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Relationship of Transformational and Transactional Leadership with Employee Influencing Strategies

RONALD J. DELUGA Bryant College

The purpose of the study was to compare manager-employee influencing dynamics within the framework of transformational and transactional leadership theory. A total of 117 employees of a manufacturing firm anonymously completed the Multifactor Leadership Questionnaire-Form 5 (Bass, 1985a) and the Profile of Organizational Influence Strategies-Form M (Kipnis & Schmidt, 1982). Multiple regression analyses supported the predictions that (1) perceived transactional leadership would be more strongly inversely related to reported employee upward influencing behavior than transformational leadership, and (2) transformational leadership would be more closely associated with leader effectiveness and employee satisfaction with the leader than transactional leadership. Results are examined in terms of the apparent volatile nature of transactional leadership-employee influ- encing systems. Transformational leadership-employee influencing interactions are viewed as more effective in promoting organizational productivity. The practical implications of these findings are also discussed.

Effective leadership implies an understanding of how managers and employees influence one another (Yates, 1985). Of particular importance to the practicing manager is the relationship of leader- ship style to employee influencing behavior. Could the manager’s leadership style encourage constructive or destructive employee influencing? That is, in what ways could this interaction affect such critical organizational outcomes as manager effectiveness and employee satisfaction with the manager? The implications of these influencing dynamics on organizational productivity and employee developmental needs seem apparent. Thus the purpose of this study was to investigate the nature of managerial leadership and employee influencing systems in a manufacturing enviornment. Transactional and transformational leadership have been two Group & Organization Studies, Vol. 13 No. 4, December 1988 456-467 a 1988 Sage Publications, Inc.

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approaches offering an explanation as to how managers-employees influence one another (Bass, 1981, 1985a; Burns, 1978; Hollander, 1985).

Burns (1978) argues that leadership can be understood best as either a transactional or a transformational process. Transactional leadership suggests that most managers engage in a bargaining relationship with employees (Hollander, 1978). Bass (1981, 1985a) cites contingent reward and management-by-exception as two factors that emerge with transactional leadership. Contingent reward describes the familiar work-for-pay agreement. Employees are told what they need to do to obtain rewards. Management-by- exception characterizes how the manager reacts primarily to employee errors. The manager exerts corrective action only when employees fail to meet performance objectives. On the other hand, transformational leadership differs from

transactional leadership. The transformational manager cultivates employee acceptance of the work group mission. The manager- employee relationship is one of mutual stimulation and is charac- terized by four factors, including (1) charisma, (2) inspiration, (3) individual consideration, and (4) intellectual stimulation (Bass, 1985a).

First, charisma is the fundamental factor in the transformational process. Charisma is the leader’s ability to generate great symbolic power with which the employees want to identify. Employees idealize the leader and often develop a strong emotional attach- ment (Bass, 1985a).

Closely related to charisma is inspiration. Inspiration describes how the leader passionately communicates a future idealistic organization that can be shared. The leader uses visionary expla- nations to depict what the employee work group can accomplish. Excited employees are then motivated to achieve organizational objectives (Bass, 1985a).

Third, individual consideration characterizes how the leader serves as an employee mentor. He or she treats employees as individuals and uses a developmental orientation that responds to employee needs and concerns (Bass, 1985a).

Finally, intellectual stimulation describes how transformational leaders encourage employees to approach old and familiar prob- lems in new ways. By stimulating novel employee thinking patterns,

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employees question their own beliefs and learn creatively to solve problems by themselves (Bass, 1985a).

Transformational and transactional leaders differ in another important respect. The typical manager is a transactional leader who analyzes employee lower-level needs and determines their goals (Zaleznik, 1983). That is, she or he attempts to satisfy the employee’s basic wants and works to maintain the organizational status quo. However, the transactional leader also limits the employee’s (1) effort toward goals, (2) job satisfaction, and (3) effectiveness toward contributing to organizational goals (Bass, 1985a). Bass (1986) suggests that transactional leadership is accept- able as far as it goes, but fundamentally is a prescription for organizational mediocrity.

Conversely, transformational leaders incorporate and amplify the impact of transactional leadership (Waldman, Bass, & Einstein, 1985). They recognize and exploit those employee higher-level needs that surpass immediate self-interests. By appealing to these elevated needs, the transformational leader motivates employees to perform beyond initial performance goals and objectives (Bass, 1985a; Burns, 1978; Tichy & Devanna, 1986).

HYPOTHESES

Transactional and transformational leadership theories have contributed to the understanding of manager-employee influ- encing processes. However, just how manager-employee influ- encing networks interact has been cited as an underdeveloped research area requiring further methodological exploration (Ansari & Kapoor, 1987; Bass, 1985a; Crowe, Bochner & Clark,1972; Kipnis, Schmidt, & Wilkinson, 1980; Tichy & Devanna, 1986). Thus the purpose of the study was to compare manager-employee influ- encing dynamics within the framework of the transformational and transactional leadership approaches.

As expressed in manager-employee influencing relationships, it seems reasonable that managers who have organizational support, multiple sources of power, and control resources valued by employees, and who are perceived to be in a position of dominance (French & Raven, 1959; Podsakoff & Schriesheim, 1985) would display stronger influencing patterns relative to employees. An

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accelerated managerial ability to influence would seemingly further diminish employees’ influencing capability. Following the same mechanism, employees experiencing a favorable power position would likewise display an influencing advantage. Therefore:

H1: Perceived transformational and transactional leadership (manager downward influencing behavior) will be inversely related to reported employee upward influencing behavior.

Transactional leaders were described as engaging in an exchange relationship with employees. As such, it appears plausible that the flow of influencing behavior may constantly fluctuate in response to manager-employee comparative bargaining strength. Managers perceived as transactional would then seem to be more likely targets of employee influencing activity. Therefore:

l12: Perceived transactional leadership will be more strongly inversely related to reported employee upward influencing behavior than transformational leadership.

If in fact transactional leaders are subject to more employee influencing, the less volatile transformational manager-employee influencing behavior may minimize distractions and promote both leader effectiveness and employee satisfaction. Therefore:

H3: Perceived transformational leadership will be more closely asso- ciated with reported leader effectiveness and employee satisfaction with the leader than transactional leadership.

In terms of day-to-day managerial implications, the influencing activity predicted for transactional leadership may be organiza- tionally detrimental. Managers and employees may take turns with the carrot and stick as their negotiating positions change. Lingering resentment could further escalate the game playing. For instance, an employee may feel he or she was unfairly denied a much wanted promotion. At a later time, the relative power position could shift in favor of the employee. She or he may then feel compelled to seek revenge by withholding valued skills and knowledge. On the other hand, the stability predicted for transformational

leader-employee influencing behavior could be organizationally advantageous. Both the manager and employees would be jointly working toward shared group goals, rather than being diverted by the urge to repay past slights.

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METHOD

PARTICIPANTS AND PROCEDURE

The target population was 400 exempt and nonexempt em- ployees of a manufacturing firm located in a lower-middle-class, multiethnic area of the Northeast. All were nonunion employees. After reading an explanatory page indicating company support and detailing instructions, volunteer employees completed a confi- dential self-report questionnaire. The questionnaire contained the leadership style and satisfaction with leadership instruments (Part I) as well as the upward influence strategy instrument (Part II). To encourage participation, all employees completing the question- naire received a free coffee and donut. Also, participants had their names entered into a random drawing for the opportunity to win a day off with pay or a pair of state lottery tickets.

Over five working days, 117 usable questionnaires (29.3%) from 41 males and 76 females were anonymously returned to a box located in the factory cafeteria. Respondents included upper-level managers (23%), middle/entry-level managers (21%), manual la- borers (36%), and &dquo;other&dquo; (20%) who represented the manu- facturing (39.87%), international (28%), creative/marketing (31.5%), finance/administration (11.1%), and sales/merchandising (14.8%) departments.

INSTRUMENTS

Transactional and transformational leadership were assessed using the behavioral based Multifactor Leadership Questionnaire- Form 5 (MLQ-5) (Bass, 1985b). The instrument measures contingent reward and management-by-exception as the two factors associated with transactional leadership as well as charisma, inspiration, individual consideration, and intellectual stimulation as the factors associated with transformational leadership. In this study, the internal correlations ranged from .91 to .25. The alpha coefficients ranged from .93 to .46. It should be noted that the coefficients for inspiration (.71) and management-by-exception (.46) were below the generally preferred level of .80 (Carmines & Zeller, 1979). As a result, these data may be somewhat attenuated by random measure- ment error.

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Strategies used by subordinates to influence their superiors were measured by Form M of the Profile of Organizational Influence Strategies (POIS-M) (Kipnis & Schmidt, 1982). The 27-item behav- ioral-based instruments assess how frequently an employee reports using each of six behavioral strategies directed as a first attempt and, when encountering resistance, as a second attempt toward influ- encing the manager. The strategies assessed by the POIS-M include:

(1) friendliness is designed to create a favorable impression through flattering or &dquo;buttering up&dquo; the manager.

(2) Bargaining involves exchanging benefits and making deals. (3) Reason is the use of facts and data to support the development of a

logical argument. (4) Assertiveness includes the use of a direct and forceful approach. (5) Higher authority is &dquo;going over the boss’s head&dquo; to gain support. (6) Coalition is the mobilization of other employees to collectively

influence the manager.

For this study, the POIS-M internal correlations ranged from .15 to .78, while the alpha coefficients ranged from .92 to .61. Since the coefficients for coalition (.61 and .67) were below the preferred level of .80, these data may also be somewhat attenuated by random measurement error (Carmines & Zeller, 1979).

Satisfaction with leadership was assessed by two items measuring the degree to which employees reported satisfaction with their manager and his or her management methods (Bass, 1985b). Four additional items measured employee perceptions concerning lead- er effectiveness (Bass, 1985b). The alpha coefficients for satisfaction with leadership and leader effectiveness scales were .95 and .86, respectively, while the internal correlation was .77.

RESULTS

The data was first evaluated by combining the four transforma- tional leadership factors into a global transformational leadership variable. The global variable was subsequently regressed with each influence strategy as a dependent variable. A similar procedure was conducted with the two combined transactional leadership factors. The purpose was to assess how the four combined factors associ- ated with transformational leadership (Bass, 1985a, 1985b) and the

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TABLE 1

Results of Global Leadership Style Regression Analysis with Employee Influence Strategies

*p < .05 ; **p < .01.

two combined factors associated with transactional leadership (Bass, 1985a, 1985b) relate as global entities to employees influencing behavior. This reflects the typical managerial profile as no one manager is exclusively charismatic, uses just contingent reward, and so forth. A general inspection of the standardized beta coefficient pattern

in Table 1 offers support for Hypothesis 1. Both transformational and transactional leadership emerge as inversely related to em- ployee influencing behavior. The beta coefficients also show that, as compared to transformational leadership, transactional leader- ship was more frequently and strongly inversely related to employee influencing behavior (Hypothesis 2). For example, second attempt friendliness (p < .05), assertiveness (p < .05), bargaining (p < .05), and higher authority (p < .01) were significantly and inversely

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TABLE 2

Results of Leadership Style Regression Analysis with Satisfaction with Leadership and Leader Effectiveness as the Dependent Variables

*p < .0001.

related to transactional leadership. Only coalition was reported as being directly associated with transactional leadership. A second analysis was also conducted whereby the global

transformational and transactional leadership styles were regressed with leadership effectiveness and satisfaction with leadership as the dependent variables. The resulting beta coefficients (Table 2) support Hypothesis 3, as employees reported global transfor- mational leadership as significantly more effective and more satisfactory (p < .0001) than global transactional leadership.

DISCUSSION

The findings appeared to support the hypotheses that perceived managerial downward influencing behavior would be inversely related to reported employee upward influencing behavior. Sim- ilarly, the data suggest that as compared to transformational leadership, transactional leadership does promote more influenc- ing activity between managers and employees. Finally, transforma- tional leadership was found to be more closely associated with leader effectiveness and employee satisfaction than was transac- tional leadership. Therefore, further discussion of these findings seems warranted.

TRANSACTIONAL LEADERSHIP

The transactional manager enters into an exchange relationship with employees and reacts primarily only when goals are not met

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(Bass, 1985a). It would appear that as employees fall short of expectations, the employee’s bargaining position is eroded, while that of the manager is correspondingly strengthened. At the same time, alert employees aware of their own vulnerable position may conclude that influencing attempts would be futile or even professionally harmful. The manager subsequently can use her or his multiple sources of power (French & Raven, 1959; Podsakoff & Schriesheim, 1985), that is, reward and punishment, to control valued outcomes and influence employee performance. The pro- cess seems feasible, as previous studies have proposed that em- ployee performance does appear to influence manager behavior (Greene, 1976; Sims, 1977; Sims & Szilagyi, 1978; Szilagyi, 1980). The volatile process may also operate to the employee’s advan-

tage. Due to their own unique sources of power, such as expertise, effort, commitment, and access to valued facilities (Mechanic, 1962; Porter, Allen, & Angle, 1983), employees operating from a position of more relative strength may be able to obtain a greater flow of organizational benefits. An example of this influencing process can occur when an

employee has failed to meet recent sales goals. He or she is obviously in a weak negotiating position and is not likely to succeed in gaining the desired larger office, preferred vacation schedule, or a monetary bonus. In fact, the manager would probably use these desired benefits to influence the employee to reach the sales goals. However, employees may resent this carrot-and-stick approach and seek to retaliate as sales and bargaining strength improve. The retal iation may take the form of unreasonable demands to compen- sate for perceived slights or even through accepting a position with a competitor. As proposed above, the flow of power and influence may constantly fluctuate as a function of transactional manager- employee comparative power base potency. Associated dys- functional &dquo;game playing&dquo; may result in marginal organizational performance.

TRANSFORMATIONAL LEADERSHIP

The findings supported the prediction that relative to trans- actional manager-employee relationships, transformational man- ager-employee interactions would exhibit more stable influencing activity. This apparent equilibrium is indicated by these findings in two ways. First, the transformational manager- employee influ-

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encing patterns shown in Table 1 appear less volatile. Fewer and less severe inverse relationships are evident. Second, employees re- ported significantly greater satisfaction with transformational lead- ership and viewed the approach as more effective (Table 2).

The transformational leader-employee interactions may be more balanced since the manager and satisfied employees both jointly and effectively work toward the organizational mission. Perhaps the vision of a common goal as articulated by the transformational leader has relegated harmful organizational game playing to a subordinate role.

For example, company sales may be plummeting due to the impact of a foreign competitor. The transformational leader emo- tionally arouses employees to collectively meet the foreign chal- lenge and inspires them to extra effort and greater accomplishment. Employees are not occupied by what they may individually bargain for as a result of the crisis. Rather, employees are motivated to succeed beyond their immediate self-interests and to achieve the goals of organizational survival and prosperity.

IMPLICATIONS

The battles among competing and mutually exclusive interests usually claim a high price in management attention; the focus of an entire organization may be adversely affected by turbulence in the internal balance of power (Selznick, 1957). The major point is that the transformational approach appears to alter destructive in- fluencing networks created by fluctuating manager-employee power differences. In return, the organization will experience dividends in organizational productivity.

Implications for fostering transformationally oriented organi- zational cultures through training, job and organizational design, and human resource decisions seem clear. Bass (1986) has suggested that training in mentoring and recognizing the varying develop- ment needs of employees can promote the transformational factor of individual consideration. Integrative problem-solving, rather than competitive (win-lose) relationships, would advance the transformational factor of intellectual stimulation. Both factors could be learned through the use of scenarios, videotapes of actual situations, and/or role playing. With appropriate feedback, work group productivity would increase. Similarly, organizations facing rapid environmental change would benefit from the flexibility

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nurtured by transformational leadership at all levels. For example, encouraging transformational leadership through recruiting pro- grams, selection standards, and promotion policies seems likely to attract desirable prospects and retain valued employees.

Future studies might use longitudinal approaches examining how manager-employee influencing networks evolve over time. Perhaps the balance shifts as a function of organizational type, employee group, or internal/external environmental forces. Other investigations could systematically manipulate alternative leader- ship theories to further illuminate the dynamics of manager- employee influencing behavior.

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Mechanic, D. (1962). Sources of power of lower participants in complex organi- zations. Administrative Science Quarterly, 7(3), 349-364.

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Ronald J. Deluga is Associate Professor of Psychology in the Department of Social Sciences, Bryant College, where he is Coordinator of the Learning for Leadership Program. He received his Ed.D. from the University of Cincinnati.