One unfortunate consequence of the focus on “charismatic,” “transformational,” and “visionary” leader behaviors during the past few decades has been the tendency to diminish the importance that transactional leadership behaviors have on leadership effectiveness. We say that this is unfortunate because recent research has shown that transactional leadership, in the form of contingent reward and punishment behaviors, can have substantial effects on a variety of important employee attitudes, perceptions, and measures of job performance. Therefore, in this article we discuss some possible reasons why transactional leadership has been relegated to a lesser role than transformational leadership, summarize the research that indicates the importance of leader contingent reward and punishment behavior to leadership effectiveness, and identify some of the mechanisms that these forms of leadership behavior work through to influence employee attitudes and behaviors. Following this, we address ten misconceptions managers often have regarding the administration of rewards and punishments, and provide some recommendations about how leaders can improve their effectiveness in administering recognition and discipline in organizational settings.
It has become increasingly popular in the past 20 years to extol the virtues of “transformational,” “charismatic,” “strategic,” and “visionary” leadership (Avolio, 1999 and Bass, 1985). According to Bass (1985), transformational leadership behaviors transform the values of employees, activate their higher-order needs, and encourage them to transcend their own self-interests for the sake of the organization. One obvious reason for the interest in these leadership behaviors is that empirical evidence (Judge & Piccolo, 2004) has shown that transformational leadership behaviors—such as articulating a vision, idealized influence, intellectual stimulation, individualized consideration, and inspirational motivation—have positive relationships with employee attitudes and behaviors, and with measures of organizational effectiveness.
However, one unfortunate consequence of this trend toward transformational leadership is that it tends to focus attention away from what has come to be called “transactional” leadership. We say unfortunate, because two recent studies (Judge and Piccolo, 2004 and Podsakoff et al., 2006) have shown that one of the primary forms of transactional leadership, called leader contingent reward behavior, is more strongly related than transformational leadership to some employee outcomes. In addition, this research has shown that two other forms of transactional leadership, called contingent and noncontingent punishment behaviors, also have important relationships with employee attitudes, perceptions, and behaviors.
Therefore, the purpose of this article is to review the research on transactional leadership and discuss its importance for practicing managers. As a first step in this process, we discuss some possible reasons for the trend away from transactional leadership to transformational leadership. Following this, we summarize the literature on the relationships between leader reward and punishment behaviors and employee outcomes. Next, we explore some of the theoretical mechanisms that these behaviors work through to influence employee attitudes and behaviors. We then address ten popular misconceptions held by many managers regarding leader reward and punishment behaviors in organizations. Finally, we provide some recommendations for leaders who wish to improve their effectiveness in administering rewards and punishments in organizational settings.
