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Charismatic Leadership vs. Transactional Leadership

Updated September 23, 2022 by Carl Lindberg

This article contrasts and compares charismatic and transactional leadership, two very different leadership styles. Let us start with short introductions and background of both leadership styles before we go into an actual comparison of charismatic vs. transactional leadership.

Introduction to Charismatic Leadership

Max Weber created a definition of three types of leadership authority: charismatic, traditional, and bureaucratic leadership, as ways to exert power over others. The charismatic style was depending on the persona and personality of the leader to a very high extent. This person would be perceived as extraordinarily gifted by the followers, according to Weber’s theory.

Charismatic leadership focuses on influencing and inspiring others. Charismatic leadership is tightly connected with the persona and charisma of the leader, it is more personality bound than any of the other leadership styles. The charismatic leader often connects to his or her personal view on morals and passion. The charismatic leader also plays on the emotions of his or her followers, who, in turn, recognize and appreciate the morals and passion of their leader. Where does the line between charisma and leadership skills go?

Charismatic leadership is when a leader uses charismatic qualities to inspire others. Charismatic leadership can be very inspirational and motivational, leading to unity and engagement. Charismatic leadership risks becoming an autocratic one-man. Dr. Martin Luther King Jr is an example of a charismatic leader.

The advantages of charismatic leadership are:

  • Charismatic leadership inspires people to work together and unitedly for a common cause
  • Organizations led by a charismatic leader often show high levels of commitment and purpose
  • There is high clarity when it comes to roles and organizational objectives
  • Being part of something “bigger” than yourself can accelerate productivity and engagement among the members

The disadvantages of charismatic leadership are:

  • Charismatic leadership can become locked together with the leader’s persona. This makes succession planning difficult or even impossible.
  • Charismatic leaders can overestimate their own importance, believing they are above everything else. This could result in a violation of the law, and moral codes and shutting out other opinions, ultimately leading to autocratic leadership.
  • If the vision or “cause” is a bad one, it can lead to the demise of the organization
  • A high level of obedience limits transparency, and inspiration can be risky – people might simply agree to whatever the charismatic leader says.

All the above information is taken from our main article on charismatic leadership, which I suggest you read for a more profound understanding of this rather risky leadership style. (The risks are explained in more extreme cases in the article about the dark side of charismatic leadership.)

Introduction to Transactional Leadership

Transactional leadership is based on a system of rewards and punishment with a strong focus on results, reminding us of Scientific Management. This leadership style assumes low or no self-motivation at all among the employees, so a strict transaction-based system with built-in incentives is used instead, radically different from its sibling style of transformational leadership.

The core of transactional leadership consists of a clearly set exchange between the leader and the employee. A framework of rules and guidelines stipulates what reward or punishment an employee will receive if he or she performs various actions resulting in different outputs. At the end of the day, both parties would gain from the same outcome – the employee gets rewarded for good performance and the leader reaps the benefit of good output. Transactional leadership belongs to the Full Range Leadership Model together with transformational and laissez-faire leadership, so it is merely a subset of an overall leadership toolbox.

Transactional leadership has three different maturity levels or approaches: Active management by exception, passive management by exception, and contingent reward.

Advantages of the Transactional Leadership Style:

  • There is a clear connection between performance and rewards
  • It can be very productive, especially when it comes to short-term results
  • Clear order, structure, and rules, enabling repetition and swift onboarding of new team members

Disadvantages of the Transactional Leadership Style:

  • The sole focus on performance can be demotivating and disengaging
  • Rewards have a limited impact on people’s performance; at some point, other factors start to matter more
  • The strict structure hampers creativity and innovation

You can read much more about this interesting style in our main article, from which the above is a summary. Click here to read more: Transactional leadership.

Differences between charismatic leadership and transactional leadership

As with servant leadership vs. charismatic leadership, the differences between transactional and charismatic leadership are huge. Despite being able to write easily twenty aspects of how they differ, let me focus on a few of the biggest ones.

The differences between charismatic and transactional leadership are:

  • Charismatic leadership builds on the leader’s personality, which is given little to no space in transactional leadership
  • Communication and influence are key in charismatic leadership, while transactional leadership builds completely on preset rules and instructions
  • Transactional leadership focuses on repetitive tasks in the short-term, while charismatic leadership involves a long-term vision
  • Charismatic leadership includes leading others with a purpose, and building unity along the way, while transactional leadership sees the followers as producers being cogs in a machine built on doing what you are told
  • Charismatic leadership leads to stronger loyalty among the followers

Similarities between charismatic leadership and transactional leadership

The similarities between these styles are few, but there are some, so let us take a look.

The similarities between charismatic and transactional leadership are:

  • There is little participation in decision-making
  • Both styles build on autocratic tendencies with strong leaders who make most of the decisions

Charismatic leadership vs. transactional leadership – Summary and Conclusions

So, to summarize, there are very few similarities between these ways of leading. It is almost like comparing apples and oranges, which are both fruit but remain different in so many other ways. Of course, it will be easier to get others to do as you wish by using personal charisma, but that is common for most, if not all, leadership situations.

Further reading

Check out our leadership styles portal for loads of interesting articles, or see these specific ones:

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