Behind every great company is a great leader. We look to our leaders to inspire, motivate, and guide us to achieve greatness. Many of us can still think back on one or two great leaders in our professional lives that drove us to success. Yet, many of us can also remember a handful of mediocre leaders, leaders who cared more about managing tasks and sticking with the status quo than inspiring change.
Effective leadership can be the difference between a motivated and engaged team and a demotivated one. At a time when the business world is changing more rapidly than ever, companies are now putting a lot of stock in those in leadership roles to guide teams through massive company upheavals. Simultaneously, with a workforce that proves less and less engaged at work, businesses are also searching for ways to improve employee motivation and increase engagement in the office.
Many of us have heard the phrase transformational leadership thrown around in HR circles as a remedy to low engagement and motivation, but what does it mean exactly, and how does it effect change in ways that other leadership styles don’t?
Transactional Leadership vs. Transformational Leadership: What’s the Difference?
It wouldn’t be a stretch to say that transactional leadership constitutes the norm in business management. Transactional leadership seeks to maintain order within a system or structure that is already in place within a company. Transactional leaders expect their team to follow their lead in a disciplined fashion and to adhere to company norms. Keeping with the status quo is key, and a system of rewards and punishments are employed to keep teams focused.
Transformational leadership, on the other hand, employs a more holistic approach. Transformational leaders are driven by vision and focus on identifying and building the core strengths of their team members to propel the organization forward. Transformational leaders don’t demand that their team follow their lead, but inspire them to do so by fostering a dedication to a collective sense of identity within the organization. As Alexia Vernon puts it in Forbes, “Transformational leaders are people who, irrespective of audience, possess the ability to create big shifts in their audiences’ thinking, which leads to big shifts in their behavior, which enables them to achieve extraordinary results.”
Transformational Leadership in Practice
Innential Cofounder Thomas Klein has spent much of his career in the field of Human Resources researching the difference between these two leadership styles. “In a transactional leadership style,” he says, “you’re only saying: ‘you have to do this, you have to do that, these are your goals.’” Incentive structures are then put in place to reward employees when they reach their targets. The manager defines the employees’ yearly goals in a ‘top-down’ manner, meaning their individual bonuses are contingent on everyone reaching their targets.
Conversely, being a transformational leader, starts from within, explains Thomas. “As a leader you always have to be an example,” he says. “So, if you want to change your team, you have to do this first yourself, and then the team will follow you. You have to be charismatic and you have to lead by example.”
Transformational leadership, he explains, is comparable to agile leadership. People in the team are encouraged to learn from another based on their skill sets, to fail fast, learn from any mistakes made, and move on. Whereas transactional leaders want to be in constant control of everything, transformational leaders embrace unknowns, avoid micromanaging, and guide their team through times of uncertainty. “The goal is to trigger your team’s motivation through inspiration and intellectual stimulation,” asserts Thomas.
Transformational leadership works because it is focused on empowering the individuals in the team. According to Ronald E. Riggio in Psychology Today, research shows that groups lead through transformational leadership outperform those led by other types of leaders. This is because transformational leaders embrace the strengths of their workers positively, and trust that they are capable of doing their jobs well and surpassing expectations. This results in an empowered workforce, and a team dedicated to personal development. Thomas agrees:
“As an employee, you need to feel confident in what you’re doing. You need to have the feeling that what you are doing also has an impact on the company. Leaders need to evaluate the current situation and then to act as they need to in this moment. That’s the difference between managing and leading.”
If transformational leadership is so powerful, why are companies so afraid of embracing it? Thomas explains that there are many reasons, one being that change, true change, is never easy: “It’s a hugely emotional topic. These are uncertain times, and both employees and leaders don’t know what to expect in the future. At certain companies, people have been doing the same thing for 30 years, and suddenly they are expected to change. That’s asking a lot.” What’s more, many companies are so large that they don’t believe that their hierarchical structure allows for anything that might threaten norms.
That’s not to say that transformational leadership isn’t catching on. Today, more and more companies are realizing that things can’t go on the way they have and are adopting new methods of leadership to spearhead both employee and workforce success. This also depends on the motivation of the leaders in companies and how they decide to approach their role. After all, although every leader wants to see results, most want to foster a pleasant work environment and create meaningful, lasting change within their teams. That can start with transformational leadership.
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