Learn about Resonant Leadership, Emotional Intelligence the six leadership styles and how to practically switch between the styles to become a more effective , flexible and impactful leader!

Transactional Leadership: Passive Management by Exception

Updated August 24, 2022 by Carl Lindberg

Passive Management by Exception leadership is a version of transactional leadership. The passive management by exception approach has both advantages and disadvantages, which will be shown with a few examples in this article. During my twenty year leadership career, I have seen plenty of leaders use passive management by exception, sometimes with good outcomes, and sometimes with bad. Let us start with a quick description.

What is passive management by exception?

Passive management by exception leadership gives team members more freedom to work and the leader only intervenes when errors are committed, or problems have arisen. Eventhough this reactive approach to transactional leadership provides more freedom, it still contains an element of punishment toward the employee who caused the problem.

Before we go deeper, I need to briefly introduce you to transactional leadership since passive management by exception, is one of three versions of this leadership style. If you are already well acquainted with transactional leadership, just scroll down and continue reading.

Passive Management by Exception: Introduction to transactional leadership

Transactional leadership can be seen as the more directive and less engaging sibling of transformational leadership, which belongs to the Full Range Leadership Model together with Laissez-Faire leadership, the lowest leadership style in the model.

Transactional leadership builds on a clear reward and punishment structure for different performance levels. This leadership style focuses on results, efficiency, and performance much more than on employees and personal relationships, which makes it seem almost opposite to transformational leadership. (Refer to our comparison here: Transformational leadership vs. transactional leadership).

Transactional leadership expands the bureaucratic leadership style, originally created by Max Weber under the name of rational-legal leadership and has been further developed during the 20th century. (You can find our detailed articles about bureaucratic leadership in our leadership styles portal, together with more than 25 other styles.)

There are three different components, or approaches, of transactional leadership. Besides passive management by exception, the other two components are active management by exception and contingent reward.

The three components of transactional leadership

Here are the three components of transactional leadership:

Contingent reward 

Contingent reward is a straightforward approach to rewarding the followers depending on task fulfillment and outcome. Contingent rewards include bonuses, promotions, recognition, and appreciation, for instance. We will describe this component thoroughly, with examples, in this article.

The active management by exception approach of transactional leadership involves controlling and monitoring activities and tasks and the performance and outcome in the end. The leader steps in and intervenes at an early stage, prompted by signs of problems or failure. This intervention will result in negative feedback, a reprimand, or another type of punishment.

As mentioned in the beginning of this article, passive management by exception approach gives team members more freedom. It prompts leadership intervention only when necessary, even if intervention comes later than in the active management by exception case. Like in the active case, failure results in a negative reaction towards the failing employee.

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 peoples performance; at some point, other factors start to matter more
  • The strict structure hampers creativity and innovation

There is much more to learn about transactional leadership. Feel free to read our article on this style here: the transactional leadership style, if you are interested.

Passive Management by Exception Leadership Explained

So, passive management by exception means that the leader intervenes reactively, i.e., when a problem has already occurred or a mistake has been committed, which has a bigger impact on the situation of the leader and the employees than you might initially think.

Employees are left alone to do their work and feel more trust than if their manager is checking the details and is constantly watching over their shoulders. This enables employees to plan and execute their work slightly more to their flavor than constantly adhering to a detailed breakdown of activities and processes. Do not get me wrong, we are still talking about transactional leadership here, so there is a strong element of control, but passive management by exception leader will essentially leave you alone to do your work until something bad happens. This brings a more peaceful work environment, as long as you are performing properly, that is, rather than in the case of active management by exception, which involves closer control and monitoring of each work task.

As with most transactional leadership approaches, passive management by exception works well in repetitive environments where a limited number of activities and tasks are performed over and over again and the performance can be clearly judged by the outcome.

The key to a good passive management by exception approach to leadership is to provide the necessary clarity for the employees and emphasize which situations will prompt intervention on part of the manager. This means employees clearly know what to expect and get a grasp of the do’s and dont’s in their work situation. Furthermore, if any wiggle room is allowed when it comes to how the work is done as long as the expected output is delivered, it should also be defined to a degree. The advantage is that some team members might find better and more effective ways to perform their work, allowing for some creativity which can be tapped into for process improvement and achieving a more general productivity boost within the entire team.

The over-arching problem with transactional leadership remains within the passive management by exception component, which is that errors and problems receive attention and punishment, whereas little feedback and focus are put on the things that go well. Remember to learn more about transactional leadership and the overall Full Range Leadership Model to which it belong. (A great and versatile leadership model by the way, which could radically improve your understanding of management and leadership.)

Situations when transactional leadership: passive management by exception can work

Passive management by exception can work in the following example situations:

  • Fast Food restaurant
  • Cleaning services
  • Warehousing
  • Manual labor in agriculture and low-complexity production environments

Just because it can work, does not mean that it is good. Let me give you an example of two different levels of approaching passive management by exception for a cleaning crew.

Cleaning services example of passive management by exception

Consider a cleaning crew working nights in offices, emptying trash cans, dusting, vacuuming, etc. Why monitor them and require strict adherence to rules and instructions beyond what is necessary for obtaining the right results?

In a strict commanding leadership or authority-obedience case, they might have to adhere to the following intricate instruction:

  • 19.00 Wipe tables
  • 19.15 Empty dust bins
  • 19.30 Vacuum carpets with vacuum cleaner A for area 1 and cleaner B for area 2
  • 19.40 Clean sinks and mop floor in the kitchen
  • 19.50 Clean the sinks and mop the floors in the restroom area
  • 19.50 Perform inspection round to lock for errors and mistakes

In a passive management by exception case, the instructions could be:

  • Ensure all tables are wiped
  • Ensure all carpeted areas are vacuumed and non-carpet areas are mopped, inclusive of any sinks
  • Empty all dust bins and remove any trash
  • Double check cleaning quality before leaving
  • The cleaning process needs to be performed between 19.00 and 20.00

This means the same job will be done since the basic requirements must be fulfilled. However, the cleaning crew can plan their work, what equipment to use, and in what order to do things on their own. Chances are that they will notice things that the manager creating the instruction will not. Let us say the kitchen is on the way out, meaning they have to walk over a freshly mopped floor, leaving marks. If left to decide on their own, they might clean the kitchen first in order to get a more effective process with better quality as an outcome. However, they will only get feedback if they do anything wrong in each case, and that feedback will be negative. Remember, passive management by exception means the leader will not intervene unless someone screwed up.

There are limitations with both of these examples, though since there are limited upsides for the employees to use this relative freedom. Why take chances when you only get attention if you do things wrong? Well, people generally feel happier and more engaged if they can put their personal touch on things and do not have to behave strictly like robots, so there should be some benefits in terms of employee engagement, although limited. They might also find more creative and better ways to perform their jobs if not instructed to the most minute detail.

Learn more about transactional leadership, including pros, cons, famous leaders, scientific aspects, and more: transactional leadership. If you are interested in more than 25 other approaches to leadership, visit our leadership styles repository.

Does the passive management by exception approach of transactional leadership work?

According to studies, passive management by exception is less effective than active management by exception and contingent reward, but more effective than laissez-faire leadership. While it ensures output and performance in a much better way than laissez-faire leadership and can provide some freedom compared to even stricter commanding leadership, it is a bad alternative. If you cannot provide your employees with positive feedback, some coaching, and being involved in their situation without not overly controlling them, then are you the right material to be a manager?

Even though passive management by exception is better than laissez-faire, which by the way is also described as “the absence of leadership” or “zero leadership”, it has the lowest complexity and performance in the entire Full Range Leadership Model. It is called Impoverished Leadership in another leadership model, which says it all.

In general, transactional leadership approaches only work to a certain level since most people require more intrinsic motivation to really perform and go the extra mile. Contingent reward at least provides incentives for performing better, and active management by exception can at least render a pat on the back, but passive management by exception only provides attention and negative feedback when you commit an error. Otherwise, you get pretty much no attention. Which employee would like and respect a manager who only shows up to scold you? Perhaps they would get some points for at least caring, which the laissez-faire leader hardly does.

To conclude: do not fall back to passive management by exception. In my book, using passive management by exception can only be caused by two things: an overstretched manager who only has time for negative attention, or an incompetent manager who knows nothing about motivating others. You are much better off using a stronger version of transactional leadership or any of the transformational leadership components instead. Read about the entire model here: Full Range Leadership Model, or consider the Goleman leadership styles based on Emotional Intelligence instead.

Refer to the main article on transactional leadership for sources.

Develop yourself with these products from Leadershipahoy.com

Intrapersonal Communication: Your Inner Dialogue

- Understand Your Thinking
- Self-Coaching
- Channel Your Thoughts
- Improve Social Skills

Leadership Styles
The Classics

- Learn the Lewin Styles:
Autocratic, Democratic,
Laissez-Faire Leadership
- Understand the Experiments And Conclusions

Leadership Origins

116 page E-book with Leadership Theories Over The Years: From Great Man And Trait Theory To Situational Leadership Theories

Pacesetting Leadership:
A CEO's Blueprint

- Master Pacesetting!

- Get results without unnecessary team stress

- Learn How to Push Performance from a CEO