Transformational Leadership: Styles, Elements, and Business Examples

Introduction to Leadership and Management

The success of companies in the international business environment is influenced by numerous factors, and one of the most significant is leadership. The leadership style adopted by a company is likely to significantly influence that company's performance. In addition, the leadership style orients the activity of employees toward the strategies that companies intend to pursue.

Specialists in the field emphasize the differences between leadership and management. In their view, management refers to organizing the activity of the company and its employees, and to maximizing profits. Leadership, however, is not limited to these concerns. Leaders inspire their subordinates and work toward reaching the company's objectives as well as those of the employees themselves.

Overview of Leadership Styles

There are several styles of leadership (Chapman, 2009). The most important are the autocratic or authoritarian style, the participative or democratic style, the laissez-faire style, the charismatic style, and the transformational and transactional styles. The autocratic style is characterized by a centralized decision-making process. In this case, most decisions are made by the leader, and subordinates' opinions are not taken into consideration. Decisions are communicated to employees, who are expected to implement them.

The participative style is somewhat the opposite of the autocratic style. Team members are involved in the decision-making process, and democratic leaders encourage their subordinates to express their opinions and to develop their own decision-making ability (Bass & Riggio, 2006). The laissez-faire style most strongly encourages employees to make decisions and to determine what tasks and activities they must address. However, this style is not considered the most successful because of the high level of decentralization it produces, which can negatively affect company performance. The charismatic style is one of the most interesting types of leadership, relying heavily on the personal magnetism and inspiration of the leader.

Transformational leadership focuses on creating meaningful changes in individuals and in social systems. These changes are intended to improve individuals' situation and performance, and the ultimate objective is to transform subordinates into leaders themselves. The most important issues that transformational leadership seeks to influence are the motivation, morale, and performance of employees.

The concept of transformational leadership was developed by James MacGregor Burns in reference to political leaders and was later extended to the organizational field. This theory also explains the differences between managers and leaders, which Burns attributed to differences in characteristics and behaviors. Burns also developed theories regarding transactional leadership, an approach based on exchanges between a leader and subordinates, in which the leader does not seek to bring about fundamental change.