transformational leadership

What is transformational leadership?

Transformational leadership is a management philosophy that encourages and inspires employees to innovate and develop new ways to grow and improve the path to a company's future success. Using this method, executives give trusted employees the independence to make decisions and support new problem-solving approaches.

Transformational leaders are passionate about their work and the company's mission, while also helping all employees succeed. Another key trait is their ability to identify business processes that no longer work and focus on streamlining or changing them as needed.

While transformational leaders are often admired, they don't seek out praise or adulation because their focus is on doing what's best for their organization. Risk taking is calculated -- based on gathering intelligence from team members, the leader's own instincts and experience. Decisions are made with an eye toward the organization's values, vision and objectives.

Why is transformational leadership important?

There are many kinds of leadership styles. While some may benefit the individual leader or offer short-term results, transformational leadership inspires actions and habits designed to help an organization over long time periods. This approach has gained popularity because it can be the proverbial win-win, helping both the leader and organization succeed.

For example, rather than focus on tactics or short-term issues, a transformational leader gives priority to understanding what motivates individual employees and helps them focus on the company's long-term vision.

These leaders also aren't afraid to be challenged or consider constructive criticism. As a result, employees are empowered to share their ideas and offer constructive criticism of new directives. Leaders will also take risks and encourage suggestions from others so everyone has input into the team's accomplishments. Rather than a rigid leadership approach, transformational leaders practice team building and encourage coaching. Building confidence in employees' ability to succeed and learn from failures better prepares organizations for sudden changes, such as a reorganization or downsizing.

Learn how to build a team that works well together by focusing on three key factors.

Transactional vs. transformational leadership

Different managers may deploy different management styles depending on the situation and the needs of the organization. There are times when a more transactional approach is needed to make sure important short-term goals are met and operations are running smoothly. However, the transformational approach encourages business innovation, new ideas and longer-term objectives.

Transactional leadership

Transactional leadership uses structure and clear guidance to determine and communicate an employee's performance requirements. It also employs a system of rewards and punishments, depending on the results. This transactional leadership approach tends to favor short-term planning and results. While it is a more top-down approach than others, ideally, employees are given the resources they need to do their jobs effectively, and goals are mutually agreed to. So-called SMART -- specific, measurable, achievable, relevant and time-bound -- goals are set for employees.

Transactional leaders also practice management by exception, not getting involved if things run as expected. But negative results, such as missed sales goals or production delays, attract prompt attention.

Transformational leadership

While transformational leaders are responsive to issues and concerns as they arise, they are more proactive in encouraging new ideas and approaches on an ongoing basis. They focus on long-term or aspirational goals that are harder to quantify. However, the transformational leader puts more traditional, quantifiable goals -- such as a sales quota or positive customer feedback -- into the bigger picture.

Transformational leaders also encourage actions that help the team and company achieve organizational goals and their vision of success, motivating employees by appealing to their own self-interest. This is developed by letting employees be part of the decision-making process, which leads to more buy-in of agreed-upon goals. For example, a manager and employee might agree that response time to customer service inquiries has to be 10% faster to ensure greater customer satisfaction. But rather than simply following a management edict, the employee understands that meeting this goal is a sign of accomplishment for them and better for the company.

Where a transactional leader may react to negative results punitively -- e.g., a missed sales quota leads to lower commission or reassignment of sales prospects -- the transformational leader strives to fix the problem by more direct involvement -- e.g., joint sales calls to better understand the challenges the salesperson is facing or offering additional resources and training.

Transformational leadership characteristics

Transformational leaders have a set of distinct characteristics that, in a best-case scenario, build on and play off one another to create the most effective leadership approach. Those characteristics include the following:

• Embracing change. Transformational leaders embrace change and anticipate the effect it will have on an organization so they are prepared to handle challenges.
• Emotional intellige A willingness to collaborate, empathy and emotional intelligence are key traits of transformational leaders. In practice, they are self-motivated, resilient, and able to build trust and respect from those around them.
• Adaptability. Transformational leaders in information technology (IT) have the capacity to deal with fast-paced industry change and deploy complex technologies. They also recognize the implications of how these changes will affect other technologies, anticipating problems before they arise.
• Inspirational team player. Transformational leaders focus on the well-being of employees and the company instead of taking a me-first approach. When the team succeeds, they celebrate as a team and give credit where credit is due.
• Encouraging participation and communication. Transformational leaders take in ideas from all around them -- without judgment or knee-jerk reactions. They're able to communicate openly and honestly with employees, which, in turn, builds long-lasting trust.

Learn how Ford and Wayfair built trust with their employees by using Slack to enable communication between employees and executives.

Transformational leadership advantages and disadvantages

Getting employees to consistently meet and exceed goals is a key aspiration of leadership. Transactional leadership accomplishes this with rewards and punishments, while transformational leadership is more about inspirational motivation.

Advantages of transformational leadership

• These leaders have a less heavy-handed management approach, where employees are freer to experiment and suggest new ideas and approaches.
• Employees are encouraged to focus on what's good for the organization rather than their own self-interests.
• More new ideas and approaches come from the people doing the work, dealing directly with customers and production issues.
• Employees have a personal interest in the organization's goals, leading to greater commitment and effort in the workplace.
• An effective transformational leader unites the organization in a common cause.

Disadvantages of transformational leadership

• The transformational leader's inspiring, big-picture vision is not always paired with detailed directions of how to get there.
• If the vision is too grand or aggressive, employees can burn out or get discouraged trying to achieve it.
• By definition, a transformational leader brings change to an organization, but in some cases, that change can be too disruptive. Leaders must focus on the benefit to the organization, not change for the sake of change.
• There is always a risk that some employees won't agree with the transformational leader's vision. It doesn't mean they won't do their jobs, but it could be in a less-than-optimal way.
• A key part of being a transformational leader is keeping enthusiasm levels high and engaging with employees. This is best accomplished with ongoing proactive communication and encouragement, which can be time-consuming.

Here are three keys for leaders to measure employee engagement.

Transformational leadership training and certification

There are a number of free and paid transformational leadership training courses, seminars and certifications available that can help advance a career. Here's a sample of the trainings available:

• The American Management Association (AMA) offers paid classes in transformational leadership for both members -- at a discount -- and nonmembers.
• LinkedIn offers a course on transformational leadership for a small fee. It is free for LinkedIn Premium members or those who wish to do a one-month free trial.
• Udemy offers "Transformational Leadership -- Leadership Course & Training," which includes five hours of on-demand video for a fee.
• Georgetown University offers a paid certification program in transformational leadership.
• Coursera's "Transformational Leadership for Inclusive Innovation" is offered via the University of Toronto. It is available with seven-day free trial access and offers certification.

Examples of transformational leaders

Many transformational leaders have helped bring revolutionary products and services to the technology market, while also boosting profits and performance. Here are several examples of transformational leaders.

Steve Jobs

The late Apple co-founder and chief executive officer (CEO) was often referred to as a genius and visionary and inspired a wave of innovative product development during two tenures at Apple. In Apple's formative years, he inspired -- and demanded -- teams to create the most consumer-friendly hardware and software designs. His return to Apple more than a decade later was highlighted by products such as the iPod, iPhone and the iPad. He effectively communicated his vision that products meet high-quality standards and be consumer-friendly.

Satya Nadella

When Satya Nadella took over as CEO of Microsoft in 2014, he transformed the company. What was once a slow-moving tech giant focused on keeping its dominant position in the industry is a far nimbler and more open supplier that moved quickly to make its software available on all platforms, including that of its competitors.

Read this Q&A with Nadella on why empathy is important for technology innovation.

Jeff Bezos

The industry Jeff Bezos transformed when he started Amazon is now but a footnote to its mega-success. Amazon's initial success was as an online bookseller. As the company began selling other products, Amazon quickly grew to become the e-commerce giant it is today. Encouraging a corporate culture that's open to innovative approaches has paid off further. Amazon has helped launch the cloud computing revolution with Amazon Web Services (AWS), which was initially a homegrown solution to Amazon's own storage and computing needs.

Reshma Saujani

The former CEO and founder of the nonprofit Girls Who Code led a movement to close the gender gap in technology. In addition to leading the organization, Saujani promoted the core tenets of the organization with her book, Girls Who Code: Learn to Code and Change the World. She also recorded a TED talk, "Teach girls bravery, not perfection," that's gotten more than 4 million views.

Elon Musk

A key transformational leadership trait is establishing a vision an organization can understand and enthusiastically adopt. Elon Musk had a vision for electric vehicles that withstood early struggles and near-bankruptcy. Today, Tesla is one of the most valued companies in the world. His understanding of software also redefined what it means to be a successful car company. He is also one of those rare individuals to disrupt multiple industries, as Musk's SpaceX has been a leader in helping commercialize space travel.

Reed Hastings

The co-founder and co-CEO of Netflix helped change entertainment forever with its namesake service that has established streaming in the industry. Originally, the company shipped DVDs (digital video disc) for a monthly fee and later transitioned to streaming. Under Hastings's leadership, Netflix grew beyond being a delivery service to become a major provider of original content. Going a step further, Netflix developed complex algorithms about viewer consumption to make relevant content recommendations. A key element of Hastings's leadership has been his belief that the company needed to have the right culture. After meeting with employees to hear how they thought the company could best operate, he created an internal culture guide. Later, it was posted publicly online and became a screening tool that helped dissuade incompatible people from applying to work at Netflix.