Customer demands are intense, the need for continuous innovation is vital, and our national culture is changing. In the busy and ever changing world of business, leading businesses is more challenging than ever. James McGregor Burns, in his renowned book, Leadership (1978), proposed two leadership styles: transactional and transformational. Transactional leadership is an exchange-based relationship in which followers’ pursuit of objectives is based on the potential exchange of rewards (or punishments) for accomplishments (or failures). In contrast, transformational leaders seek to motivate followers through higher-level needs, encourage followers to view group interests as a priority, and emphasize moral values. As the theory developed, transformational leadership was proposed to include four components:
(1) Formulating and articulating mission, vision, and challenging goals.
(2) Instilling pride in being associated with the team.
(3) Treating followers as individuals.
(4) Seeking different perspectives when addressing problems.
Transformational leaders motivate followers to rise above their self-interests and accomplish more as individuals and as a team.
Multiple studies have confirmed a positive relationship between the presence of transformational leadership and performance. Yet, why might transformational leadership enhance performance? Maybe it’s the intrinsic motivation subordinates experience by following transformational leaders, resulting in more commitment and effort. Possibly, the unification around organization mission presented by transformational leaders, providing direction and a sense of purpose, boosts performance. And finally, the shared values demonstrated by transformational leaders, which unites the team, might result in higher performance. So which are you? A Manager (transactional)? Or a Leader? (Transformational).