International Journal of Science and Research (IJSR)

ISSN (Online): 2319-7064

Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391

The Transactional and Transformational

Approaches to Leadership in Corporate Sector
Syed Sultan Mohiuddin

Abstract: Ethical principles serve as the basis for various contemporary frameworks for work, business, and organizations, which
extend individual and corporate concerns far beyond conventional business aims of profit and shareholder enhancement (Wren,
1994). The value of Ethical Leadership Skills is grounded on the principle that genuine leaders are concerned with "doing the right
thing" and not just "doing things right." The benefits of ethical leadership traits are also seen to go beyond the decision making
process itself. Previous studies have found that in organizations where leaders have demonstrated ethical leadership skills, these traits
are among the most appreciated by employees of the organization (Richardson, 1992).

Keywords: ethics, leadership

1. Introduction character, traits, culture as well as behavior and not just on

any concept of leadership (Wren, 1994). Years of research
Ethical principles serve as the basis for various in leadership and its relative theories have demonstrated that
contemporary frameworks for work, business, and not all organizational leaders have the same leadership styles
organizations, which extend individual and corporate in achieving success (Bass, 1990).
concerns far beyond conventional business aims of profit
and shareholder enhancement (Wren, 1994). The value of In today‟s unstable world, ethics and values exist at a
Ethical Leadership Skills is grounded on the principle that number of levels for executives and managers—leaders who
genuine leaders are concerned with "doing the right thing" commit their time and efforts to directing the process of
and not just "doing things right." The benefits of ethical value development. This more general perspective of ethical
leadership traits are also seen to go beyond the decision leadership empowers leaders to integrate and be ambiguous
making process itself. Previous studies have found that in about their own values and ethics.Leaders have a strong
organizations where leaders have demonstrated ethical influence on how their followers achieve organizational
leadership skills, these traits are among the most appreciated goals (Peters, 2005). They have a better understanding of
by employees of the organization (Richardson, 1992). leadership styles to direct development and progress in
attaining the organization‟s goals. Leaders establish the
Ethical leadership starts with the manner leaders perceive functional atmosphere of an organization through their
and conceptualize the situations around them. Ethical leadership style, thus leadership has a vital role in
leadership, organizational ethics, and corporate social organizational effectiveness (Howard, 2006). On the other
responsibility, which are fundamentally perceived as hand, absence of empowerment leads to discontented
separate studies, are interrelated concepts. The way that followers who may not function to accomplish
ethical leaders interact with and comprehend the organizational goals and objectives. Leadership is also
phenomenon around them necessitates their capacities for crucial in keeping a healthy work environment (Shirey,
examination, decision-making and action. These capacities 2006).
are typically aset of skills, knowledge and behaviors that can
be developed (Johnson, 2005). In totality, the leader's Every business necessitates a touch of leadership to be a
function is to direct and empower the development of the successful and thriving enterprise. The outcomes of any
potentials of the followers as one community in order to organization particularly in strategic decisions and
accomplish the organizational aims in ways that free the performance are partially predetermined by the features of
individuals rather than restraint their talents and the leaders (Hambrick& Mason, 1984). Thus, a sound
collaborative behaviors. understanding of leadership and its relative theories is very
beneficial for aspiring leaders and to any organization. This
Ethical leadership must be „effective, efficient, and excellent essay starts on the premise that for an organization to be
if it is not to waste human potential‟. Furthermore, it is not successful, it must adopt a robust leadership style.
sufficient to be ethical in one's individual actions to be an According to Cox (2001), there are two basic categories of
ethical leader of a community. To be „effective, efficient, leadership, namely transformational and transactional
and excellent,‟ then, the leader must adopt and demonstrate leadership styles, which are recognized as strong approaches
the style appropriate to the situation (Johnson, 2005).Ethical for directing an organization. In this essay, I aim to examine
leadership often comes from top leaders who hold a formal how leadership styles influence an organization‟s
position of authority and establishes casual interpersonal productivity and success and moreover to determine which
relationships and exhibits personal characteristics (Mellahi& robust theoretical model of leadership is the most preferred
Wood, 2003). when it comes to the ethical leadership of people.

Various research studies have examined the theories of

ethical leadership over the years. The fundamental
perception of ethical leadership is that success or failure in
producing outcomes generally depends on the leader‟s
Volume 6 Issue 1, January 2017
www.ijsr.net
Licensed Under Creative Commons Attribution CC BY
Paper ID: ART20164318 DOI: 10.21275/ART20164318 2382
 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
2. Transactional Leadership versus The transactional leadership style is one approach, which is
Transformational Leadership widely and commonly used in most organizations. The
relationship is based on transactions arranged between an
There are evidently various types of leadership that are employee and an organization or between followers and
linkedto the authenticity of influence and well-versed leaders.
approval by followers. Two diverse but interconnected ideal
leadership styles are transformational and transactional A transactional leadership is similar to a military type of
leadership.Majority of the studies made on leadership are command applying the 'Carrot and Stick' philosophy. It is a
directed on the leader‟s characteristics and influence on the proven approach of managing an organization wherein,
organization (Bass, 1985). Bass‟ (1990) theory states that in through reward and punishment, things get accomplished.
transformational leadership, the leader empowers followers Similar with Maslov's hierarchy of needs, transactional
by encouragingthem, laying healthy challenges and leadership style is suited for individuals whose needs in the
promoting personal development. Through a sense of bottom half of the pyramid such as food, shelter, security are
purpose and a common goal, the transformational leadership not satisfied. Transactional leadership is grounded on the
encourages the attainment of high standards. The second perception that rewards andpunishment are factors that
leadership style is transactional whereinthe leader empowers motivate individuals. This approach also lies in the view
his followers through the gain of certain benefits provided that a clear chain of command is the most effective way of
that the followers are capable of accomplishing the tasks managing an organization.Once followers agree to perform a
assigned to them. The transactional style involves task, they are entirely in the command of the leader, thus
negotiation between the leader and follower (Bass, 1990).To they yield complete authority to the leader. Once complete
have a full understanding of which approach is most authority has been given to the leader, followers must
effective in ethically leading people, it is important to perform as they are instructed and in return will be
differentiate between transformational and transactional benefitted.
leadership.
Transactional leadership works effectively if the followers
are motivated by rewards. This approach is a proven
3. Transactional Leadership compliance strategy which usually works best if the leader is
capable of making important decisions and has a strong
Transactional leadership is grounded on reciprocity (Bass, personality.
1990). The connection between leaders and their followers
happens from the exchange of certain benefits such as A transactional leader directs positive results to individuals
performance ratings, pay increase, recognition, and for performing their tasks but also puts attention on
appraisal. This approach includes leaders clarifying goals employee mistakes and complaints. An assertive and
and communicating to have a system for tasks and activities commanding leader will find the transactional leadership
with the collaboration of their followers to make certain that favorable in managing an organization. However, while the
wider organizational goals are attained. The relationship leader can strongly influence the followers, the growth of the
relies on hierarchy and the ability to work through this followers as leaders can also be restrained. When
manner of exchange. individuals become accustomed to performing just what they
are toldand only as much they are told, the capability to
A transactional leader replaces the wants of a leader for the think out of the box is usually suppressed. Transactional
wants of a follower. The wants of followers are considered leadership may produce an obedient workforce but hinders
their needs and those certain needs are fulfilled through original thinking, creativity, or initiative. The discovery of
recognition or rewards for the tasks that are performed for new leaders will be difficult from the lower levels of
the organization (Shriberg, Shriberg& Lloyd, 2002). With authority. Hence, this leadership approach may lead to a
the support of the transactional leader, individuals achieve stressful environment. Productivity may be generated but
the goals of the organization through their performance and innovations and breakthrough will be difficult to achieve.
in turn receive rewards for it. Bass (1990) further supports
this perception by stating that the transactional leader
presents a benefit for the follower and in exchange, the 4. Transformational Leadership
follower delivers a quality performance and achievement of
the organization‟s goals and objectives.The transactional Transformational leadership is perceived as a more
leader sets the path and direction needed to attain these goals humanitarian leadership approach, as compared to the
and objectives. Transactional leaders emphasize process militaristic transactional style. It stands in empowering
development in setting goals, directing, and striving to individuals to do great work through the example and
manipulate and control the situation (McGuire &Kennerly, influence of a leader's personality. Visser, deConing and
2006). This approach ensures that the appropriate resources Smit (2005) described transformational leadership as the
and training is provided to the individuals to perform the ability to empower followers to achieve results greater than
functions needed for the organizational success and in what was originally planned. The description further
return, individuals are benefitted for their efforts and emphasizes that motivation of human resources leads to
accomplishments. Rewards are employed so the followers greater productivity and higher performance.
are encouraged to focus on the functions and goals of the
organization. Transformational leaders have a closer relationship with the
followers and adapt their characteristics to achieve
organizational growth and success. A transformational
Volume 6 Issue 1, January 2017
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Licensed Under Creative Commons Attribution CC BY
Paper ID: ART20164318 DOI: 10.21275/ART20164318 2383
 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
leader's personality presents charisma, inspiring motivation and CEO of IBM, is another transformational leader. He
and intellectual encouragement (Harland, Harrison, Jones, & transformed IBM around from having an $8.1 billion loss in
Reiter-Palmon, 2005). In a successful organization, all 1993 after recognizing part of the company‟s problem as
individuals function for one common goal and objectives. A „success syndrome‟. That is, asbeing one of the greatest
transformational leader delivers confidence to the followers. commercial organizations from the 1960s-1980s, IBM had
When individuals trust their self-worth, they adopt self- become inward-looking and inflexible (Sheppard, 2002).
confidence to deal with any function delegated to them Gerstner totally changed the culture of the organization from
(Hesselbein, Goldsmith, and Beckhard, 1996). A follower developing desired behavior and getting rid IBM‟s infamous
gains the needed resources from a transformational leader to dress code (Sheppard, 2002).
have self-confidence. Transformational leaders are capable
to persuade followers to function beyond their self- Lee Iacocca is another prominent transformational leader
confidence so they devote to the organization's goals and who is recognized for saving the Chrysler Corporation. He
objectives (McGuire &Kennerly, 2006). took over Chrysler when it was on the verge of bankruptcy
and set about changing the perceptions of his followers. His
The basic assumptions of transformational leadership style pursuit transformed thecorporation‟s culture. Since a
are grounded on the perceptions that individuals willingly transformational leader empowers others to become
adheres to a leader who inspires them and that the vision and transformational leaders, soon Chrysler was filled with
passion of a leader can transform his followers to achieve effective leaders (Kelly, 2003).
great works. This approach is also based on the view that
power and motivation are the vital factors that get things In the educational environment, one high profile
done. transformational leader is Dr. Ruth Simmons, the first
African-American to be selected as President of an „Ivy
Transformational leaders also perceive situations from a new League‟ university (Brown) in the USA. As President of
perspective within a strategic environment. In today‟s Smith College, Simmons had earlier begun an engineering
setting when almost everything is being viewed at from the program, making her the first ever pioneer at a women‟s
military‟s jointperspective, the concept of transformational university in the USA. Simmons was a transformational
leadership is very important. This perspective of leadership leader who herself accredited her own successes to her
is categorized down through each function and to each kindergarten mentor, Ms. Ida Mae Henderson, who had
follower, and it improves the perception of change in a advised her she could do anything in her heart she set out to
positive direction. achieve (Chekwa, 2001).

In transformational leadership style, the vision of the leader Within military and government contexts, General Colin
is perhaps the most important aspect in the organization. The Powell triumphed over well-established racism, particularly
leader‟s vision provides a sense of direction and purpose to in the US military and low institutional expectations of
the organization and its followers. It also provides the African Americans to become chairman of the US Joint
leader and the organization a road map on where it wants to Chiefs of Staff in 1989. Yet, he pursued further,
go and what it wants to achieve. The transformational becomingthe first African American to become US
leader is responsible in making certain that the organization Secretary of State in 1991, a position others said filled with
fulfills these strategic goals. vision and the qualities of a transformational leader
Additionally, the transformational leader does not fear (Chekwa, 2001).
committing errors. Growth is developed from the learning
brought by mistakes henceprogress may not exist if there are Other successful transformational leaders comprise of
no mistakes (Buhler, 1995). In this approach, the greater Christine Nixon, the present Police Chief Commissioner in
good of the majority is always kept in mind replacing self- the Australian state of Victoria, who is widely known to
interests. The transformational leader raises the awareness have changed the culture of the region‟s police force for its
of everyone, not just the followers. Everyone becomes aware advantage (Lussier&Achua, 2004).
of working toward superior goals beyond self-interest
(Buhler, 1995).According to Bass (1990), transformational The transformational leadership approach effectively creates
leadership is a style of leadership that occurs when leaders an enthusiastic environment and drives the organization with
widen and raisethe interests of their followers, when they innovations. When individuals function through self-
produce awareness and acceptance of the organization‟s motivation, higher output and efficiency are guaranteed to
goals and objectives, and when they motivate their followers be achieved. The inspiring environment also provides
to look beyond their own self-interest for the benefit of the potential for the development of future leaders. It is proven
organization. that individuals adhere to the transformational leader even
when rewards or benefits offered are lesser since the
Even though the idea of transformational leadership is inspiration is based on the leader‟s vision. However, this
relatively new, people who have demonstrated the approach is entirely based on the ability of the leader to
characteristics of this form of leadership have already motivate the followers to put their best in. Some leaders
existed for many years. As argues by Yates (2002),Genghis may not have the character and capability to achieve that.
Khan was a transformational leader who unified violently
independent Mongol tribesduring the late 12th and early 13th
centuries to ultimately create one of the largest land empires
ever seen in the world. Lou Gerstner, the retired Chairman
Volume 6 Issue 1, January 2017
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Licensed Under Creative Commons Attribution CC BY
Paper ID: ART20164318 DOI: 10.21275/ART20164318 2384
 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
5. Conclusion characteristic is more of a spirit, but great leaders value their
jobs and approach them with determination, zeal and
In summary, I can infer that both transformational and commitment.
transactional leadership styles have a significant impact on
organizational objectivity and success. Although previous From the comparison between transformational and
studies have demonstrated that transformational and transactional leadership styles, I can conclude that
transactional leadership styleshelp develop the basis for motivation from leaders gives employees inspiration to
robust leadership yet I believe that every leader‟s primary achieve personal satisfaction. Giving employees the
responsibility is to provide ethical leadership to followers to authority to make decisions demonstrates flexibility in
create maximum performance, effectiveness, and leadership, which is viewed as an attribute of
satisfaction to achieve optimum productivity and success. transformational leadership style and a critical factor for
increasing performance in an organization. Transformational
Transactional leadership regards the association between leaders also demonstrate the characteristics that an ethical
leaders and followers as a two-way process of exchange and leader possesses. The bottom line is that transformational
mutual influence. Leaders accrue power through their leadership is a more developmental and constructive form of
positions and their personalities, but their authority is leadership for the follower and the organization as a whole.
controlled by the expectations of their followers. Hence, it is the most preferred approach in ethical leadership
of people.
Transformational leadership on the other hand presents a
one-way outlook of the relationship between leaders and 6. Acknowledgment
followers. Leaders establish the relationships which, directs
followers to new ethical levels and motivation. The author wishes to thanks to Dr. Abdul Rahman Jassim Al
Transactional leadership displays a militaristic image while Hammadi for giving me the opportunity to do research and
transformational leadership presents representations of providinginvaluable guidance throughout this research. His
remarkable individuals such as Mahatma Ghandi or Nelson leadership, vision, sincerity andmotivation have deeply
Mandela. inspired me. It was agreat privilege and honor to work and
study under his guidance. I am extremelygrateful for what he
The contrast between accomplishing and transforming has offered me. I would also like to thank him for
expectations is at the heart of the distinction. Transactional hisfriendship, empathy, and great sense of humor. I am also
leaders are oftentimes portrayed as consenting and keeping extending my heartfelt thanksto Mahmoud Salem Al Alawi
an organization‟s culture on its current existence while for his acceptance and patience during the discussion I
transformational leaders transform institutional culture hadwith him on research work and thesis preparation.
through introduction of new beliefs and goals and by
transforming the way followers define their roles, thus this References
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Paper ID: ART20164318 DOI: 10.21275/ART20164318 2385
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ISSN (Online): 2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391
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