Transactional Leadership Theory

Transactional leadership theory was first introduced by Max Weber in 1947 then by Bernard Bass in 1981 (Managementstudyguide.com, 2015). This leadership theory argues that employees are motivated mainly by rewards and punishments systems. Power of the leader mainly depend on the formal authority given by the organizational structure and this theory closely relate with the telling style of leadership where leader expect employees to achieve set performance goals and if the employee achieves this he will be rewarded if not there will be a punishment. These leaders will be focused on work processes opposed to innovation and creativity.

This theory is based on four key dimensions

1. Performance Rewards – Leader will set mutually agreed SMART goals and link them to the compensations schemes. They clearly set the expectation and provide necessary resources to achieve the goals.
2. Active Management by Exception – Leader closely monitor activities of the employees and their performance. They will take immediate corrective actions if an employee deviates from the set guidelines and expectations.
3. Passive Management by Exception – Leader intervene only when performance expectations are not met to take actions. They may even take disciplinary actions or punishments against undesirable performances.
4. Think Inside the Box – These leader prefer to work within the current processes and procedures. When solving problems or challenging new situation