Transactional Leadership: These are the type of leaders who value order and structure. The power is bestowed upon leaders from their formal position and authority in the organization.
Employees are motivated through a system of rewards and punishments. Expectation from them are clearly defined and communicated. They are given specific tasks, and clearly documented SOP (standard operating procedure). Employees are supposed to follow the structured rules and procedures and get the results. In return, they would be given the rewards in terms of money and other perks (like bonuses).
In other words, followers are punished for the non-compliance and the biggest assumption is that subordinates could be motivated only by simple rewards. Personal initiatives are not encouraged and creativity is limited.
These lead to
Leaders tend to be highly directive and action oriented
Relationship between leaders and followers tends to be transitory and not based on emotional bond
Employees may feel the lack of trust from leaders in their capabilities of doing something new. They must follow a certain way of doing things and get the results
Employees may find the work to be repetitive and boring over a period of time
Above mentioned factors often lead to low organizational commitment as employees develop continuance commitment based on the relative costs of staying or quitting. They decide to continue working at an organization based upon their perceptions of the degree of trust in their abilities of doing a meaningful work. They don’t feel important enough to continue working for an organization because of the perception that leaving will not impact the organization. Hence, we can say that this type of leadership is ineffective in creating the organizational commitment.
Laissez-faire leadership: This is the form of leadership where leaders allow group member to make their own decisions. This is based on trust. This philosophy requires the leaders to deliberately remain absent from interference in individual freedom of choice of doing work.
When the leaders in a company are of this mindset, they would give you high degree of freedom in terms of your daily decision making. “I want results. How and When to do is entirely up to you as long as it’s within timelines” You often get to hear such narratives.
This leadership style can be described to have following characteristics
Very little guidance from the leaders
Team is expected to solve the problems on their own
Leaders take responsibility of the actions and decisions of the group members
Lack of role awareness in the team
Poor involvement in the group
Passivity and avoidance
Now this style may work well in situations where the team is highly qualified and motivated by personal freedom of choice. But not in situations where the team members are those who like the direction and order in their lives.
As the team receive little to no guidance, they may not sure about their role within the group and what they are supposed to be doing with their time. They are not sure of the future career path, what will lead to a definite success. Such situations often may lead to ineffective time management by teams, resulting in ambiguous objectives which may not align with the organizational objectives.
These situations often lead to low organizational commitment. People may not feel the part of the team if they are unsure of their roles, future results. This may often lead to high turnover rate for the company.
Transactional leadership style would be effective in following organizations
MNCs where all don’t speak the same language
Project based companies (A power plant EPC contractors, and IT project companies)
laissez-faire leadership would be effective in following organizations
Product design field
Management consulting projects
Works best near the top of organizational hierarchy
R&D division for a pharmaceutical company
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