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Transactional Leadership vs. Laissez-Faire Leadership

Updated August 24, 2022 by Carl Lindberg

This article describes the differences and similarities of transactional leadership and laissez-faire leadership. In my leadership career leading up to my role as a CEO, I met both transactional and laissez-faire leaders, and I have also read lots of literature on both styles. I have combined my experience and knowledge when comparing transactional and laissez-faire leadership below.

Before we go into the actual similarities and differences between the styles, I want to introduce both of them to you real quick. In case you are already familiar with them, simply scroll down a bit.

Introduction to Transactional Leadership

Transactional leadership is built on a clear structure of reward and punishment for different levels of performance. It is focused on results, efficiency, and performance rather than people and relationships. Transactional leadership is often seen as the opposite of transformational leadership. 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 peoples performance; at some point, other factors start to matter more
  • The strict structure hampers creativity and innovation

Introduction to Laissez-Faire Leadership

Laissez-faire leadership is a hands-off leadership approach where team members make all the decisions. Laissez-faire leadership leads to low productivity and a perception of a disengaged leader but can work in skilled, capable, and self-motivated teams.

Laissez-faire leadership has the following advantages:

  • A highly skilled and experienced team can truly thrive
  • Team members have creative freedom
  • The retention rate of experts can increase

Laissez-faire leadership has the following disadvantages:

  • Teams that need consistent guidance fall apart
  • The leader is viewed as uncaring and absent
  • Productivity decreases
  • Team members are confused about their roles

You can read much more about this leadership style in my book Leadership Styles Classics: Autocratic, Democratic and Laissez-Faire (Amazon) or go to our main article on laissez-faire leadership, or check out our leadership styles test (new tab) to see if you are a laissez-faire leader yourself.

Differences between transactional and laissez-faire leadership

Transactional leadership and laissez-faire leadership actually belong to the same leadership framework, the Full Range Leadership Model, which means they have been defined as two separate things, which means there are plenty of differences between them.

The key differences between transactional and laissez-faire leadership are:

  • Transactional leaders are more engaged in the team’s output than laissez-faire leaders
  • Laissez-faire leaders present little to no feedback to employees, whereas transactional leaders focus on giving negative feedback to team members
  • Transactional leadership is based on clarity, rules, and processes, and laissez-faire leadership has very weak or no structure at all
  • Employees see laissez-faire leaders as disengaged or even uncaring, where transactional leaders are seen as very task-oriented, focusing little on people and relationships
  • Transactional leadership has three different components with different levels of engagement and performance. Laissez-faire leadership does not have different versions.
  • Laissez-faire leadership belongs to several leadership models, FRLM as well as the Lewin styles, while transactional leadership only belongs to one model, which is FRLM
  • Laissez-faire can only really work well with experienced and highly skilled employees in creative environments, while transactional leadership suits better for low-skill repetitive environments

Similarities between transactional and laissez-faire leadership

Despite being defined as two separate leadership styles, transactional and laissez-faire leadership do have some things in common.

The key similarities between transactional and laissez-faire leadership are:

  • Both transactional and laissez-faire leadership are part of the Full Range Leadership Model.
  • Both laissez-faire and transactional leadership are seen as relatively low levels of leadership, resulting in low to medium performance
  • Neither laissez-faire nor transactional leadership build motivation or engagement among employees
  • There is little to no people focus within transactional and laissez-faire leadership

Summary on transactional vs. laissez-faire leadership

While neither leadership style should be the top ambition of any serious leader, both styles can actually work under the right conditions, although laissez-faire is less likely to achieve any major performance. Both leadership styles are part of the Full Range Leadership Model, where transactional leadership is seen as slightly more evolved leadership than laissez-faire, which is considered “zero leadership” to a degree. The bottom line is that you should avoid laissez-faire leadership and use transactional leadership sparingly and in the right environments, and hopefully only in a transition period where you continue to evolve your leadership into transformational leadership.

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