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Transformational leadership: How to unlock your team's potential

Future of work
Team photo from Montreux, Switzerland

Each type of business requires a different kind of leader. If you look at every successful company in the world, you'll find that the people at the top all adopt a leadership style that suits them and their companies.

Richard Branson, the founder of Virgin Group favours an affiliative leadership approach whereas Larry Page and Sergey Brin, the founders of Google, preferred a combination of laissez-faire and democrative leadership.

When you're finding a style that works for you, it's worth weighing up the options before deciding which is right for you and your company.

That's why we're back with another leadership style for you to consider: Transformational leadership.

This leadership style is centred around inspiring and motivating teams to exceed their expectations. It focuses on empowering each team member to reach their full potential and help use their skills towards the company's goals.

In this article, we look into the characteristics of transformational leadership, its benefits and challenges and real-life examples of successful transformational leaders.

Read on to find out if it's the leadership style for you.

What is transformational leadership?

Transformational leadership

Transformational leadership is an approach that encourages change through inspiration and vision.

It's about motivating teams to achieve above and beyond usual expectations by creating a culture of trust and innovation.

It's up to the leaders to create this environment and lead their teams towards those goals.

What is transformational leadership theory?

This approach was first introduced in 1978 by James MacGregor Burns who said that leaders can inspire and motivate their teams to surpass their limitations and achieve more.

As part of this theory, Burns shared four core components: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration (more on this later). [SOURCE]

Burns found that these four elements are what help leaders become role models, inspire shared goals, challenge conventional processes and develop a trustworthy environment.

Key traits and characteristics of a transformational leadership style

Let's look at the four pillars of this leadership style in more detail. As a reminder, these are: idealised influence, inspirational motivation, intellectual stimulation and individualised consideration.

Idealised influence

Transformational leaders act as role models to their teams. They demonstrate high ethical standards which earns them the trust and respect of their employees. They're charismatic and inspire others through their actions and values.

These leaders:

  • Prioritise the needs of their team over their own
  • Take calculated risks
  • Stay consistent with their behaviour
  • Have unwavering commitment to the organization's goals

Inspirational motivation

Leaders who employ this style know how to communicate their vision and motivate their team to achieve it.

They:

  • Articulate clear expectations
  • Create a sense of purpose and meaning in work
  • Are optimistic about goal attainment and share that
  • Use emotional appeals to focus team efforts

Intellectual stimulation

Transformational leaders encourage innovation and critical thinking.

They challenge assumptions and stimulate creativity within their team by:

  • Asking for new ideas from team members
  • Reframing problems to explore alternative solutions
  • Supporting risk-taking and independent thinking
  • Avoiding public criticism of individual mistakes

Individualised consideration

These leaders pay attention to each team member's needs for achievement and growth. They act as mentors and provide personalised support.

This involves:

  • Recognising each person's different needs and desires
  • Practising active listening
  • Delegating tasks so employees can develop their skills
  • Creating learning opportunities and a supportive environment

Transformational leaders are the ones who identify new innovative trends and lead their teams to embrace them.

They focus on building a strong culture and encouraging employees to take ownership of their work.

But how does that compare to a transactional leadership style? Let's find out.

Transformational leadership vs transactional leadership

Transformational leaders prioritise their long-term vision and spend time making sure their employees are encouraged and supported to do the work to achieve that.

They inspire and motivate their teams and create an environment where innovation can thrive.

Transformational leaders put emotional connections first and work to create team cohesion and a happy and thriving workplace.

Transactional leadership, on the other hand, revolves around structured and defined processes.

This approach focuses on task completion, with rewards or punishments at the end depending on performance. It's more about sticking to current goals than encouraging innovation or out-of-the-box thinking.

The main focus of this leadership style is maintaining order and efficiency, which is why it's great for short-term projects.

The key difference between the two is motivation. Transformational leaders inspire internally, while transactional leaders rely on external motivators.

For example, a transformational leader encourages employees by sharing how the project fits into the longer-term vision whereas a transactional leader will use incentives like bonuses to engage their teams.

The reason we're comparing them is because the two can be combined to make one leadership approach.

Transformational leadership is great for vision and transactional leadership works for execution. By using the two, you get the best of both worlds: innovative thinking and a structured approach to achieving your goals.

Advantages and disadvantages of transformational leadership in the workplace

All leadership styles have their strengths and weaknesses. These are the ones for transformational leadership.

Pros of transformational leadership

  • Enhanced motivation: Transformational leaders know how to inspire their employees to exceed, which results in increased productivity and engagement. Companies that are led by a transformational leader are forward-thinking and creative as their employees are encouraged to think outside of the box. This means they can adapt and change as needed.
  • Clear goal-setting: These are visionary leaders who have a clear and compelling vision for the company and know how to share that and how the team fits into that vision. They can clearly articulate that to their employees so everyone understands their roles and place in achieving organizational goals.
  • Professional development focus: With this type of leader the focus on personal growth is at the centre. Employees are encouraged to develop new skills and take on new challenging tasks to grow both personally and professionally. A report by LinkedIn found that 94% of employees said they would stay longer at a company if it invested in their learning and development [SOURCE]. So by doing that not only do you have a skilled workforce you also have a happy one.
  • Improved communication: This is a management style that needs open dialogue and transparency to be successful. Firstly through sharing their vision for the business but also when discussing roles and expectations. Everyone should be clear on their part in the vision. Providing tailored coaching and support also means that employees can get the guidance they need when they need it. This is why the leader needs to possess strong communication skills.
  • Increased autonomy: When employees are empowered to make decisions and contribute ideas, they feel happier and have a greater sense of job satisfaction and innovation. This means they are comfortable finding new solutions to problems and automating processes to support the future success of the business.
  • Team cohesion: A shared vision and sense of purpose unite team members, enhancing overall performance, teamwork and collaboration. This is one of the qualities that is hard to replicate without the right environment.

Cons of transformational leadership

  • Complex decision-making: The emphasis on collaboration and input can slow down the strategic decision-making process. This is also true when it comes to creative problem-solving. If employees are told to find innovative ways to solve problems, this can slow down the process of getting things done.
  • Communication overload: The need for constant communication and feedback may overwhelm both leaders and followers. Some people would like the hands-on approach from their leader but others may struggle.
  • Risk of burnout: Having high expectations and a continuous push for excellence can lead to employee burnout if not managed carefully. This would counteract all of the good you're trying to do as a transformational leader.
  • Potential disruption: As with every leadership style, when you implement a new way of managing, there can be some growing pains. It changes plans and processes and will take some time to get used to.
  • Dependency on the leader: A transformational leader supports and coaches their teams to achieve more. Can that continue even when the business and leader are incredibly busy? When teams get used to that level of support, they can become reliant on it and would struggle if it was taken away or paused. That's something to think about before implementing.
  • Not suitable for all contexts: Again, as with other leadership styles, it's not right for every context. It is less effective in highly structured environments or industries that require strict adherence to procedures. This is why the combination of transactional and transformational leadership can be the secret to success.

Examples of transformational leaders

It's great talking about transformational leadership but to show what it can do, here are some examples of leaders who have adopted a transformational approach.

Reed Hastings, Co-founder and CEO of Netflix

Did you know that Netflix started as a DVD rental service in 1997? If you only know that as the streaming giant they are today, that's probably due to Reed Hastings' transformational leadership skills.

Today, Netflix is the most-subscribed video-on-demand stream media service, with 282.7 million paid memberships in more than 190 countries. Hastings knew what was needed to take it from the rental service to the global platform it is today. He built a culture of risk-taking and innovation and worked with his team to push boundaries and think outside the box.

Because of Hastings' work, Netflix is a household name and a market leader in its industry. [SOURCE]

Henry Ford, Founder of Ford Motor Company

Whatever you know about cars, one thing is for sure: you'll know the name Ford.

Henry Ford was a pioneer and used visionary leadership to support the middle class. Under his leadership, Ford Motor Company introduced the assembly line production method, which made cars more affordable and accessible to the average American.

He focused on improving working conditions for his employees, encouraged innovation and led the company to be the global leader in the automobile industry.

Although Henry passed away in 1947, his legacy continues to inspire generations of entrepreneurs and business leaders. [SOURCE]

Barack Obama, the 44th US President

Barack Obama is often said to be the ideal example of a transformational leader. During his presidency, he shared a compelling vision of hope and change, inspiring millions of Americans to believe in a better future.

Obama's presidency is marked by his commitment to inclusive policies and his drive to address societal issues through collaboration rather than division.

His ability to engage diverse audiences and bring them together over a shared vision is what made him one of the most loved US presidents.

How to become a transformational leader

If you think this approach could be for you, here are our tips on how to make a successful transformation into this leadership style.

Embrace continuous learning. If you're encouraging your employees to develop and grow, you need to set an example. Have a growth mindset and seek out transformational leadership training.

Understand how to create a compelling vision that energises and excites your team. Involve your team in the process so they have a say in the vision and can take ownership of their part.

Have and express confidence, decisiveness and optimism about the vision and its implementation. If you don't believe in yourself and your vision, how do you expect your team to?

Cultivate self-awareness to understand your strengths and areas for improvement. Seek feedback from your team to gain insights into your authentic leadership style. Use this information to shape and refine your transformational approach.

Work on your empathy and active listening skills. Tailor your communication to each person's personality and working style, so your employees feel heard, understood and valued.

Invest in the success of every team member. Show genuine interest in their professional development and provide growth opportunities. Act as a role model and consistently demonstrate the behaviours and values you expect from your team.

How to combine a transformational leadership style with a transactional leadership style

If you like the sound of transformational leadership but need the structure that transactional leadership brings, here are our tips for how to combine the two.

Transformational leaders excel at creating a shared vision that resonates with employees. Pair this with transactional leadership by setting clear, performance-based expectations and ensuring your team knows their role in achieving the vision.

Set structured future goals using the vision as a guide, then utilise transactional methods like performance reviews to ensure focus and alignment.

Use traits from transactional leadership like reward systems for acknowledging and recognising achievements. For example, give employees bonuses for achieving specific targets but make sure you're still similarly recognising innovation.

Support the autonomy of transformational leadership with transactional elements like checklists and timelines.

Use communication to inspire and energise while still guiding and providing clarity. Your visions and strategies should be clear and your team should know exactly how they fit into that picture.

By combining both leadership styles, you create a balanced environment where innovation can thrive within a structured framework. This blend brings together the best parts of each style but still addresses the complex challenges of running a business.

You need to focus on the empathetic side of a transformational leadership style but use the direction of a transactional leader.

As long as you don't adopt both to the extreme and use the two characteristics together, your team will be clear about what's expected of them and will be able to trust you as a leader.

Conclusion: The change within

If you want an inspired and motivated team, transformational leadership is a powerful approach to help you do that.

By embracing its characteristics, you can lead a team that can transform your business from what it is now to what it could be. Just look at what Reed Hastings and Henry Ford did.

Effective leadership isn't about choosing between styles but adapting your approach to meet your team's needs. Whether that's adopting transformational leadership to the fullest or combining it with transactional leadership to have a balanced approach.

If you're leading a small group or a large corporation, the principles of transformational leadership can help you unlock your team's full potential and achieve extraordinary results. As you continue to develop your leadership skills keep these insights in mind and watch your impact grow.

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