Are You A Transactional Or Transformational Leader?


Time and time again, in my executive coaching, I witness senior leaders demand increased productivity and performance from their people. This impulse is likely being driven by our ever-evolving, ultra-competitive, and fast-paced business environment, riddled with volatility, uncertainty, complexity and ambiguity (also known as VUCA).

The pressure for leaders to excel has never been higher. The VUCA environment places demands on top leaders to stay agile and competitive by accelerating business growth at a blistering pace.

What I have found is despite the insatiable appetite of increased demands on employees, leaders fail to fuel their team with proper growth and development. According to a 2015 Right Management survey, 68% of employees agreed that their managers aren’t actively involved in their development.

It’s time for leaders to step up their development investment game if they want more out of their people. They need to give more to get more.

Leaders who expect more from their people yet fail to develop them are what I call “transactional leaders.” They are focused on performance, driving hard and getting the job done. All of these aspects are important, but transactional leaders care very little about the learning and growth of their team. On the other hand, a “transformational leader” values learning, growth and development. In the long run, it’s the transformational leaders who get more out of their people because they give more to their people. Which one are you?

Transactional leaders need to reprioritize and leverage human capital development to drive performance and other key business success metrics. The Center for Creative Leadership reports that investment in leadership development improves bottom-line financial results, attracts and retains top talent, drives strategic execution and increases success in navigating change. We know all the benefits of development but most leaders, from my experience, fail to make the shift to focus on the developmental journey of their team.

The reality is if learning, growth and development are not prioritized, then your team’s productivity, performance and engagement are destined to plateau and/or implode. In fact, according to Gallup, the most expensive mistake a leader can make is failing to engage their people through development.

Focusing on drivers for engagement, like development, gets exactly what leaders need out of their people. According to 2016 research by Gallup, engaged employees lead to an increase of 10% in customer loyalty/engagement, 21% in profitability, 20% in productivity and a 40% reduction in turnover. However, globally, employee engagement is sitting at a paltry 13%, with an astounding 24% actively disengaged. Gallup estimates that disengagement alone costs American businesses $450 billion to $550 billion in lost productivity per year.

If I take a step back for some perspective, all this tells me is transactional leaders who expect more — but won’t give more — get less out of their people.

All this information sets us up beautifully to discuss the question that is probably on your mind: How much do I spend on development? Training Magazine categorizes average training budgets by company size. Large companies of 10,000-plus employees are budgeting for $13 million. Midsize companies of 1,000-9,999 employees are spending roughly $3.7 million on training. Lastly, small businesses of under 1,000 employees are spending $290,000 on training. Where is your organization on this spectrum?

I’d like to conclude this article by challenging you to take a deeper look at how you get more out of your people. Despite the day-to-day pressures, do you demand more or develop more? How you answer this question will ultimately determine the true potential of your leadership.


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