TRANSACTIONAL THEORY

History:

                The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic management process of controlling, organizing, and short-term planning.

                As defined by Eric Berne (1977), transactional theory presumes that perception is based on unconscious assumptions about a person's environment. These assumptions can be viewed as probabilities of transactions that may occur in that environment. Therefore, according to the transactional theory, what is perceived is highly dependent on the knowledge gathered during interactions with the environment, and the perceived reality and its properties are built up via a series of interactions or transactions.

Diagram:

Discussions:

Transactional leadership involves motivating and directing followers primarily through appealing to their own self-interest. The power of transactional leaders comes from their formal authority and responsibility in the organization. The main goal of the follower is to obey the instructions of the leader. The style can also be mentioned as a ‘telling style’.

The leader or manager is a caretaker who sets goal for employees, focuses on day-to-day operation and uses management by expectation. It is competitive, task focused approach that takes place in a hierarchy. It tends to maintain status quo through policies, procedures, routinized performance, self-interests and interpersonal dependence (bass 1990; Huber 2006; Marquis & Huston,2006; Sullivan & decker 2005; yoder-wise &Kowalski 2006)

In transactional leadership, rewards and punishments are contingent upon the performance of the followers. The leader views the relationship between managers and subordinates as an exchange - you give me something for something in return. When subordinates perform well, they receive some type of reward. When they perform poorly, they will be punished in some way. The exchange between leader and follower takes place to achieve routine performance goals.

These exchanges involve four dimensions:

·         Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations, provide necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for successful performance. They set SMART (specific, measurable, attainable, realistic, and timely) goals for their subordinates.

·         Active Management by Exception: Transactional leaders actively monitor the work of their subordinates, watch for deviations from rules and standards and taking corrective action to prevent mistakes.

·         Passive Management by Exception: Transactional leaders intervene only when standards are not met or when the performance is not as per the expectations. They may even use punishment as a response to unacceptable performance.

·         Laissez-faire: The leader provides an environment where the subordinates get many opportunities to make decisions.  The leader himself abdicates responsibilities and avoids making decisions and therefore the group often lacks direction.

Explanation:

                Transactional leadership is an exchange posture that identifies needs of the followers and provides rewards to meet those needs in exchange for expected performance. It is concerned with a day to day operations and view the leader-follower relationship as a process of exchange. The transactional leaders overemphasize detailed and short-term goals, and standard rules and procedures. They do not make an effort to enhance followers’ creativity and generation of new ideas. This kind of a leadership style may work well where the organizational problems are simple and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit with existing plans and goals. The transactional leaders are found to be quite effective in guiding efficiency decisions which are aimed at cutting costs and improving productivity. The transactional leaders tend to be highly directive and action oriented and their relationship with the followers tends to be transitory and not based on emotional bonds. The theory assumes that subordinates can be motivated by simple rewards. The only ‘transaction’ between the leader and the followers is the money which the followers receive for their compliance and effort. The transactional style of leadership is viewed as insufficient, but not bad, in developing the maximum leadership potential. It forms as the basis for more mature interactions but care should be taken by leaders not to practice it exclusively, otherwise it will lead to the creation of an environment permeated by position, power, perks, and politics.

Application:

The theory of transactional leadership, can be apply it in nursing profession by setting rules and regulations in the institution made by the administration or the highest authority (president, chairman, CEO of the company or institution). You are the one who motivate your subordinates appraise or recognize them if needed to boost up their motivation in doing their job well. Your subordinates (staff nurses and other employees) should know how to follow the rules and regulations you implemented, once they fail to follow a certain rule,(e.g. uniform policy, proper waste disposal or even negligence) they have to have penalize in their actions.

Latest Update:

Transformational and transactional leadership enabling (disabling) knowledge acquisition of self-managed teams: the consequences for performance

John D. Politis, (Higher Colleges of Technology, Dubai, United Arab Emirates)

 Abstact: Knowledge has been identified as one of the most important resources that contribute to the competitive advantage of an organisation. The problems associated with poor leadership and interpersonal skills manifest themselves in the loss of organisational knowledge and the expensive duplication of knowledge creation and acquisition, rising costs and reduced performance. Although behavioural and interpersonal skills are most often cited as essential for successful knowledge acquisition, little is known about the role played by “transformational and transactional” leadership in the process of knowledge acquisition and the consequences for organisational performance. A survey of 239 self-managing employees who are, or have been, engaged in knowledge acquisition activities was carried out to investigate the relationship between the components of leadership dimensions associated with Bass’s model, a number of knowledge acquisition attributes and performance. Although results showed that some of the “transformational” leadership dimensions enable followers’ knowledge acquisition, “transformational” leadership is not a pre-existing condition for achieving desirable performance of self-managing teams.