“Change is the only constant in life” said Greek philosopher Heraclitus (Graham, 2019). However cliche it may sound, it still resonates with many in this globalised world. Ramsay (2020) listed six technologies that we cannot live without today, such as Netflix providing video streaming on demand when people were used to pre-programmed television and cable channels, food delivery platforms like FoodPanda and Deliveroo with the former evolving with times by offering grocery on demand through PandaMart, and WhatsApp leading the charge in instant messaging and moving the world away from Short-Message-Service (SMS) by introducing images, videos, emojis and other creative alternatives in our text messages.
In the corporate space, change is often led by the management which initiate changes for various reasons, such as keeping up with times with new business strategies, acquisition and merger. No matter the reasons, employees and shareholders look toward business leaders to lead and manage these changes.
Effects of transactional leadership on organisational change
Kuhnert and Lewis (1987) defined transactional leadership as “an exchange between a superior and subordinate reciprocally for something of value”. To a superior, it would be the fulfilment of a given task. To a subordinate, it would be financial or nonfinancial reward.
In relation to change management, the strength of the relationship between the management and employees would determine the amount of resistance to accepting change (Florea, 2016).
Effects of transformational leadership on organisational change
Transformational leaders typically rely on traits, such as the ones below, to motivate and lead employees as opposed to transactional leaders who rely on rewards:
Charisma to gain respect, build confidence and inspire employees to fulfil a clear vision represented by the leader.
Inspirational to strongly motivate employees to fulfil specific goals.
Intellectually stimulating by entrusting employees with responsibilities to promote autonomy and developing their abilities to solve problems, which are in line with business goals and the leader’s vision.
Effectiveness of both leadership styles in organisational change
Change can be scary in an organisation and facing resistance is common, this is where leadership is essential. Transformational leadership would be well applied in a structured environment, such as the military and large corporations. Transactional leadership style was applied and only instructions for change were given to a group of employees after a business merger, employees felt the change of standards, leaving employees feeling pressured and undervalued. Whereas with transformational leadership, the approach for change starts with the leader encouraging change among employees, seeking mutual understanding and forming a collaborative way of moving towards change, leading to employee involvement and acceptance towards the change. This was found in a study by Florea (2016) during a business merger and acquisition.
Howard Schultz, the founder of Starbucks, (FOSTER, 2018) was able to execute transactional leadership as he put Starbucks back on track in 2008 when the Starbucks experience was lost, making the executive decision to close all Starbucks outlets and educate all employees on the Starbucks experience. Starbucks was built on a strong rewards-based system, where stock options were available to employees. Thus, bringing back the Starbucks experience would bring growth and in turn, reward employees.
Bill Gates successfully executed transactional leadership while building up Microsoft (St. Thomas University, 2018), however, he later embraced transformational leadership and was known to use these two leadership styles according to situational needs. Satya Nadella, who succeeded Bill Gates, was known for his transformational leadership (Kassa, 2018) style. He embraced change and revived a stagnant Microsoft to the forefront of the technology playing field. Nadella gained the trust of employees by being authentic and being relationship-oriented. With the trust and support of his employees, Nadella was able to implement change and transform Microsoft to become the third US company to achieve a trillion-dollar market capitalisation in 2019.
Conclusion – adopting an appropriate leadership style in change management
There is no better style of leadership. It is about using the appropriate style in the right situation, based on factors such as time and available resources to achieve the goal. Transactional leadership works when goals are required to be achieved in a short period of time, such as short-term projects or a fast-paced environment where efficiency is key. Transformational leadership requires time to educate and impart thus it would require a longer period, although it would achieve a sustained result with employees equipped to solve problems with solutions aligned with business objectives. A model example would be Bill Gates, who was able to apply the leadership styles as the situation requires.
Florea, R., 2016. Change Management and the Role of Leadership in Facilitating Organizational Change in Corporate Takeovers. European Journal of Economics and Business Studies, 2(1), pp. 68-72.
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Available at: https://www.qsrmagazine.com/consumer-trends/5-ways-starbucks-innovating-customer-experience
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Graham, D. W., 2019. “Heraclitus”, The Stanford Encyclopedia of Philosophy. Fall 2019 Edition ed. s.l.:Metaphysics Research Lab, Stanford University.
Kassa, M., 2018. Uncovering a Leadership Style: Satya Nadella. [Online]
Available at: https://www.linkedin.com/pulse/uncovering-leadership-style-satya-nadella-mekonnen-kassa/
[Accessed 26 April 2021].
Kuhnert, K. W. & Lewis, P., 1987. Transactional and Transformational Leadership: A Constructive/Developmental Analysis. The Academy of Management Review, 12(4), pp. 648-657.
Ramsay, S., 2020. The 2010s: 6 essential technologies that didn’t exist 10 years ago, from WhatsApp to Deliveroo. [Online]
Available at: https://www.scmp.com/yp/discover/lifestyle/features/article/3070899/2010s-6-essential-technologies-didnt-exist-10-years
[Accessed 25 April 2021].
Shah, T. & Mulla, Z. R., 2013. Leader Motives, Impression Management, and Charisma. Management and Labour Studies, 38(3), p. 155–184.
St. Thomas University, 2018. What is Transactional Leadership? How Structure Leads to Results. [Online]
Available at: https://online.stu.edu/articles/education/what-is-transactional-leadership.aspx
[Accessed 26 April 2021].