Transformational and transactional leadership in organizational change

Transformational and transactional leadership in organizational change

As companies fight for more market share and profit increment, change becomes an inevitable affair. According to Changar & Atan (2021), the recent economic downturn occasioned by COVID-19 has posed a great challenge to the competitiveness and sustainability of most companies. Consequently, companies no longer have the comfort of resting on their laurels to enjoy past achievements. Instead, they must be constantly challenging the status quo and be on the lookout for new and better opportunities. To achieve this, organizations initiate change through both transformational and transactional leadership.

Researchers have identified 8 steps taken by organization leadership take to effectively implement transformational change. The first few steps involve assembling a change leadership team, vision creation and developing an effective communication system devoted to the desired change (Maheswari, 2021). However, according to Vanesa (2021), these early stages of change management encounter significant levels of change resistance which must be overcome and achieve their visions.

This manuscript seeks to study a body of literature on how transformational and transactional leadership styles can be used to effectively manage change and achieve the desired organizational outcomes. The paper is divided into several sections. The first section introduces and defines both transformational and transactional leadership styles and the impact of each style within the organizational context. In his section, the paper will demonstrate how leadership is crucial in managing organizational change. In the second section, the paper will evaluate the concept of change resistance and what causes change resistance in organizations. The third section will give an overview of the concept of commitment, which is the direct opposite of change resistance and acts like the desired element of organizational change. Here, the paper will also discuss how both commitment and resistance occur within a given organizational context. Section five of this study will highlight the various outcomes that emerge from the above-mentioned change factors while the six-section will conclude the paper by discussing all the concepts.

Organizational environment this section sets the background for the discussion of organizational change and how both transformational and transactional leadership styles relate to it. It explores various concepts and the relationship between them. Key to discussions here is an organizational structure, communication between various hierarchical levels of the organization and the impact of organisational culture on commitment or resistance to change.

Due to the strategic importance of organizational change, most organizations introduce transformational change from the top levels of the organization (top management team, TMT), meaning that the departmental managers all report to the CEO (Antonopoulou et al 2021). In this, employees in the hierarchical positions closer to the TMT and who understand the strategic importance of change are more likely to embrace change while, contrastingly, employees in low-ranking positions and are less aware of the strategic importance of change are more likely to be pessimistic and cynical about it (Rajabi et al 2021). according to Achmad (2021), this strategic understanding gap is further worsened by the tendency of TMT to communicate more frequently among each other than they do with members of the lower ranks of the organization.

Gassemi et al (2021) defined hierarchical distance as the number of organizational levels between the TMT and employees. It is a crucial factor in the prediction of employee’s normative commitment to change. Against this backdrop, studies by Martínez-Moreno et al (2021) concluded that the TMT is often unaware of the eventual roadblocks to change implementation while the low-ranking employees (who are responsible for the daily running of the organization) are often aware of these potential roadblocks. Whereas the idea of change generally originates from the TMT, it must be implemented among all employees across the hierarchical levels (Maheswari, 2021). this implies that widespread pessimism and cynicism towards change may be the main factor hindering any attempts to successfully implement change. Based on the explained importance of the hierarchical gap as an influencer to organizational change, communication emerges as the most significant factor holding an organization together.

Organizational culture, defined as the behavioural patterns, beliefs and values forming the identity of an organization Stothard & Drobnjak (2021), has been linked with the concept of commitment and that some types of culture tend to facilitate commitment towards change (Mishra, 2021). more importantly, research by Alheet et al (2021) showed that both commitment and organisational culture have an impact on organizational financial performance. Ideally, to successfully implement organizational change, TMT must promote and impersonate the values that are in congruence to the desired change. This may include influencing the culture to obtain the desired level of commitment.

Successful implementation of change requires a combination of variables that interact at various organizational levels i.e. organizational culture, employee predisposition to resist or commit to change, and the hierarchical distance between the top management and lower ranks of the organization. However, some studies (Martínez-Moreno et al 2021, Khadka 2021, Donkor et al 2021) argue that may never, or rarely manage to successfully implement change due to the adoption of wrong leadership styles. This observation highlights the need for a competent application of leadership style to achieve the desired change outcomes.

As such, Anastasiou & Garametsi (2021) wrote that various leadership abilities and skills are associated with successful change implementation including the ability to effectively communicate, build and reward teams, motivate, coach and involve the teams in decision-making. Studies by Melvin et al (2021) also acknowledge the skills of motivating others and effective communication abilities as some of the most important leadership skills that are useful in change implementation. Considering that most of these skills are related to transformational leadership skills, it is possible to conclude that the transformational leadership style has a positive correlation with successful change implementation (Frias et al, 2021).

Nevertheless, it is important to consider the various situations in which various leadership styles apply to organizational change implementation. An overview of existing literature materials on this topic area reveals that transformational leadership is viewed as the natural way to implement organizational change, while transactional leadership is viewed as a means for maintaining the status quo (Lauer et al 2021). However, Achmad (2021) argued that both transactional and transformational leadership styles complement each other in leading organizational change. He highlighted the roles of each leadership style with an emphasis that delineated goals, visions, and responsibilities are essential in the change implementation process.

Transformational leadership, according to Changar & Atan (2021), is important in shaping employees’ valuation and perception of TMT’s change communication. Similar remarks were made by Stothard & Drobnjak (2021) who noted that transformational leaders are more likely to display a good balance of behaviours that are relevant to transformational leadership and are best applicable in the early stages of the change implementation process. On the other hand, according to Vanesa (2021), transactional leadership is more essential throughout the change implementation process. However, Changar & Atan (2021) wrote that apart from influencing the outcome of change implementation, employee commitment to change and resistance to change can also interact with leadership styles to impact organizational effectiveness.

Achmad (2021) defined organizational effectiveness as the extent to which an organization can use its resources to achieve its objective without unduly straining both its members and its resources. On the other hand, Achmad (2021) defined leadership effectiveness as the application of proper leadership behaviours in a way that contributes to organizational effectiveness at both group level and organizational level (Maheswari, 2021). however, performance can be measured either objectively or subjectively.

In objective performance measurement, according to Changar & Atan (2021), managers mostly consider financial metrics such as margins, sales growth, ROIs, market share and costs per unit, among others. Even though quantifying the financial benefits of transformational leadership behaviours is a challenging task, evidence by Stothard & Drobnjak (2021) suggest that by enhancing employee commitment, transformational leadership can facilitate positive changes in some financial aspects of the organization. Indeed, transformational leadership was perceived as a predictor of business unit performance (Maheswari, 2021). Similarly, Achmad (2021) acknowledged that goal setting and training interventions can facilitate the enhancement of transformational behaviours – a phenomenon that is an attribute of transactional leadership because it involves a clear set of performance expectations. Nonetheless, focusing only on the objective measurement of organizational effectiveness may not effectively reveal the role of transformational and transactional leadership style in facilitating effective organizational change. Below is an overview of subjective performance.

The role of leadership styles in creating effective organizational change can also be evaluated through some subjective measurements of organisational performance. In this regard, Rajabi et al (2021) wrote that some of the subjective measurements of organizational performance include survival, group performance, growth, goal attainment and organization’s prepared to deal with emergencies, staffs’ satisfaction with the organization’s leadership, commitment to organizational goals and employee psychological well-being. Against this backdrop, Rajabi et al 2021 argued that the main aim of transformational leadership is to improve organizational effectiveness through social performance. To this end, studies by Changar & Atan (2021) facilitates employees’ ability to identify with the work units, means of efficiency and self-efficacy, all of which have been attributable to positive job performance. Many studies (e.g. Achmad, 2021) show that whereas laissez-faire leaders can achieve exactly the opposite of positive job performance, transformational leadership has a positive correlation with job commitment, performance and satisfaction (Maheswari, 2021).

Moreover, a review of the literature reveals a general trend in the body of literature also reveals that most researchers perceive transformational leadership to be more important than change-oriented leadership in developing a follower behaviour conducive to effective organizational change (Antonopoulou et al 2021). Similarly, literature also reveals that transformational leadership plays an important role in managing employee resistance to organizational change. This implies that change-oriented leadership alone is not enough to successfully address change resistance in the context of implementing new organizational innovations.

In another study by Herold et al (2008), it was observed that change commitment is more related to transformational leadership than change-oriented leadership especially when the intended change has a significant personal impact on employees. However, effective change management practices were associated with higher levels of change commitment in the absence of transformational leadership, indicating that the impact of change-oriented leadership is a function of existing transformational leadership and the extent to which the change personally impacts people.

On one hand, much of the impact of leadership style on effective organizational change concerns the perception of change held within the organization, the implications of the leadership styles and how change is managed from the top positions as well as among employees (Maheswari, 2021). on the other hand, according to Changar & Atan (2021), transformational leadership plays an important role in influencing employees’ perception of the top management’s communication regarding change implementation.

As leaders implement transformational change management, employees must adapt to various factors within the work environment – requiring the organizations to change by solving problems by learning from the problem-solution process (Maheswari, 2021). Therefore, organizational learning becomes an important aspect of the transformational change process because as Stothard & Drobnjak (2021) remarked, the best way to cope with change is to engage in a continuous process of learning. Moreover, committed employees always try to contribute to the change and this can be facilitated through an institutionalized organizational learning process. As a result, according to Rajabi et al (2021), good transformational leaders include organizational learning as part of their execution strategies. Conversely, leaders who ignore organizational learning become more reactive and less likely to reflect organizational capabilities and market realities.

While implementing effective organizational change requires the management to acknowledge the importance of learning and respond to this knowledge accordingly, various attributes of transformational leadership such as inspirational motivation, individualised consideration, intellectual consideration, and idealized influence are positively related to organizations that are learning-oriented (Antonopoulou et al 2021). according to Vanesa (2021), transformational leadership infuse a sense of enthusiasm and has a compelling vision that constantly reflects on their followers. As the followers strive to emulate their leaders, they develop a more productive attitude that ends up developing learning-friendly behaviours (Maheswari, 2021).

More importantly, according to Changar & Atan (2021), transformational leaders stimulate the intellectual capacity of their followers and provides them with personalised support to help them address the challenges they meet on their course of duty. Consequently, organizations with transformational leaders develop dynamic capabilities for reshaping, recreating and assimilating the necessary knowledge in the ever-changing business competitive environment Vanesa (2021).

Based on the complex interaction between leadership styles, organizational outcomes and resistance to change, achieving a successful change implementation requires managers to continuously be conscious of two factors: their leadership styles and the organizational context within which they intend to implement change. However, studies by Stothard & Drobnjak (2021) indicate that doing so requires a continuous evaluation of the most appropriate behaviours (in the context of organizational culture, the stage in process of change and hierarchical distance) and how modifying those behaviours can potentially affect organisational outcomes. Implementing change correctly when the organizational requirements no longer match with the leadership[p behaviour is important in attaining effective organisational change within the ever-changing business environment.

The different degrees of transformational and transactional leadership is important in the successful implementation of organizational change. Through transactional leadership, organizations can reinforce positive behaviour by maintaining ongoing control over performance inputs, contingent rewards and acting as short and medium-term support of the organization. On the other hand, transformational leadership acts as an appropriate foundation for successful implementation of organizational change by enabling an easier adoption in the form of organizational readiness, whereby the transformational mindset acts as a catalyst for long-term organizational growth.

As such, it is appropriate to claim that transformational leaders are the real agents of organizational change. According to Vanesa (2021), they are visionary leaders who motivate or influence teams to achieve their best in business performance. Furthermore, Vanesa (2021) argued that transformational leaders highlight the importance of collaboration and facilitate teamwork to achieve the best level of organizational performance – instead of running the daily organizational tasks.

As they focus more on team building, transformational leaders ensure that they operate in an environment of clearly stated vision, set examples, establish standards and develop an appropriate organisational culture (Maheswari, 2021). Regarding organizational vision, according to Stothard & Drobnjak (2021), transformational leaders envision where they expect the organization to be in future and communicate those visions across all levels of the organization to motivate them towards excellence. On the other hand, Changar & Atan (2021) noted that transformational leaders set examples by exemplifying good behaviour that they would like their followers to emulate. More importantly, transformational leaders develop and orient followers on the desirable standards and norms through a predetermined pattern of behaviour that facilitates the achievement of organizational goals.

The other important roles that transformational leaders play in change implementation is the development of effective communication and liaison, talent acquisition and development. According to Vanesa (2021), transformational leaders develop the connection between the organization and the external world, acting as the main point of contact well0-known to other stakeholders. Through their communication and liaison, transformational leaders can provide the necessary assistance to stakeholders including technological assistance, resource support, and best business practices in organizational leadership (Maheswari, 2021).In team building and development, transformational leaders participate in the identification of suitable talent that would effectively oversee organisational change (Maheswari, 2021). Upon identifying the best talent, according to Vanesa (2021), transformational leaders participate in talent development to ensure they align their skills to organizational objectives.

From the reviewed literature, transformational leadership seems to have various advantages that make it a preferred leadership style for organizational change. According to Vanesa (2021), transformational leadership encourages creativity and innovation at the workplace by developing employees’ enthusiast towards work in a challenging work environment. By encouraging innovation, transformational leadership provides adequate opportunity for individual growth and the ability to achieve desired performance standards (Antonopoulou et al 2021).

The other significant advantage of transformational leadership is that it facilitates change within the existing processes by creating a higher expectation among followers (Frias et al, 2021). according to Rajabi et al (2021), this motivates followers to perform beyond what is expected of them. Consequently, transformational leaders guarantee high performance among teams and increases organizations’ general productivity.

But a few researchers have also pointed out some disadvantages of transformational leadership. For instance, Changar & Atan (2021) argued that even though transformational leaders can see the broader picture of the organization, they might not have the detailed orientation needed to achieve the visions. Therefore, according to Vanesa (2021), transformational leaders require support from transactional leaders, who are more detail oriented. On the same note, Stothard & Drobnjak (2021) pointed out that transformational leaders have an overdependence on emotional, passion and inspirational aspects of organizational change management, which may lead them to neglect realities and facts received from information gathering, investigation and research.

Dig deeper into Transactional and Transformational Leadership with our selection of articles.

References

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Anastasiou, S. and Garametsi, V., 2021. Perceived leadership style and job satisfaction of teachers in public and private schools. International Journal of Management in Education, 15(1), pp.58-77.

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McClean, S.T., Yim, J., Courtright, S.H. and Dunford, B.B., 2021. Transformed by the family: An episodic, attachment theory perspective on family–work enrichment and transformational leadership. Journal of Applied Psychology.

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Mishra, S.S., 2021. Leadership of Political Policy Entrepreneurs: a Comparison of Transactional and Transformational Styles. Public Organization Review, pp.1-15.

RAJABI, K.M., GÜNEY, S. and GÜRÜL, B., The Effect of Transformational and Transactional Leadership Behaviours on Organizational Culture. Florya Chronicles of Political Economy, 6(2), pp.193-220.

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Vanesa, V.H., 2021. The Effect of Transformational and Transactional Leadership on Employee Negative Behavior Mediated by Work Stress. International Journal of Science, Technology & Management, 2(1), pp.368-376.