Transactional Leadership

The Transactional Leadership model suggests that people are motivated by rewards and punishment. That's not necessarily so!

The transactional leadership model suggests that rewards and punishment motivate people. It's a system of quid pro quo:

  • If a person does something well, then they can expect to be rewarded. 
  • If they do something poorly, they can expect to be punished.

Some form of transactional leadership can be found in all organizations (people get paid .. don't they?!) 

And make no mistake. High-performance people will want to be rewarded/paid and paid well. But it isn't their prime motivation.

The major flaw with the Transactional Leadership model (if it is the primary model being used to motivate people toward better performance), is that it is at odds with a vast volume of research. Research suggests that people today are less motivated by $$ and more inspired by meaningful work, allows them to use their talents, and enables a sense of accomplishment.

Get those elements working together well, and you are more likely to have high performance. Even more so, you'll get better performance for the long term, than you ever will by just waving a fist full of dollars in front of people.

I have yet to come across a high-performance organization that uses the Transactional Leadership model, as their primary focus, for improving performance.

You are more likely to see it being used in organizations that are immersed in the traditional thinking of, 'people only come to work to get paid.' 

These types of organizations don't deliver the outstanding results that their high-performance competitors do! To understand how to avoid this, access "How To Motivate Employees" (This product is currently undergoing a rewrite and will be available soon).

So, if you are stuck in an organization that thinks they'll get their best performance from people by use of carrots and sticks, here are five things to help you avoid the worst of the traps of transactional leadership.

5 Ways to Successfully Implement Transactional Leadership

  • 1
    Understand which rewards motivate team members.

Because the success of transactional leadership relies on the team member valuing the rewards that are in place, you need to understand what motivates each individual. What works for one person, may not work for another.

Link the rewards, most valued by a particular team member, with the successful completion of the task or achievement of the goal. You can read more about effective ways to reward employees in this article.

Caution:  Read the insightful book "Punished by Rewards" by Alfie Kohn. He provides many examples of where you reward people for completion of tasks/goals, and the net result is often poorer performance. 

  • 2
    Team members need to understand the reward system and how they can achieve the rewards.

Because this model pre-supposes people will work harder for rewards, people must be crystal clear about what they get for their efforts and precisely what they have to do to get those rewards. Any confusion and you won't get the performance you want.

  • 3
    Ensure that both reward and punishment systems are in place and are consistently used.

If team members feel that their leaders show bias, (either toward or against specific individuals or groups), then any motivation that this system is meant to inspire, will suffer.

  • 4
    Provide timely feedback throughout the work process.

People will become quite disillusioned, and mutinous, if they feel they've put in an effort to get their expected reward, only to find out too late that they have missed the mark, and no bonus is on its way to them.

Giving feedback about the quality/quantity of work someone is doing is crucial. Regardless of whether you are using a Transactional Leadership style or not. However, when using the framework of transactional leadership, you are continually linking and shaping the employees' expectations to the reward they will receive for their efforts.

  • 5
    Ensure that rewards and recognition are provided shortly after performance.

Timing is everything and because this is a carrot and stick approach - if the rewards come too late after the task/job is completed, next time around, you may struggle to get people to link their actions to the reward. Reward too early, and you may be rewarding the wrong behaviors.

A Couple of Lookouts When Using a Transactional Leadership Style

Do not assume that transactional leadership will yield the same results across different cultures.

Most North American cultures focus on the individual. So reward systems that allow for an individual reward might be most advantageous there. Many Asian cultures, however, give more focus to the group. So in those cultures, group rewards or rewards that are paid due to overall group performance may work better.

Also take into account the type of work being performed, and whether it is group performance reliant, or individual performance reliant.

If you don't want to be up to your ears in morale issues ... make certain any group rewards are made in such a way that they are fair. E.g. Non/low performers aren't rewarded at the same level as high performers. Or systems are in place to quickly get non/low performers up to speed, so they don't impact too negatively on the rest of the group's rewards.

Short Term Focus

Transactional leadership can steer people toward taking a short-term focus. This can create problems for the business longer term. For example, some people will take short-cuts to achieve the reward on offer for this period - knowing full well that further down the track, there could be consequences that could be severe for the organization.

I once worked with a team, who had used this style of leadership to get productivity improvements. Unfortunately, the way they set up the rewards steered team members towards focusing only on output and not quality. The customer complaints, eight months down the track, went through the roof as some of the glue components of the packaging began to fail.

The team members had reduced the glue expulsion rate to speed up the machine. Without thinking through/caring about the long-term impact of the practice on the final product.

Do make sure that there are no unintended consequences, and all elements of the rewards program work together to achieve the desired outcomes of the business.

Bribery Doesn't Get You High Performance

If you want fully engaged, enthused and high performing people you wouldn't use Transactional Leadership as your prime strategy.

Certainly, bribing people with rewards will get them taking action. But will you get them performing at their peak? I very much doubt that. Their heart and soul won't be in it. They'll be doing enough to get the reward, and then get the heck out of there and on to something they'd much rather be doing.

Ultimately the vast majority of people are inspired to be at their best for far different reasons than rewards. In "How To Motivate Employees" (this product is currently undergoing a rewrite and will be available soon) I share with you the areas in which you should focus to inspire people to be at their best ... without dangling carrots like pay increases, bonuses, and other short-term-performance inducing rewards.

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