Transactional leadership includes a range of structures and precise regulations within its relationships, and this approach has its benefits and drawbacks.
The strong feature of this strategy implies motivating employees to do their best to fulfill their responsibilities (Dartey-Baah, 2015). In addition, it is possible to establish achievable aims for workers of different departments. The last advantage is avoiding confusion and misunderstanding within the chain of services. However, despite the attractive benefits of transactional leadership, there are some weaknesses in this approach. First of all, it prevents employees from revealing individuality while performing their duties (McCleskey, 2014). Second, transactional leadership contributes to limiting the amount of innovation that is possible to create during the production process (Dumdum, Lowe, and Avolio, 2013). Lastly, supplying strict rules does not intend to develop leadership skills among staff members.
Some of the features of transactional leadership may be evident in the example of a large commercial bank in some aspects. The whole operation is divided by function, and each department has its executive. All the staff members are provided with precise regulations and standards, which they are required to follow at their workplace. However, predominantly, the bank sticks to a combination of authoritative and democratic leadership.
In general, the strategy of servant leadership may be effective in the long run. It contributes to creating a healthy, supportive, and positive working environment (Robert et al., 2013; Sihombing et al., 2018). Moreover, it helps to achieve better collaboration between employees and create a strong team of workers devoted to an organization and interested in its development (Rasheed, Lodhi, and Habiba, 2016). They are motivated to improve their knowledge and update their skills, which allows achieving high results (Mukonoweshuro, Sanangura, and Munapo, 2016). During crises, this strategy may be useful for avoiding high turnover rates and losing talented employees which occupy key positions (Goulet, Jefferson, and Szwed, 2012; Northouse, 2016). Therefore, it may be relevant in banking organizations, which have to cope with crises regularly.
Dartey-Baah, K. (2015) ‘Resilient leadership: a transformational-transactional leadership mix’, Journal of Global Responsibility, 6(1), pp. 99-112.
Dumdum, U.R., Lowe, K.B. and Avolio, B.J. (2013) ‘A meta-analysis of transformational and transactional leadership correlates of effectiveness and satisfaction: An update and extension’, Transformational and Charismatic Leadership: The Road Ahead 10th Anniversary Edition (Monographs in Leadership and Management), 5, pp. 39-70.
Goulet, L., Jefferson, J. and Szwed, P. (2012) ‘Leadership is everybody’s business, T+D, 66(8), pp. 48-53.
McCleskey, J. A. (2014) ‘Situational, transformational, and transactional leadership and leadership development, Journal of Business Studies Quarterly, 5(4), pp. 117-130.
Mukonoweshuro, J. Z., Sanangura, C. and Munapo, E. (2016) ‘The role of servant leadership and emotional intelligence in managerial performance in a commercial banking sector in Zimbabwe, Banks and Bank Systems, 11(3), pp. 94-108.
Northouse, P.G. (2016) Leadership Theory & Practice, 8th Edition. Los Angeles: Sage Publications.
Rasheed, A., Lodhi, R. N. and Habiba, U. (2016) ‘An empirical study of the impact of servant leadership on employee innovative work behavior with the mediating effect of work engagement: Evidence from Banking Sector of Pakistan’, Global Management Journal for Academic & Corporate Studies, 6(2), pp. 177-190.
Robert, C. et al. (2013) ‘Servant leadership and serving culture: Influence on individual and unit performance, Academy of Management Journal, 57(5).
Sihombing, S. et al. (2018) ‘The effect of servant leadership on rewards, organizational culture and its implication for employee’s performance’, International Journal of Law and Management, 60(2), pp. 505-516.