There is a plethora of leadership theories and models that attempt to consider leadership as an enabler of firm performance. Recent studies have indicated that there is an increased emphasis on the important role of leaders, which could extend the literature and theories in this field (Anderson & The American Productivity & Quality Centre, 1996).
This article adopts Burns’ (1978) leadership theory (particularly the transactional style) and applies it within the performance paradigm evident in organisations. Although the empirical studies provide evidence of the overlap between leadership and organizational performance, there is a gap in the literature in linking the role that transactional leaders who play an important role in improving organizational performance. Understanding this dimension from a transactional leadership and performance paradigm may provide a significant contribution to the academic and extant literature – especially in bridging this important field of leadership and management.
Transactional leadership involves determining the tasks, rewarding goal achievement, and punishing failure in attaining goals (Eagly & Carli, 2003). Marturano and Gosling (2008) claim that the effectiveness of this leadership style is dependent on two conditions: the first being that the current differences in organizational hierarchies and structures are totally accepted by subordinates; the second being that all the employees are able to work towards mutual exchange of benefits and where they are rewarded for achieving the determined goals (Cheung, 2012).
This leadership style assumes impersonal interactions in reality in which leaders do not consider higher humanistic desires or relationships between leaders and followers. Consequently, this form of leadership is still based on grounded theory that does not explore a desired probable situation. In lieu of transactional leadership is the more acceptable transformational leadership which in many ways is much richer in both research and acceptance. However, other authors such as Burns (1978); Hollander (1984) illustrates that transactional leadership is successful in developing mutual exchange between leaders and employees in organisations. In addition, it can be inferred that transactional leadership is linked with organizational performance, particularly in terms of achieving goals (Daft, 1995).
Another aspect of the transactional style is passive management by exception or laissezfaire leadership (Hinkin & Schriesheim, 2008). Laissez-faire is characterised through managing the situation where a problem has occurred (Eagly & Carli, 2003) and leaders take a reactive approach to correct mistakes or to overcome problems. This style of leadership has been critiqued in the literature as leaders are not concerned with proactively identifying or preventing problems. They do not advocate for knowledge sharing and joint problem solving with subordinates (Frischer, 2006). Hence, it is rational to state that laissez-faire leaders do not possess high commitment in seeking the proposed solutions jointly with their subordinates.
Moreover, when such leaders assume the responsibility or intervention to solve problems, they rarely consider the empowerment of their employees to assist (Wageman, 1997). Due to this limitation, we suggest that leaders today should empower followers to engage in problem solving. In this situation, leaders would use transactional leadership and transformational leadership with more emphasis on the latter when employees are more empowered.
In summary, transactional leadership affects organizational performance, through achieving business goals. The study by Obiwuru (2011) affirms this relationship, and also sheds light on the critical role of transactional leaders in enhancing non-financial performances, particularly in terms of improving organizational commitment. This critique of the leadership models that only emphasize the use of transformational leadership provides a frank appellation of the importance of transactional leadership as an important style of leadership. Just as leaders need to be both autocratic and democratic at times; they also need to be both transactional and transformational at times also.
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