Transformational vs. Transactional Leadership

I often get asked to explain the difference between
transformational and transactional leadership, and I recently saw an example of
a large corporate change that illustrates it. The leadership of this corporation set out to reduce the
number of call centers that it had around the world. It had a highly diversified business model with a number of
different customer bases. The call
centers had grown up locally without a central strategy. Now they wanted to create an overall
strategy for call centers and at the same time reduce the overall number as
well as create some technological consistency throughout them all.

Now let’s talk about it. Of course, I’m going to talk about leading this change, not
the change itself. For
clarification here’s a working definition.

Transactional leadership – Exchanging “this for that” as you
lead people.
Transformational leadership – Changing the beliefs, ideas,
and overall values as you lead people.

I should say right here that every leadership act has
elements of both transactional and transformational styles.

For this one, there are two choices as
a leader.

Set up projects to reduce the number of call
centers and programs to communicate the whys and hows of the change.
Set up culture change processes to change the
value set of the organization AND set up projects to reduce the number of call
centers.

Either approach will require elements of each style, and
they will yield significantly different results.The difference lies in the fundamental intention and overall
direction of the vision.

The first approach will achieve the goal of reducing call
centers and will achieve transformation of thinking in some of the people. Most likely this approach will have a
strong governance component added to ensure that the numbers stay down.However, without a deep culture change,
as turnover occurs in leadership and in governance structures, it is likely
that the number of call centers will go back up. Why?Because
the overall organization will not get changed through the effort.It is impacted, changed in some ways,
but not at the level of thinking. Only those people who are involved with the thinking of the effort
experience the transformation. After the project, these tend to get dispersed around the organization
an often feel stranded among people who do not see the world the same way.

The second approach will have the primary intention of
changing the culture of the overall organization.The effort will center on what it takes to change the
thinking of the entire system while giving the opportunity to make real changes
that align with that thinking.The
majority of the effort of the organization will be on culture. During the process, the people will
find many things that need to be changed in order to accommodate the new
thinking beyond the umber of call centers.This type of change is more organic and is highly specific
to the environments where people actually live and work.

Of the two, the second approach is more sustainable.Okay, here’s where I get
challenged.How do I know which
will be sustainable and which will not?The answer, based on thinking of the system, is that the organization’s
decision processes and “right answers” all led to multiple call centers. The same level of local answer probably
exists in many other systems.Unless that is changed, the same sort of decisions will get made
again. There is always the choice
in a change effort as to whether or not to take on the entire organization’s
belief set. This must be answered
based on the overall long-term vision.

Here’s a way to think about this.The mindset of an organization is like DNA.Any time the organization reproduces
some part of itself, the new parts will use that DNA imprint and re-create the
old in the new.Unless you change
that DNA, the organization will continue to spring forth around your project
work.A transactional leadership
effort will focus on changing the artifacts (number of call centers) while
supporting the transformational efforts required for the change (the belief
sets of individuals involved in the projects). A transformational leadership effort will focus on changing
the DNA of the overall organization while supporting the transactional efforts
(projects) required in the overall change.

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