How a Transactional Leadership Style Works

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Transactional leadership is a leadership style that utilizes rewards and punishments to motivate and direct followers. This approach to leadership, also sometimes referred to as managerial leadership, emphasizes the importance of structure, organization, supervision, performance, and outcomes. The goals and tasks for the group are highly structured, and members are rewarded when they achieve these goals and reprimanded if they miss deadlines.

This theory of leadership was first described in by sociologist Max Weber and further explored by Bernard M. Bass in the early 1980s. Take a closer look at how the transactional style works as well as some of the potential benefits and downsides of this style.

Basic Assumptions of Transactional Leadership

  • People perform their best when the chain of command is definite and clear.
  • Rewards and punishments motivate workers.
  • Obeying the instructions and commands of the leader is the primary goal of the followers.
  • Subordinates need to be carefully monitored to ensure that expectations are met.

This theory takes a behavioral approach to leadership by basing it on a system of rewards and punishments.

Transactional leadership is often used in business; when employees are successful, they are rewarded; when they fail, they are reprimanded or punished.

Athletic teams also rely heavily on transactional leadership. Players are expected to conform to the team’s rules and expectations and are rewarded or punished based on their performance. Winning a game might mean accolades and bonuses while losing might lead to rejection and verbal castigation. Players often become highly motivated to do well, even if it means suffering pain and injury.

Unlike transformational leaders who tend to be forward-looking, transactional leaders are interested in merely maintaining the status quo. Transformational leaders try to sell their ideas and vision to followers. Transactional leaders, on the other hand, tell group members what to do and when to do it.

How Transactional Leadership Works

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 a reward. When they perform poorly, they will be punished in some way. Rules, procedures, and standards are essential in transactional leadership.

Transactional leaders monitor followers carefully to enforce rules, reward success, and punish failure.

They do not, however, act as catalysts for growth and change within an organization. Instead, they are focused on maintaining this as they are and enforcing current rules and expectations.

These leaders do tend to be good at setting expectations and standards that maximize the efficiency and productivity of an organization. They tend to give constructive feedback regarding follower performance that allows group members to improve their output to obtain better feedback and reinforcement.

When Is Transactional Leadership the Most Effective?

Followers are not encouraged to be creative or to find new solutions to problems. Research has found that transactional leadership tends to be most effective in situations where problems are simple and clearly defined.

It can also work well in crisis situations where the focus needs to be on accomplishing certain tasks. By assigning clearly defined duties to particular individuals, leaders can ensure that those things get done.

In times of crisis, transactional leaders can help maintain the status quo and “keep the ship afloat,” so to speak.

Transactional leaders focus on the maintenance of the structure of the group. They are tasked with letting group members know exactly what is expected, articulating the rewards of performing tasks well, explaining the consequences of failure, and offering feedback designed to keep workers on task.

While transactional leadership can be useful in some situations, it is considered insufficient in many cases and may prevent both leaders and followers from achieving their full potential.

4 Sources
Verywell Mind uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Xenikou A. Transformational leadership, transactional contingent reward, and organizational identification: The mediating effect of perceived innovation and goal culture orientationsFront Psychol. 2017;8:1754. doi:10.3389/fpsyg.2017.01754

  2. Sultana U, Darun M, Yao L. Transactional or transformational leadership: which works best for now?International Journal of Industrial Management (IJIM). 2015;June.

  3. St. Thomas University. What is transactional leadership? Structure leads to results.

  4. Wongyanon S, Wijaya A, Mardiyono, Soeaidy M. Analysis of the influence of leadership styles of chief executives to organizational performance of local organization in Thailand (A case study of transformational, transactional and laissez-faire styles of leadership in Pattaya City, Laemchabang city municipality and chonburi provincial organization). International Journal of Applied Sociology. 2015.5(2):76-83. doi:10.5923/j.ijas.20150502.02

Additional Reading
  • Bass, B. M, Leadership and Performance, N.Y. Free Press; 1985.

  • Burns, J.M. Leadership. New York. Harper & Row; 1978.

By Kendra Cherry
Kendra Cherry, MS, is the author of the "Everything Psychology Book (2nd Edition)" and has written thousands of articles on diverse psychology topics. Kendra holds a Master of Science degree in education from Boise State University with a primary research interest in educational psychology and a Bachelor of Science in psychology from Idaho State University with additional coursework in substance use and case management.