The transactional theory of leadership was first discussed by Mark Weber in 1947 and was later developed by Bernard M Bass in 1981.
Core Idea: The leader makes sure people are aligned towards the goal of the organization with the help of rewards and punishments.
Assumptions underlying the transactional theory of leadership
- People perform their best when the chain of command is definite and clear.
- Workers are motivated by rewards and punishments.
- Obeying the instructions and commands of the leader is the primary goal of the followers/subordinates (autocratic leadership).
- Subordinates need to be carefully monitored to ensure that the expectations are met (micro-management).
Characteristic features exhibited by transactional leaders
- Contingent reward: The leader links the goals of the organization to rewards and clearly specifies and expectations.
- Management by Exception (active): The leader actively monitors the performance of the subordinates, watches and searches for deviations from rules and standards, and take corrective actions to prevent mistakes.
- Management by Exception (passive): In terms of passive management, a leader intervenes only if standards are not met and even use punishments for poor performance.
- Laissez-Faire leadership: Gives an environment for the subordinates, where they can take decisions. The followers may lack direction as the leader himself abdicates responsibility and avoids making decisions.