How To Renovate Your Organization Using Transformational Leadership

Is your organization struggling to meet rapidly changing business needs? Do you feel your company is stuck in old issues for a long time and needs to refresh? You know that your institution needs a complete revamp, but you are not sure where to start? 

If yes, Transformational Leadership is a one-stop solution. 

If no, mmmm…Well, you may still need to apply transformational leadership!

That’s because ‘transformation’ may not always be from bad to good. It is also from good to better or better to great, transformational leadership is all about bringing a positive change to your business.

“Transformational leaders don’t start by denying the world around them. Instead, they describe a future they’d like to create. ” – Seth Godin

As a transformational leader, you can quickly analyze the current standing of an organization and assess the areas that require improvement. You can define or redefine the core values of an institution and inspire everyone to imbibe them. 

Before we get into the details of its components, let’s first discuss what is meant by transformational leadership.

What is transformational leadership?

The concept of transformational leadership dates way back in the 1970s when James V. Downton coined the term, and later, James Burns expanded it in his book ‘Leadership’.  Even after decades, in current times of digital transformation, this is the most desirable leadership style.

In basic terms, transformational leadership is a management style that brings a positive change in your organization by identifying the improvements needed, setting a compelling vision, and motivating employees to work collaboratively to achieve it. 

It is the path you need to follow to bridge the gap between the current state of your organization and the future of it that you wish to see.  

Worried, how would your workforce react to such a change in your leadership strategy? I’m sure they will welcome the change. Here’s why:

As a transformational leader, your objective will be to amend the current state of your organization. To achieve this, you need to unleash the creativity of your employees and encourage them to innovate by giving them more independence and ownership. With this freedom, their job satisfaction level and morale are only going to go up.

Before you go ahead and apply transformational leadership, let’s first discuss the essential parts that constitute it. 

Components of Transformational leadership:

To transform your organization, you need to move out of the old methods and develop new techniques that give desired outputs. To attain this objective, you need a strong vision that gives you the requisite direction. You then need to inspire your employees to align themselves with your vision.  

There is a substantial body of investigation on transformational leadership that can help you attain these goals. Bernard Bass is the main contributor to the study of transformational leadership who defined the four main components of it, also called the ‘4 I’s’.

Following is a brief description of these components and how can you apply them:

1. Intellectual Stimulation

Intellectual stimulation is the behavior that encourages innovation and creativity and develops critical-thinking and problem-solving ability. It arouses thoughts and imagination, as well as revives the ability to identify and solve problems creatively.  

A solid example to understand how intellectual stimulation works is this interview of Steve Jobs for the PBS documentary, Triumph of the Nerds. When the interviewer asked how to run a company, his answer was by simply asking, “Why do we do things, and how can we do them differently?”

Wondering how you can apply intellectual stimulation in your company? Following are a few suggestions:

You need to challenge the status quo in your organization’s systems, processes, and operations. Collaborate with your team and other employees to identify the issues, bottlenecks, and roadblocks in the practices of your company. Do not hesitate to discard methods that are not working.

Next, you need to encourage creativity and innovation in your subordinates to develop better processes in your company. Persuade them to foster new ideas and build novel approaches. Such a change in the system will not only transform your organization but also give your employees new opportunities to learn. 

2. Individualized Consideration

Individualized consideration is the degree to which you give support to the individual members of your team. It includes your attention to their needs, and your openness to discuss their concerns. It also incorporates your ability to recognize the aspirations and abilities of your employees.

To be a successful transformational leader, you need to take care of not only your team but also your team members. Keep in mind that every individual is talented and can bring something new to the table. You need to help them develop and demonstrate their skills.

How will you offer support to every person in your team? 

Following are a few methods you can use:

Keep open communication channels; let your team feel free to share ideas. If there are direct lines of communication, everyone in your group will be comfortable to have discussions. If they come to you with a problem or concern, always take time to listen and offer your support and empathy. 

Act as a mentor or coach. Guide your team members on how they can achieve the desired results. And empower them to make decisions and provide support to implement their ideas. 

Customize your approach as per the needs of individuals. Some team members may be excited by money, while others by change or challenging assignments. You may have to alter training, learning opportunities, and personal development plan as per the individual.

3. Inspirational Motivation

Inspirational motivation is your ability to develop confidence and motivation in your employees. It comprises of your skill to create a positive work environment, increase the engagement level of your employees, and enhance team spirit. 

To start cultivating an encouraging culture, you should have a clearly defined vision that inspires and motivates your employees. Remember, the set of values in your vision is the foundation of your transformation journey. You need to articulate it such that your employees become passionate about achieving its objectives.

 How do you develop such enthusiasm in your employees for your vision?

You need to have clearly defined expectations. This allows your team to have a sense of purpose and meaning to invest extra effort in their tasks. Also, be optimistic about the capabilities of your team members. When you are positive about their skills and abilities, they perform beyond expectations by taking up challenges and fulfilling them.

 Following are a couple of practical tips to practice inspirational motivation: 

Share an inspirational quote with your team members every day as they get closer to their goals. 

Exhibit your excitement and provide incremental rewards like a bonus or a team outing if there is marked progress towards attaining the goal.  

Watch this video to find out more about how you can inspire your employees:

4. Idealized Influence

In simple words, idealized influence is to “lead by example.” Your goal, as a transformational leader, is to influence people for a positive change. Hence, you need to practice what you preach and be a role model that your employees want to emulate. 

To have a transformational effect, you need to win the trust and respect of your subordinates through what you do and how you act. Hence, you need to set high standards of ethical behavior and develop an approach of integrity in all your actions. Remember, when you are a transformational leader, people strive to be like you.

Following are a few realistic suggestions to develop idealized influence :

– Work towards your vision with as much commitment and passion as you expect from your employees. Do not hesitate to walk the extra mile, like stretching your working hours or attending an additional meeting to attain your goals.  

– Reach to work earlier than everyone on your team. Do not leave the office until everyone else has left, or you are sure they will not need your assistance for completing their work. 

– Follow all compliance and security procedures of your organization. Do not take advantage of your role and position under any circumstances.

– Resolve issues involving a conflict of interests with complete integrity. Do not practice unethical conduct for personal gain. 

Now, let’s have a look at a few leaders who exhibited a transformational leadership style. A study of their methodologies can go a long way in your development as a transformational leader.

Examples of transformational leaders

Jeff Bezos, Amazon: 

The Economist magazine once published an article that featured an astronaut on the moon, delivering a shipment from Amazon. The title of the article read, “How far will Amazon go?” 

What created such a brand image of Amazon?

It was the vision of Jeff Bezos. When you have a vision, which you believe and follow as passionately as Jeff, every step that you take will be to meet your vision. From production, pricing, marketing, to delivery to the final consumer, every strategy will be to attain the objectives of your vision.

Amazon, with its customer-centric approach, never chose short term profit or amended quarterly results at the cost of long term disadvantage. With such a culture, you focus all your energy to serve the customer and solve his issues, even if it requires you to suffer a short term loss.    

However, having a vision isn’t enough. It should not be just a piece of writing on the office wall. Jeff inspires his employees by communicating his vision as often as he can. 

Likewise, you should let every pour in your business breathe your idea daily. Don’t give up your vision even if you face some troubles along the way.

Steve Jobs, Apple: 

You need to be a transformational leader not only to co-found a company like Apple but also to come back to it in a state of bankruptcy and make it one of the most valuable companies.  

Steve Jobs started Apple Computers in 1976, was thrown out in 1985, and came back in 1997 when Apple was nearing insolvency. What was remarkable was that he had the qualities to transform the company all these years. 

How did Steve achieve this feat?

Again, the answer is a laser-sharp focus on the vision. And then, having the ability to communicate the objectives to everyone in the company.  

The special thing about Steve’s communication was its simplicity. Through stories, demonstrations, use of superlatives like revolutionary, incredible, unbelievable, and even sound effects like boom!

Steve influenced his employees by igniting a strong desire for work and sharing his passion with them. Rather than creating products that bring profit to Apple, he motivated his employees to develop devices that they would enjoy using themselves. As a result, under his leadership, every instrument that Apple created was a masterpiece. 

Satya Nadella, Microsoft: 

Satya Nadella has exhibited the qualities of a transformational leader right from the moment he became the CEO of Microsoft. 

It was under his leadership that Microsoft developed a cloud computing platform Microsoft Azure, a Microsoft Office version that works on Apple iPad and a Microsoft Outlook version that works on iPhone and Android operating systems.

The recognition given to Microsoft by the financial markets is also a reflection of his success as a leader. The stock share prices of Microsoft reached an all-time high under Nadella’s leadership.

How did Satya Nadella change the fortunes of Microsoft?

When he became the CEO, he sent an authentic and emotional email to all employees, which allowed him to gain their trust and commitment.

Additionally, he conducted “ask me anything” sessions in which he addressed the issues, concerns, and questions of employees. He also discussed his weaknesses, ambition to learn lifelong, and his vision of innovation at Microsoft. 

As a result, there was clarity of purpose amongst employees, and they aligned themselves with the vision of the company. 

With his ability to transform employees and the courage to innovate and implement new ideas, Satya pushed Microsoft to new heights. 

Reed Hastings, Netflix: 

The co-founder and CEO of Netflix, Reed Hastings, is another classic example of a transformational leader. Reed has led the organization from a DVD operations company in 1998 to a colossal media-house. The stock of the company since its inception has increased by more than 200%.

How did Hastings work out the way for Netflix? Let’s take a look at a few steps that he took as a leader. 

The Human Resource policies of Netflix reflects how employees reciprocate a positive culture at the workplace through passionate performance. 

Employees at Netflix can work out with managers to take as much personal time as they want. There are no formal reviews, employees and managers converse about performance in their work interactions. Netflix offers market-based pay to its employees with no bonuses, and they are allowed to choose how much compensation would be in the form of equity.

Hastings also gave independence, ownership, and empowerment to his employees by making very few decisions himself. For example, the hit series “House of Cards” was approved for production, by the management, in less than 30 minutes because employees at Netflix laid a solid groundwork. 

He challenged the status-quo of the television industry through his vision. He did not follow the established processes and procedures and redefined the way we watch television and movies. 


Practicing transformational leadership gives you the power to influence and motivate people. Your employees will demonstrate high efficiency, job satisfaction, and performance with the positive work culture you built in this leadership style. 

A strong vision, along with such a dedicated workforce, is the need of the hour, as every organization needs digital transformation to adapt to the rapidly growing technology platforms. This, coupled with the current business environment of social and economic turbulence, makes transformational leadership the ultimate methodology you can adapt.  

What steps are you going to take to transform your business? How are you going to apply transformational leadership for the same? Let us know in the comments below.


Transactional leadership: All that you need to know

In every grade during my schooling, if I scored the marks my father aspired, he gifted me something I love. If I failed to achieve his desired results, I lost his present for that year. His gift or no-gift methodology motivated me to study hard. 

At the end of my schooling, I realized I topped most of my grades, leaving my classmates far behind.  

That’s precisely what you need to replicate as a transactional leader.

Transactional leadership, popularly known as managerial leadership, is a telling leadership style. Rather than inspiring employees or helping them, you motivate them to perform based on incentives and punishments.

You can achieve this by setting the right rewards and penalties that are standardized as per the performance of employees. This persuades them to deliver exceptional outcomes. 

As a transactional leader, you set the standard of performance as per the requirement of your organization. For instance, for each employee in the sales team, you may set a goal of attaining sales worth a number of dollars (as per your quarterly target for the sales department). 

If your employees achieve the figure, you allocate a monetary bonus; else, you reduce a specific percent of their compensation.

Thus, the transactional leadership style is simply a give and take process. You achieve the organizational objectives by serving the self-interest of your employees. 

Before we discuss how you can apply this style in your organization, let’s first understand its assumptions and components. 

Assumptions of Transactional leadership:

The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981. 

You need to understand the assumptions of this style to know the environment for which this style is effective. If you believe these assumptions do not match your organization’s culture, you may consider mixing this style with other leadership styles (give link).

With this in mind, let’s have a look at the underlying assumptions of Transactional Leadership:

Employees perform best when the chain of command is definite and clear: 

In one of my newly formed teams, I brought in a few senior folks who had similar levels of experience of about a decade. The idea was that they had the maturity to handle themselves and other less experienced members. Hence, I could use laissez-faire methods and concentrate on other projects. 

However, after a few months, the team’s performance was continuously going down! The less experienced folks had defects in their assignments, they missed deadlines, and the same piece of work was worked upon multiple times by different team members. 

What was wrong? These people were performing well individually in their previous projects.

When I started analyzing, I realized there were ego clashes. Each senior member thought they were leading the team. The difference in opinion amongst them confused the less experienced folks. The hierarchy of the team wasn’t clear to them.

The team needed an organized structure and a clearly defined source of commands. I brought them on the same page, sorted existing issues, and decided on who is going to head the team through consensual discussions in multiple meetings.

There was a set direction once a defined person was leading the team. Hence, the efficiency and productivity of the group went up drastically.

This instance is a classic case of how an unclear chain of commands can hinder the performance of your team. 

Transactional leadership helps in bringing out the best in people by having a precise and definite objective; the clarity of purpose results in improved performance. 

Rewards and punishments are motivators:

To get effective results as a transactional leader, you need to create a system of rewards and punishments– honor employees if they achieve their targets and penalize them if they miss it. The transactional leadership style assumes that this methodology works best to motivate employees and achieve requisite outcomes.

As a transactional leader, you focus only on the lower level needs in Maslow’s hierarchy of needs. The first four levels are deficiency needs (D-needs), and the top-level is known as growth or being needs (B-needs). The requirements at the lower levels of the hierarchy must be satisfied before attending the needs higher up.

Rewards and punishment work as the best motivators for satiating the D-needs of your employees. By recognizing their good through rewards, you increase their self-esteem and encourage them to perform better. Similarly, punishing them for not attaining their goals, pushes them to try harder. 

The primary objective of the employees is to obey the commands of the leader:

The transactional leadership style ensures that the current system, processes, and procedures work at maximum efficiency. It does not allow creativity and out-of-the-box thinking. Hence, it assumes that the primary goal of your subordinates is to follow your instructions without altering the status-quo.

You should abide by the existing structure of your organization to get the best results as a transactional leader. You need to follow the hierarchy in your company and accomplish results as per the current processes. To achieve this, you will need to allocate tasks to your employees and expect them to follow your commands.

Milgram’s Studies on Obedience to Authority reveal the relationship between obedience and leadership. According to the study, authorities, through their power, can push people to obey the commands of even giving a shock to others. 

You can use this study to understand that your instructions to employees are a powerful tool to get desired results from them. If you are clear with your commands, they are bound to follow them.

Subordinates require careful monitoring to meet expectations :

By now, you are aware that your employees need to know the hierarchy of your organization, and they believe that they need to follow your instructions. Also, you have built a system of rewards and punishments standardized across employee performance.

But is that enough?

Not really! Transactional leadership assumes that your employees need external motivation. Hence, if you keep an eye on their work, they will be inspired to do it to the best of their abilities.  

You need to monitor the performance of your employees closely. It prevents any deviation of your employees from their targets and pushes them to stretch themselves to complete their assignments.

You can use various methodologies for monitoring employees like daily task allocation registration, conducting meetings to discuss progress on tasks, and giving feedback. 

Through close monitoring, you will be able to focus your employees on their tasks and imbibe discipline in them. Also, you can review their work and make changes if needed. 

To understand further, you need to have a look at the core components of transactional leadership.

Components of Transactional Leadership Style:

The fundamental constituents of transactional leadership are Supervision, organizing, and assessing performance. These form the basis of the style, and you should apply them throughout your organization. Following is a brief description of these elements:


You need to focus on controlling your employees by giving them proper guidance. There have to be clear guidelines that specifically mention what is acceptable and what will be considered inappropriate. Then you need to ensure that your subordinates strictly follow these guidelines.

Supervising your employees need not include close monitoring. However, it can be related but not restricted to the handling of customer data, ensuring the project is on schedule, allocation of assignments, and tasks to group members, among others. 

In my team, for instance, we have a clear guideline of sending an update everyday on the work accomplished in the day. With this process in place, I can track the progress of my team members and guide them if they are stuck and need help. It also allows me to ask them to put extra efforts if they are behind schedule.


You need to be a good organizer of business activities to use the transactional leadership style effectively. These activities can include ensuring an efficient business plan for your organization, setting up meetings to discuss organizational objectives, and creating deadlines to meet them.

You also need to put in place rules, procedures, and standards that your subordinates need to follow. Your organizational structure is the backbone of setting up these aspects. What this means is, you will need to consider the hierarchy, policies, and protocols of your organization while deriving the regulations for your employees.

When you set up standards and expectations, you increase the efficiency and productivity of your employees. 

For example, you can distribute a list of activities that your employees need to follow.  This can include their minimum working hours, deadlines of assignments, and minimum standards of products or services that you expect them to deliver. When your employees perform to meet these objectives, they are bound to be efficient.

Assessing performance:

In the first two components, you have set the expectations from your employees as per organization standards and supervised employees to check if they are meeting those expectations. 

What’s next? What if your employees meet those expectations, and what if they don’t?

You need to evaluate the performance of your employees.

The driving factor of this style is a reward and punishment system based on how well your employees have performed in the objectives you have set. You need to evaluate their output and decide whether it deserves punishment or reward.

For instance, many IT organizations have a variable component in the compensation of their employees. This component, which is a certain percentage of the salary of employees (typically five to ten percent), is linked with their performance. If the employees achieve organizational goals, they get their variable components; else it is discarded.

With such mechanisms, you can assess employee performance and reward them as per their efficiency and productivity.

Now, you are aware of the assumptions of the transactional leadership style and also know its basic building blocks. The next step is to apply this leadership in your business. The following are some guidelines you can use. 

How to apply transactional leadership:

As can be seen in the figure below, your interaction with your employees in transactional leadership can fall into four different categories- contingent rewards, Active Management by Exception (AMBE), passive management by exception (PMBE), and laissez-faire.

Let’s discuss the categories one by one:

Contingent Reward

The incentives that you give your employees for meeting specific goals are contingent rewards. They motivate your employees and provide positive reinforcement for a job well done.

To have the system of contingent rewards in place, you need to set goals for your employees. It is suggested you follow the SMART principle while setting-up goals as explained below:

Specific:  You should clearly define expectations in your goal. Avoid using generalised sentences like ‘we want to generate profit.’ You are better off stating the figure of profit like ‘we want to produce a profit of a million dollars’

Measurable: You should clearly define your goal with the help of quantifiable entities like quality, quantity, and cost. It helps in easily tracking your target. Avoid saying, ‘we want to increase social influence to generate profit.’ Instead, specify exactly how you want to increase social influence. You can state, ‘we want to have a profit of a million dollars by generating fifty-thousand leads through social media websites.’

Attainable/Achievable: Make sure your goal is challenging but attainable at the same time. In the example ‘we want to have a profit of a million dollars by generating fifty-thousand leads through social media websites,’ you should be sure that ‘fifty-thousand’ and ‘million dollars’ are figures which are attainable. If not, consider more practical numbers.

Relevant/Realistic: Your goal should serve the higher-level goals of the business to be relevant. You need to align the purpose of your goal with the objectives of your business. 

Also, ensure you are aware of the hurdles you may face while working on your goal. Setting realistic targets helps you gain clarity about the roadblocks you may encounter.

Time-bound: Having a defined period to attain your goal helps you to be efficient and productive. You must clearly state the time-frame- ‘We want to have a profit of a million dollars by generating fifty-thousand leads through social media websites in the next quarter.’

Active Management by Exception:

You now have clearly defined goals and rewards for your team. What’s next?

You give the team the resources they need to achieve goals and monitor their progress.

The aim of active management by exception is to ensure that you identify areas where there are chances of mistake and take preventive measures before such a situation arises. 

You need to ensure that your team operates as per the standards to achieve the goal. You should treat any deviation from the acceptable processes and procedures as exceptions. The process of identifying the unexpected is called management by exception. 

To elaborate, let’s continue with our goal of ‘achieving a profit of a million dollars by generating fifty-thousand leads through social media websites in the next quarter.’

If the expected expenses on operations of this goal are $60,000 and your team is operating at $30,000 or $90,000, you need to assess the reason and take corrective action quickly. 

Passive Management by Exception:

The difference between active and passive management by exception is the timing of your intervention. You are proactive when you are exhibiting active management by exception. You closely monitor the tasks your team is performing, and immediately take action when you notice any deviation. 

However, when you use passive management by exception methodology, you allow your team to conduct work as they want and get involved only when the results are different from the expectations. You use the system of rewards and punishments you had set-up, to penalize the team for not meeting expectations and take corrective action.

Passive management by exception is useful where you are sure of your team’s capabilities to achieve the goal. Also, you know that in case of deviation, you will be able to rectify the situation and take corrective measures quickly. 

Laissez Faire:

When you interact with your employees in the Laissez-Faire style of transformational leadership, you simply set the goal and expect results to follow by giving your team the environment to make decisions and the liberty to set up processes. You do not care about their needs.

For instance, you would set the goal of achieving a certain amount of profit in a specific time. After that, you take a hands-off approach and abdicate responsibilities. You leave it up to the team to decide on operating expenses, funding, or any other resource they would require to achieve their target. 

Laissez-Faire interaction creates a relaxed environment for your team as they have the complete freedom to opt for methodologies to achieve their goals. However, it can also lead to your team to lack direction. You should apply this method to self-motivated groups with highly experienced professionals. 

Now, you are aware of how you can apply transactional leadership. Following is an awesome video that can give you more insights:

Where is Transactional leadership style effective?

Once you are aware of the methodologies of a management style, you need to know the situations where you can apply it. Following are a few scenarios where you can use transactional leadership:

  • If there is a crisis in your organization, you need quick results. The crisis can be related to data security, economic or financial stability, or product recalls, among others. Your primary aim in such situations is to get work done from your subordinates as quickly as possible and maintain status-quo.

According to research by Tilburg University, the transactional leadership style has the right characteristics to help your organization get through a crisis. Your coercive power as a transactional leader and the rewards-punishment system you design can influence the desired behavior in a crisis.

  • If you have a system that has similar, regular, and well-defined work with already tested working solutions, you can consider applying a transactional leadership style. You need not encourage employees to search for solutions or have an out-of-the-box creative outlook in these conditions. 
  • As the design of the transactional leadership style maintains the integrity and performance of your group, it is highly effective if you need to execute fixed operations in your business. Also, you can use this style if you require similar activities to be performed in a specific manner every time. 
  • If you need to work for a well-established company with a large work environment, the stress is on the structure of the organization. Hence, transactional leadership, with its straightforward approach, is a perfect choice and can quickly get effective outcomes.

Final Thoughts

Transactional leadership is a great way to maintain order and structure in your organization. With a fair balance of assignments and rewards, you can achieve the desired results from your employees. 

However, you need to hit the right nodes while applying this style, as it can easily border Autocratic leadership. You should not seem to be authoritarian. Creating the right system of rewards and punishments as per employee performance is the key. 

If you focus on achieving clearly defined objectives with regular reviews and stick to the format set-out, transactional leadership can be a great tool in your leadership armory.

Want to expand on the discussion? We would love to hear your opinion. Do let us know how effective you find transactional leadership style in your organization.