Beware Transactional Leadership

ContractThe current UK Secretary of State for Health wishes to redraw the contract for NHS hospital doctors. Like many leadership interactions, this is intended to progress the fortunes of the organisation. However, in spite of noble goals, he is running into difficulties. One problem may be that his approach is overly transactional and missing something vital for effective leadership.

Leaders have many relationships. Some are utilitarian – an exchange of something for effort or compliance with little need for intimacy. The benefit is that the job gets done without anyone spending too much emotional energy. Most leaders also have a small number with whom they have much more personal interactions based on shared outlooks or values. As such, they do things for the sake of each other, and as a group will probably be far more productive.

In both scenarios, there is a contract. Where the relationship is strictly utilitarian, this can be formalised as a job description, appraisal, or negotiated exchange. Where the relationship is closer and more personal, the contract is still there but implied (e.g. we are in this together).

There are many failure points in both types of relationship. One that besets many is becoming overly transactional i.e. falling back on the contract to define the dynamics of the relationship. Thus, leaders may use functional hierarchy to ‘give directions’ rather than ‘create direction’, or talk about ‘obligations’ rather than ‘purpose’. Even in closer personal relationships, problems can arise from assumptions about what is fair.

All will destroy motivation and significantly affect organisational climate; as has happened in the NHS. However, whether formal or implied, the contract is still there. The tightrope that leaders have to walk is respecting the contract while using other relationship approaches to get things done. Even in extreme utilitarian situations, some level of personal engagement will often reduce the transactional nature of the exchange.

The question for a leader is therefore:

  • What do you rely on as a basis for influence?

Do you rely on contractual arrangements? Do you use the values and purpose of the organisation as inspirational motivators? Or do you leverage the quality of the relationships you have fostered?

I have seen many managers become overly transactional; too focussed on the terms of the contract rather than engaging with people at a more personal level. In consequence, they generate sterile relationships where enjoyment and trust are absent and people feel trapped in something they would rather leave.

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