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  • Writer's pictureDr. Cristina DiPietropolo

The Risks of Being a Transactional Leader

Transactional business leadership is an age-old approach to getting your team to perform. This leadership style values structure and order within each relationship and requires that guidelines be followed to achieve specific outcomes. It has been utilized in large organizations and military operations. This leadership strategy refers to behaviors where leaders reward employees for good performance or penalize them for unsatisfactory results.[1] Think of transactional leadership as being based more on reinforcement and exchanges.

The pressure for leaders to excel has never been higher.[2] Leaders are required to be agile and adaptable to pivot the trajectory of their organizations at a moment's notice. This added pressure may result in a more transactional leadership approach, with employees expected to meet all organizational performance demands. It can be an effective form of leadership in certain situations: to motivate team members to maximize productivity, create achievable goals for individuals, and eliminate confusion within the chain of command. However, it is not entirely without its own set of risks. While there are several inherent risks of transactional leadership, we will focus on management by exception and lack of praise to help you more effectively understand how to avoid the pitfalls of this type of leadership style.

Management by Exception

A major area of concern with transactional leadership is the idea of ruling by exception. In team leadership, this means you may tend to focus on what employees do wrong instead of what they do right. Feedback is provided in a negative manner as a corrective measure. Unfortunately, this can be particularly upsetting for employees who may feel the leader only focuses on their weaknesses rather than their overall contributions to the organization.

A Lack of Praise

In many cases, a transactional leadership style can lead to employees feeling unappreciated, where the leader focuses on simply meeting agreements rather than directly praising an employee. Positive feedback is not provided as employees are only doing their job and what is expected of them. Unfortunately, this type of leadership can be discouraging to some employees. It may trigger a lack of interest in taking on new projects in some cases due to a lack of appreciation.

Tips to Avoid These Risks There are certain steps that leaders must take to avoid the risks associated with this leadership style.

● Remember to Acknowledge Good Work—Be supportive and appreciative of your employees. Focus on their hard work and reward them for a job well done. Showing your employees a little extra care can help boost performance significantly.

● Offer Solutions—Avoid being a leader that gives a command and then leaves people to their own devices. This opens the risk that employees will flounder and struggle to accomplish tasks and may be fearful to ask their leader for guidance. Take an active interest in how your team gets the job done and champion them when necessary to help them overcome difficulties.

● Offer Immediate Incentives—To inspire employees, offer them clear incentives rather than just the promise of incentives down the line. Instead of rewarding individual efforts, consider monetary and non-monetary rewards based on collaboration and performance.[3] Keep your employees inspired, so they see the value in a job well done.


Transactional leadership can be effective in certain situations, but you must be vigilant to avoid the pitfalls. This leadership style creates more followers than leaders, so you need to be mindful of this approach's usefulness within organizations. By being aware of the risks associated with transactional leadership, you can build up your leadership skills and provide a greater leadership experience for your followers.

How do you get more out of your employees? Do you demand more from them, or do you invest in developing them?

Dr. Cristina Rosario DiPietropolo is the Founder and Chief Executive Officer at Leader Essentials Group, with extensive experience across multiple industries and highly skilled in the areas of strategic planning, organizational behavior, human resource management, change management, and leadership. Over ten years of teaching experience as a university professor of management, with a special focus on leadership in entrepreneurship, organizational behavior, and international management.

_________________________________________________________________________ [1] Jensen, U. T., Andersen, L. B., Bro, L. L., Bøllingtoft, A., Eriksen, T. L. M., Holten, A. L., ... & Würtz, A. (2019). Conceptualizing and measuring transformational and transactional leadership. Administration & Society, 51(1), 3-33. [2] Matthews, D. (2018). Are You A Transactional or Transformational Leader?, from [3]Tosunoglu, H., & Ekmekci, O. (2016). LAISSEZ-FAIRE LEADERS AND ORGANIZATIONS: HOW DOES LAISSEZ-FAIRE LEADER ERODE THE TRUST IN ORGANIZATIONS?. Journal of Economics Finance and Accounting, 3(1).

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