styles. The best form of leadership is not only transformational or only transactional, but rather a combination of the two. However, in order to better understand each style's pros and cons, they have to be discussed in terms of similarities and differences. This cross-analysis will reveal further inquiry topics.
Most leaders and followers find themselves in transactional relations - leaders engage in an exchange process with followers: jobs for votes for example. The leader rewards or punishes the follower on the basis of performance. The transforming leader is more effective, by looking for potential determination in followers, seeking to satisfy higher needs, and totally engaging the follower. The resulting relationship is mutually stimulating. This type of leadership has been considered to be superior, leading to higher efficiency.
New systemic theories, however, show a slightly different perspective.
Transformational leadership implies an engagement between actors, leaders motivating followers to out-perform their transactional agreement. Rubin, Muntz and Bummer (2005) identify seven conceptualizations of transformational leadership: articulating a vision of the future, encouraging group-oriented work, setting high expectations, challenging followers' thinking, supporting followers individual needs and acting as a role-model. All these issues have been analyzed separately in other papers.
Transactional leadership, on the other hand, involves extrinsic motivations. Followers are either positively motivated by praise and reward or they are negatively motivated through threats or disciplinary actions. Performance is the only criteria taken into consideration in the case of transactional leadership. Everything is structured into activities, each characterized by a clear set of implicit or explicit rewards/punishments. Performance is monitored at all times. Management, in this case, can be either active, when followers' mistakes are...