Transactional and Transformational Leadership

Transactional and Transformational Leadership

Leadership has been an important topic in the social sciences for many years. Recently, renewed interest in the concept of leadership has been aroused. “The resurgence of interest in studying the topic of leadership appears to be accompanied by an acceptance of the distinction between transactional and transformational leadership.” (Den Hartog, Van Muijen and Koopman, 1997, P.41) Transactional and transformational leadership were regarded as important leadership theory started from Political sociologists James MacGregor Burns’s classics . Burns bases his theory of transactional and transformational leadership on Kohlberg's stages of moral development and Weber's (1947) theory of leadership and authority.

Then Bass and others continued researching and improving this theory. Then we will analyze two models of transactional and transformational leadership, Henry Ford and A.G. Lafley, from different aspects.

Transactional leader ─ Henry Ford
“Henry Ford (July 30, 1863 – April 7, 1947) was the founder of the Ford Motor Company and father of modern assembly lines used in mass production. His introduction of the Model T automobile revolutionized transportation and American industry.

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” (Retrieved June 10, 2008, from

http://en.wikipedia.org/wiki/Henry_Ford) In his career of management, he used methods of transactional leader in many decision and management. First Transactional leader is “leaders who guide or motivate their followers in the direction of established goals by clarifying role and task requirements” (Stephen P. Robbins & Mary Coulter, 2005, P.433) According to the theory of Burns, transactional leadership is founded on a process of exchange. The relationship between leader and their followers from the exchange of some reward, such as pay, promotion, performance ratings and so on.

Bass proposed the transactional leaders consists of 2 aspects are contingent reward and management-by-exception. Then we will analyze Henry Ford’s management according to different factors of transactional leadership combining Bass’s theory.

◆ Role and Task Requirement
One of the characteristic of transactional leadership is that leader guide their followers by clarifying clear role and concrete requirement. Leader motivate employs just do as what they required to achieve the established goals. Leader doesn’t need the innovation and creativity from employs. Employees just meet the requirements of leaders, they can receive rewards. In my opinion, modern assembly lines used in mass production is the best example of Henry’s transactional leadership. During the process of creating a car, Henry just tell employees do as what he said like when to install the engine, how to install the wheels and so on. Employees need not to think of others’ work, they just do their own work to achieve the standard by leaders and they will get a considerable sum of money. Henry served $5-per-day as a motivation.

◆ Authority and Hierarchy
Transactional leadership is a process of management on the basis of authority and hierarchy. In most cases, employees obey their boss only because the power and authority of boss, not they believe or respect their boss. Leaders create structure and processes for planning, organizing and controlling. Leaders overemphasize power and control .Sometimes transactional leadership lead to dictator of a company. Henry Ford was adamantly against labor unions. “He thought they were too heavily influenced by some leaders who, despite their ostensible good motives, would end up doing more harm than good for workers.” (Retrieved June 10, 2008, from http://en.wikipedia.org/wiki/Henry_Ford) Another example of Henry Ford is that he gave his place to his son Edsel Ford in 1919, but he still exercised much real power. He was stubborn and rejected to put new system in Model T and rejected to lead into system of loan. These wrong decisions made a big loss of Ford Motor Company. From these two examples we can see that Henry’s management relationship depends on the power and hierarchy. Maybe, to some extent, Henry Ford is the dictator of Ford Motor Company.

◆ Motivation and Reward
The typical characteristic of transactional leadership is the process of exchanging. Employees use their labor to change for rewards, and leaders use motivation to change for performance and obedience. One way or another, the leader and follower agree, explicitly or implicitly, that desired follower behaviors will be rewarded, while undesirable behaviors will draw out punishment. “Henry Ford was a pioneer of "welfare capitalism" designed to improve the lot of his workers and especially to reduce the heavy turnover that had many departments hiring 300 men per year to fill 100 slots.” (Retrieved June 10, 2008, from http://en.wikipedia.org/wiki/Henry_Ford) Henry Ford started the 40-hours week and paid their employees $5-per-day. Ford provided so good treatment to change for efficient performance of employees.

◆ Other Leadership
Henry Ford management also embodied other leadership. Let’s discuss some of them. Transformational leadership Transformation leaders think more about the relationship with followers. They always want to give a good influence on employees and to provide good salary to employees. So Henry Ford started the 40-hours week and paid their employees $5-per-day to reduce the burden of them work. Safety measures were improved, and the work day was reduced to eight hours, compared with the ten-or twelve-hour day common at the time, sick leaves as well as improved medical care for those injured on the job were instituted. These measures embody the transformational leadership. Charismatic leadership “Charismatic leader need to have a vision, are able to articulate that vision, are willing to take risks to achieve that vision.” (Stephen P. Robbins & Mary Coulter, 2005, P.434) Henry Ford is not only a great inventor, but also a business of far vision. He is good at catching the need of market and is willing to take risks. So he created the Model T automobile and first used assembly lines in production made him get great achievement.

[pic]Transformational leader ─A.G. Lafley
“Alan George "A.G." Lafley (born June 13, 1947) is an American businessman who serves as the CEO, President, and the Chairman of the Board of Procter & Gamble.” (Retrieved June 10, 2008, from http://en.wikipedia.org/wiki/A._G._Lafley) A.G. Lafley is one of the best companies for leaders. He takes succession management and leadership development seriously. “Transformational leaders are leaders who provide individualized consideration and intellectual stimulation, and who possess charisma. They pay more attention to the concerns and developmental needs of individual followers.” (Stephen P. Robbins & Mary Coulter, 2005, P.433) Transformational leadership is concerned with engaging the hearts and minds of others. It required trust, concern and facilitation between leaders and followers rather than direct control. A.G. Lafley is typically transformational leader. Next let’s analyze him according to the theory of transformational leadership.

◆ Idealized Influence
Transformational leaders make people work for him because they believe him, not he is a boss. So transformational leadership require the power of the leader comes from creating understanding and trust not the hierarchy and position. So leaders must have the characteristics and behavior which made employees is sincerely convinced. A.G. Lafley is consistently recognized as one of the most admired companies in the world and a great developer of business leaders. Others always credit Lafley’s personality for his success. “He is soft-spoken, easygoing, and down-to-earth. He was calm and quiet, direct, decisive, and tough.” (Retrieved June 10, 2008, from www.answers.com/topic/a-g-lafley-1?cat=biz-fin) Lafley made decisions by asking lots of questions and listening attentively, and he stuck to his decisions once he had made them. He was approachable, giving everyone a fair hearing, and not averse to receiving bad news. Lafley sets a good example among employees. He made followers believe and respect him, and made employees are willing to work for him.

◆ Intellectual Stimulation and Motivation
“Transformational leaders pay more attention to change followers’ awareness of issues by helping them look at old problems in new ways and inspire followers to put out extra effort to achieve group goals.” (Stephen P. Robbins & Mary Coulter, 2005, P.433) Transformational leadership requires leaders are good at empowering employees to control themselves, developing employees’ skills and knowledge and stimulating work motivation. “We develop and grow leaders. P&G people are given the opportunity - the assignments, experiences, and coaching - to become the strongest leaders they can be.” Lafley said. He always provides employees challenging task to simulate their intellect and potential. And also, Lafley requires employees take the responsibility of development organizations and take it as one of the performance appraisal. Lafley encourages employees and provides them many opportunities to enrich and improve themselves. Lafley’s transformational leadership is very important for the sustainable development of P&G.

◆ Innovation
As a transformational leader, you should have creative thinking , be good at changing the current situation to solve problems and challenging the culture to change. After A.G. Lafley take over P&G, he was trying to change the culture of it. He renew fired the enthusiasm of creativity in P&G. At the same time he was challenging to change the culture of P&G, he made P&G become a company which is outgoing and vigorous youthful from a company which is conventional and conservative.

◆ Other Leadership
A.G. Lafley’s management also embodied other leadership. Let’s discuss together. Charismatic leadership Charismatic leader is an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. (Stephen P. Robbins & Mary Coulter, 2005, P.433) A.G. Lafley is a leader who exudes charisma, enthusiasm and drive. He is sensitive to both environmental constraints and follower needs. The harmonious relationship with Lafley and his followers makes employees believe and respect him and are willing to work for him with high efficiency. Team Leadership A team leader’s job is to focus on two priorities: managing the team’s external boundary and facilitating the team process. First, team leaders are liaisons with external constituencies. (Stephen P. Robbins & Mary Coulter, 2005, P.433) Lafley is good at contacting with others. He always talks with employees, consumers and suppliers of P&G even their competitors like Gillette, and Colgate-Palmolive.

To sum up the points we can see that leadership is a necessary but complex process of management. No matter transactional leadership or transformational leadership, they all have their own advantages and disadvantages. So as managers, we should make a rational use of different styles of leadership according to different situation.

Reference list

← Den Hartog, Van Muijen and Koopman, 1997, Linking transformational leadership and organizational culture, The Journal of Leadership Studies, Vol.3, No.4, 68-83

← Stephen P. Robbins & Mary Coulter, 2005, Management Eight Edition, Tsinghua University Press, Beijin

← Henry Ford (July 30, 1863 – April 7, 1947) was the founder of the Ford Motor Company and father of modern assembly lines used in mass production. He thought they were too heavily influenced by some leaders who, despite their ostensible good motives, would end up doing more harm than good for workers. Retrieved June 10, 2008, from http://en.wikipedia.org/wiki/Henry_Ford

← Alan George "A.G." Lafley (born June 13, 1947) is an American businessman who serves as the CEO, President, and the Chairman of the Board of Procter &
Gamble. Retrieved June 10, 2008, from http://en.wikipedia.org/wiki/A._G._Lafley

← He is soft-spoken, easygoing, and down-to-earth. He was calm and quiet, direct, decisive, and tough. Retrieved June 10, 2008, from www.answers.com/topic/a-g-lafley-1?cat=biz-fin