Transformational Leadership Theory

Cite this article as:"Transformational Leadership Theory," in The Business Professor, updated April 9, 2020, last accessed October 24, 2020,


What is Transformational Leadership?

Transformational leadership theory posits that transformational leaders lead subordinates by aligning subordinate goals with the leader’s goals. Per this approach, subordinates adopt the interests of the company as their own interest. This is in stark contrast to transactional leaders, who focus on motivating behaviors through rewards.

Transformational leaders generally have four techniques or abilities that they use to influence employees and create a commitment to the company goals.

  • Charisma – This is behavior used to inspire confidence, commitment, and admiration.
  • Inspiration – The leader is able to motivate others by developing a vision that is inspiring to others.
  • Intellectual Stimulation – The leader encourages employees to be mindful and think creatively – which often goes against organizational norms.
  • Individualized Consideration – The leader has specific concern and empathy for the well-being of the subordinate.

While transformational leaders rely on their charisma, persuasiveness, and personal appeal to change and inspire their companies, transactional leaders use three other methods.

  • Contingent Rewards – Employees are rewarded based upon performance.
  • Active Management by Exception – Employees are left to do their jobs with interference unless the leader predicts a potential problem.
  • Passive Management by Exception – Employees are left alone until something happens that requires leader intervention.

Transformational leaders are thought to increase the intrinsic motivation of subordinates, allow for more effective employee relationships, augment creativity, foster organizational commitment, and improve overall performance.

The primary reason that transformational leadership is effective concerns the level of trust in the leader amongst subordinates. That is, subordinates have confidence in the judgment, values, and fairness of the leader’s decisions.

Thought leaders often demonstrate transactional and transformational styles at times.

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