May 13, 2024

Transactional vs. Transformational Leadership: Impacting Change in Healthcare

Clinician Leadership | Leadership Development

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This isn’t a battle between good and bad leadership styles. Both transactional and transformational leadership approaches have a place in a healthcare leader’s toolkit. But to drive and sustain meaningful change, understanding their differences and applications is crucial — particularly in complex, ever-changing environments like healthcare.

What is the difference between transactional and transformational leadership?

Transactional Leadership

As the name implies, transactional leadership is most concerned with specific performance targets and rewarding employees when they meet those targets. Think sales quotas, production lines, or vaccination drives. 

According to the Michigan State University, transactional leadership is most effective in situations where teams are working under strict time constraints to deliver on a project, or where financial resources are limited. To that end, effective transactional leaders are quick to recognize and reward an employee’s accomplishments. 

Transformational Leadership

Transformational leaders focus on nurturing employees, emphasizing creative problem-solving, and prioritizing personal and professional growth. “Rather than micromanage, transformational leaders foster an independent workplace that promotes creativity, desires innovative thinking and empowers employees to make their own decisions in their work,” writes the Michigan State University.

To achieve that, MSU identifies four pillars of transformational leadership: 

  • Intellectual stimulation: encouraging new experiences and ways of thinking.
  • Individual consideration: supporting personal and professional growth.
  • Inspirational motivation: imparting a shared vision that employees internalize and make their own.
  • Idealized influence: modeling the behaviors you wish to see in employees.

Transformational leadership works well in organizations that want to develop talent and not just meet immediate production, performance or sales quotas. It is also a more effective approach for uncovering new solutions, especially in organizations or industries where innovation is critical. 

Transactional LeadershipTransformational Leadership
FocusOrganizational efficiency, quotas, employee supervisionOrganizational change and talent development
ApproachMaintains proven processesFosters creative problem-solving
Best forTight deadlines, specific performance or revenue targetsInnovation, culture building, developing talent, driving change
CautionTransactional leaders often struggle to innovate, create long-term strategies, and develop employees.Transformational leaders may lack attention to detail because they’re less concerned about daily workflows and processes.

Finding the right balance: Which is most effective?

Despite their differences, transactional and transformational leadership styles aren’t mutually exclusive. A blended approach is often preferred, but they work best in different situations, depending on the desired outcomes, experts note.

As the American Management Association explains it, transactional leadership is best suited for scenarios where compliance with standard procedures is paramount and individual performance can be quantified. Transformational leadership, in turn, excels when significant change is needed, whether to seize a competitive advantage, resolve internal issues, or both.

Most leaders you know probably fall somewhere in the middle of transactional and transformational, sometimes described as “transitional.” As the AMA explains it, a transitional style emphasizes milestones and reinforces the connection between short-term priorities and long-term goals and vision. “On the downside, transitional leadership tends to promote a short-term mentality, which is already a problem for most organizations,” the authors caution.

Healthcare needs transformational leaders

As new challenges arise in healthcare, leaders can’t keep looking to past or current practices for new solutions. Rather, healthcare desperately needs leaders to build their transformational muscle, growing their ability to inspire, influence others, innovate and sustain change. 

To do so, leaders must find new ways of thinking and operating, which is where transformational leadership shines. Additionally, research suggests transformational leadership is ideal for shaping how employees perceive and respond to organizational change.

Because becoming a transformational leader requires behavioral change — both in yourself and in the people you lead — it’s often not a competency you can develop on your own. It’s why many healthcare leaders seek out MEDI Leadership coaching. Our methods are rooted in solid research on how humans are wired to learn and change, and the behaviors needed to drive meaningful transformation in complex conditions.

Looking to build your transformational leadership competencies? Talk with a MEDI Leadership expert to explore your options and gain clarity on next steps. You’ll receive helpful guidance, even if we don’t end up working together. Contact us to schedule a complimentary consultation.

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About the author

Deena Fischer, MA, ACC

A certified executive coach, Deena Fischer, MA, ACC leads business development and operations for MEDI Leadership.

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