Transactional and Transformational: Why Today’s Leaders Need to Be Both

Are you working too many hours, neglecting friends, and sacrificing your health in the name of professional success? If so, you’re not alone. Many organizational leaders share this experience — even multimillionaires like Arianna Huffington, who once passed out from sheer exhaustion, hit her face on her desk, and woke up in a pool of her own blood.

Leadership training today tends to focus on transactional skills, like planning projects, organizing schedules, and forecasting budgets. Leaders spend a lot of time and energy trying to control the external world. We talk about being productive, we buy 80 planners and 50 calendars, we might even attend meditation retreats or spend weekends away in the woods — and then we wonder why these things don’t make us more productive or, at a minimum, less stressed.

To effect real change, we need to get to the root of the problem: our inner lives. Our transactional skills have to be supplemented with transformational skills that address our mindsets and visions. The combination of these two skill sets is incredibly powerful.This is the “yes, and” of leadership: We must transform the internal without ignoring the external. If you are willing to tackle both, great leadership is within reach.

Transactional vs. Transformational Skills

The concepts of “transactional leadership” and “transformational leadership” stem from the work of political scientist James MacGregor Burns and leadership studies scholar Bernard Bass. Transactional leadership involves interaction for the purpose of getting things done. Transactional leaders are concerned with the nuts and bolts of improving and maintaining performance. They know all the best ways to implement decisions, and they have studied methods for building the best budgets, reorganizing teams, and creating effective goals.

Transformational leadership, on the other hand, concerns mindsets, values, and visions. It involves bringing colleagues and clients into a big-picture awareness of issues and ideas. A transformational leader’s yardstick for measuring success is much bigger than the financial bottom line. Transformational leaders seek to support the overall well-being of those they lead.

In today’s workplace, leaders need both skill sets. They need to keep a schedule, plan a budget, and communicate effectively with their team while also managing their inner life and supporting others in doing the same. Transactional skills give leaders the ability to deal with the external world — the who, what, when, and how. Transformational skills enable leaders to understand the internal why — the ultimate meaning, purpose, and vision behind their transacting — and cultivate environments in which people can flourish and do their best work.

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The Need for Skill-Building

Timmy was an excellent walker. I mean, no one walked better than Timmy. One day, Timmy’s dad saw him walking with his friends after school and thought, “Man, that kid can walk!” When Timmy got home, his dad sat him down and said, “Timmy, I saw you walking today. You walk really, really well, son. Tomorrow, I’m going to let you drive to school. You’re so good at walking, I just know you’ll be an excellent driver.”

Ridiculous, right? But this is exactly what we do with leaders all the time. We think that because someone is excellent at the job they were hired to do, they’ll be an excellent leader, so we move them into a new position without giving them any training on how to actually lead. A leader might be in a leadership role for a decade before they receive any form of leadership training or development! However, if we want to create thriving businesses with thriving people, we need to teach the right skills and cultivate the right awareness within the organizational context.

Transactional skills are easier to learn, and organizations have every responsibility to create leadership development programs that teach these essential skills. More often, though, transformational skills fall by the wayside. It takes a lot of time and effort to implement an effective program that cultivates mindfulness, compassion, and wisdom. Consequently, very few organizations follow through. But without transformational skills, leaders get stuck in the reactivity of fear. They experience anxiety, stress, and depression. Organizations run on fear and adrenaline. Leaders can’t think clearly because they’re stressed out. As a result, they make horrible decisions that end up costing the company time, money, and energy.

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Effective Leadership Works on Two Planes

Leadership training should take place on two planes: transformational and transactional. Leaders need to be mindful of what is actually happening in the workplace. They need to distinguish fact from story in interactions with coworkers. Effective leaders practice mindfulness in their own lives. They pay attention to their thoughts and emotions, and they know how to bring their focus back to the present when it strays to the past or future.

Effective leaders also know how to skillfully transact with external phenomena, such as time, money, people, or the unknown. They know how to set goals and pursue them, remaining present even as they look to the future. They understand the company’s policies and procedures. They know how to delegate, organize a calendar, and efficiently use their time to tackle tasks and projects. Today, few leadership training programs cover both planes: transforming the way leaders see the world, their businesses, and themselves while simultaneously helping them transact skillfully in the workplace. This is a massive opportunity for us to grow.

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If you teach people to renew their visions and improve themselves, external action will follow. In the end, leaders who transact business with mindfulness are much more effective.


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