Transformational Leadership in the Modern Era

The transformational leadership type creates a sense of commitment and shared purpose greater than the employee and the leader. Developing this mindset is especially important for all businesses today – in the age of technological disruption and diverse workforce interests.

Very few leadership styles can boost employee morale, creativity, and drive satisfactory business success as effectively as transformational leadership. 

Transformational leaders in society and organisations become role models when it comes to trust and innovation. They have a significant impact on making employees feel highly valued yet pushing them to do their best. And, they can inspire anyone as a transformational leader in the making. 

What is Transformational Leadership?

Transformational leadership is where the leader motivates and inspires the workforce/followers to innovate and lead with a shared, led-by-example vision. It helps create positive organisational change through strong trust-building, leading to success in the ever-changing business environment. 

One key aspect of this leadership philosophy is that it remains inclusive without premeditated self-interest. It encourages the followers to become passionate about taking ownership to become leaders. 

Background to Transformational Leadership Theory

In the beginning, the concept of transformational leadership was a direct reaction against the bureaucratic authority of the transactional leadership style of sociologist, Max Weber. Later, it was studied as an extension. 

There are two important thoughts to consider.

Transforming Leadership of Burns

It is important to highlight that the first introduction to transformational leadership style is credited to James V Downtown in 1973 and James MacGregor Burns in 1978. The latter discusses ‘transforming leadership’. And further defines this as “leaders and followers help each other to advance to a higher level of morale and motivation.” 

So the main difference between transactional and transformational leadership lies in practice, if one tries to explore Burns’ theory. 

The transformational leader is quite proactive in changing organisational culture for the greater good, all the while motivating followers to innovate. 

But the transactional leader deliberately never aims to change the culture of the organisation. They set the objectives that followers must achieve to get rewarded. When they cannot achieve the target, they face the penalty. 

In this aspect, it can be argued that the leader takes a passive or reactive approach, based on the outcome of the follower’s output. 

This difference, however, became a little convoluted in the later years. 

Do explore the difference between transactional and transformational leadership in more detail.

Transformational Leadership of Bass

So, through the 1980s to 90s, researcher Bernard M. Bass expanded on the term ‘transformational leadership’. 

In his book “A New Paradigm of Leadership: An Inquiry Into Transformational Leadership” (1996), he looks into some empirical ways to measure the effectiveness of the transformational leader. 

He, along with Bruce J. Avolio and other associates, created a study discussing that transactional and transformational styles of leadership do not have to be mutually exclusive. 

Leadership can become transformational and transactional when the leader goes beyond the give-and-take relationship. It can be charisma, being considerate, and so on. 

So, in order to create a better holistic understanding of leadership, Bass and his associate researchers went on to create the Full Range Leadership Model. This model takes on both different components of transactional and transformational leadership. 

This was an empirically derived research based on the Multifactor Leadership Questionnaire (MLQ). It was a 36-item self-report inventory that measured transformational, transactional, and laissez-faire leadership behaviours.

Under transactional leadership, there are 4 components. 

• Laissez Fare: A leadership where autonomy is in the hands of the followers with little to no intervention from the leader. 
• Contingent Reward: The leader’s relationship with the follower is based on an exchange of rewards for performance.
• Passive management by exception: The leader gives followers a lot of freedom and autonomy.
• Active management by exception: It is more proactive than passive management by exception.

Do read up on the concept of management by exception.

The four components or characteristics of transformational leadership include individual consideration, intellectual stimulation, inspirational motivation, and idealised influence. Let’s explore these traits in the next section. 

Transformational Leadership Characteristics

Also known as the four I’s of transformational leadership, these characteristics help us understand how the leader-follower dynamics work. Also, by the time you see the interplay of these behavioural traits, you can draw one common thread, that is, trust. And the outcome of all these characteristics is performance that transcends expectations. 

Idealised Influence

Also termed Charismatic Leader, the behaviour makes them role models in front of their followers. This is possible when they share what risks can be involved in a specific decision or vision. They do not exercise power but build a bond of trust that inspires everyone around them. 

Elon Musk, of Tesla Motors and X Corp, is an exceptional example of a charismatic leader. 

According to Eaton Asher, in his paper titled “Elon Musk: A Case for Transformational Leadership” (2016), Musk invests on his own in his projects instead of asking for investors. Asher further delves, mentioning that Musk does not shy away from ‘exposing himself to the risks of financial loss’. This way, his followers are clear about his ‘underlying motives’, i.e., the shared vision that builds trust. 

Inspirational Motivation

The leader, here, shows behaviour of excitement for projects, no matter how challenging they can be. They are able to show resilience. 

Here is a quote from Steve Jobs on why he is considered one of the best examples of a transformative leader who can inspire motivation. 

“My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation.”

• Sourced from Harvard Business Review. 

Intellectual Stimulation

The leader in this area challenges the traditional methods of solving a problem and encourages followers to push the limits. The idea is to promote creativity among followers without negatively criticising their efforts.

The point is, leaders in various difficult situations do not have all the answers. They cannot, in fact. So to find better ways to achieve better outcomes, they involve and support the followers to put their input. Through trial and error, the followers are able to rewire their thinking on finding a solution to success. 

This is, in no way, a manipulation technique to get more work from followers. Instead, it is about making the followers realise their potential as a self-made leader. 

Individual Consideration

This is one of the essential traits that distinguishes a transformational leader against other types. 

Every follower or employee will have their own set of personal challenges, as well as needs. Mentoring all followers in a template-like manner never works as better as giving holistic importance to their individual professional growth. 

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It is important to practice a great deal of active listening – an important soft skill. At the same time, encourage professional development in specific areas where they may show a lack of expertise. At the same time, the leader must be an authentic empath, who can truly see the challenges and motivate. 

How does a Transformational Leader Engage Followers?

When it concerns organisational behaviour, it is essential to explore how a transfromational leader is capable of engaging followers. 

Transformational leadership is often seen as a necessity for a positive work culture where innovation, collaboration, and open communication are encouraged. Such an environment not only attracts talent but also retains it by keeping employees engaged and satisfied with their work. One of the key drivers of engagement is the ownership the followers take. At the same time, these leaders are focused on leading by example and generally they do not influence by words alone. 

What Defines Today's Transformational Leader?

If you look into recent academic literature on transformational leadership, be it, theory or research, there are two conceptual, self-reflective underpinnings - authenticity and trust. This is present in the Developing Your Full Range of Leadership: Leveraging a Transformational Approach (2017) by Fil J Arenas et al.Some of the core areas that make a transformational leader authentic and trustworthy are as follows. 

1. Self Awareness: The concept of self-awareness is linked to reflective practices. Here leaders engage in introspection to assess their leadership style, behaviour, and impact on others. This reflection is seen as a key aspect of developing authenticity and effective leadership.
2. Relational Transparency: Relational transparency is a quality that encourages increased openness within the leader-follower relationship. This transparency is seen as a means to create an environment where followers feel comfortable expressing themselves. This ends up contributing to the development of an authentic and effective leadership dynamic.
3. Balanced Processing: The main area of focus is removing bias even if they face challenging views. Easier said than done, the authentic leader should seek out alternative viewpoints, and assess the potential impact of decisions on various stakeholders.
4. Moral Perspective: This area closely aligns with the trust factor. And it goes without saying that the transformational leader must be clear, not ambiguous of about morality. Having a moral perspective always suggests a commitment to ethical decision-making. Do read about business ethics. 

How Does Transformational Leadership Help Employees?

Transformational leadership brings several advantages to employees within organisations.

1. Transformational leaders inspire and motivate employees to excel in their roles. They can establish a culture of high performance and excellence.
2. Transformational leaders have a visionary approach and show supportive behaviours. They are capable of encouraging employees to fully engage with their work. So instead of micromanaging, they help in leading to higher levels of job satisfaction and commitment.
3. Such kind of leadership also empowers employees to develop and leverage their psychological resources. They can show self-efficacy, optimism, hope, and resilience, which are crucial for success in the workplace.
4. Workplaces are competitive but there is always a sense of collective values and norms that emphasise excellence. The transformational leader is able to motivate employees to strive for continuous improvement and contribute to organisational success.

Case Study of Netflix: A Transformational Leadership Example 

The company culture of Netflix needs little introduction when speaking of a trustworthy and transparent leadership. With an unorthodox culture, it is always filled with high performers who are committed to the objectives of the company.

How Netflix Creates Trust with Idealised Influence

According to Rob Caruso, VP of Netflix digital products, “Netflix treats employees like adults who can handle difficult information and I love that. This creates enormous feelings of commitment and buy-in from employees.”

How Netflix Promotes Intellectual Stimulation 

Another anecdote that rings well of contemporary transformational leadership in Netflix company culture is to find solutions autonomously (even when the boss doesn’t agree). 

So in the situation when Netflix was expanding internationally. During that time, the videos weren’t made to be downloadable. Chairman of the Board of Directors of Netflix, Reed Hastings was not in favour of the idea too. 

But, the VP of Product disagreed and went on to find out that more than half of the population in India and Germany download video content from platforms, including YouTube. So, to expand in international waters, adding the downloadable feature could lead the company to grow successfully. 

Here is what Hastings mentioned, “We don’t want people putting aside a great idea because the manager doesn’t see how great it is.”

(All quotes in the above two points of the case study section are sourced from the in-depth Built In blog discussing the No Rules Rules: Netflix and the Culture of Reinvention book). 

How Netflix Inspires Motivation

Netflix is at the top of motivating employees in uncommon ways. One is by creating flexibility in raising pays and staffing. They only hire high performing individuals who are consistent. And those who are, the company does not have an issue paying them more than the competitors can.

How Netflix Involves Itself in Individual Consideration

If you didn’t know, Netflix, in some ways, reinvented the HR strategies that are a strict no in most organisations. 

It allows employees to take leaves whenever they want. And instead of formal reviews, it introduced casual conversations that are honest. 

What this also means is that the company creates an air of obligation among employees who are committed to do more. 

According to the Netflix site, “the goal is creating a strong sense of caring for Netflix so that people do what is best for the company.”

Criticism of Transformational Leadership

Here are some noteworthy limitations of this leadership style, as on the International Journal of Management and Applied Research. These two are potential outcomes, if not kept in check in an organisation.

It Can Become Too Idealistic

One major criticism of Bass’s Transformational Leadership from scholars like Northouse et. al. is that it bases its roots in the Great Man Theory. Because of this prejudice, there is a huge potential that the followers may take a leap of faith on what the transformational leader may ask or demand from them. They can do that without considering negative consequences that may arise. 

Influence Can Be Unidirectional

Scholars, including Yukl and Mullins, discuss that this type of leader can create deception by asking followers to contribute for the greater good while there is no good for them. 

How Transformational Leadership Differs from Transactional Leadership

Transformational leaders are characterised by their visionary outlook. They can inspire and motivate teams through a shared vision of the future. Their focus extends beyond transactions, engaging individuals on an emotional level and fostering a positive work environment. But when it comes to transactional leaders, they operate within the framework of rewards and punishments. They are more focused on ensuring task completion through structured processes. They provide clear directions, employ contingent rewards, and manage exceptions to maintain efficiency. 

Beyond this, you must go explore the difference transactional leadership and transformational leadership.

How Can You Start Becoming an Effective Transformational Leader?

It is important to build a wide skill set besides developing the core leadership skills. Some key areas, or let’s just say, tips, to become a transformational leader today include the following. 

• Building trust for strong relationships by fostering ethics.
• Encouraging followers to think uniquely to solve problems
• Influencing everyone to follow the goals which lead to their growth and brings life to the long term vision, instead of directive or being autocratic.

Besides these tips, you can look into taking some courses. 

Course	Course Provider
Transformational Leadership for Inclusive Innovation	Coursera with the University of Toronto
EDP in Transformational Leadership	XLRI
The Neuroscience of Leading Transformational Organizations	Coursera with the University of Colorado Boulder

Along with that, check out valuable books such as Lead From The Heart: Transformational Leadership For The 21st Century from Mark C Crowley. 
Do look into executive MBA programmes online that provide a global perspective on this modern leadership style. 

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