What is Transformational Leadership?

Transformational leadership is a leadership style where leaders encourage, inspire and motivate employees to innovate and implement changes that will shape the company’s future success. Transformational leaders lead by example - sharing a compelling vision, building trust and respect, and empowering employees to achieve higher levels of performance.

First described by James MacGregor Burns in his book, Leadership, published in 1978, transformational leadership is when: “leaders and followers help each other advance to a higher level of morale and motivation”. The concept was further expanded on during the 1980s by researcher Bernard M. Bass, who identified four components of transformational leadership.

Transformational leadership is enjoying renewed focus as an effective leadership style in an era of continued disruption. Regardless of industry, businesses worldwide are facing both challenges and opportunities created by technology advancement, climate change and evolving consumer expectations. COVID-19 adds another layer of complexity to the already challenging business landscape.

One of the world’s best known transformational leaders, Jeff Bezos, used this leadership style to grow Amazon into the biggest online retailer in the world during the coronavirus crisis, delivering close to 200% profit growth throughout 2020.

What are some of the advantages of transformational leadership?

Transformational leaders motivate employees, promote creative thinking and encourage teamwork and collaboration. Some of the benefits of this leadership style include:

  • It facilitates change. Businesses must continually evolve to stay relevant in today’s market. Transformational leadership is a great leadership strategy for introducing a vision and encouraging employees to sign up to this aspirational goal. A transformational leader can inspire their people to challenge the status quo and convincingly sell the changes and improvements needed for the organisation to achieve its potential.
  • It reduces employee turnover. It’s time-consuming and costly to replace employees, and high turnover can also reduce productivity and have a negative cultural impact. A transformational leadership style reduces turnover by building strong trust and loyalty amongst employees who are less likely to leave their roles working for a manager that they genuinely respect.
  • It’s effective. While transformational leadership may not be an appropriate leadership strategy for every business, it’s recognised to be particularly effective when used in the right organisation. Companies like Amazon, Apple and Netflix have leveraged transformational leadership to disrupt – then become leaders in – their respective markets.

What are some of the disadvantages of transformational leadership?

Transformation leadership isn’t right for every organisation. Some of its shortcomings include:

  • It’s often light on detail. Transformational leaders can paint a compelling vision for the future but often struggle to focus on the detail. Effective transformational leaders will recognise they need extra support in this area and surround themselves with more detail-oriented people. Tools like Square Team Management can also help transformational leaders ensure they stay on top of the finer details of team management.
  • It may cause conflict. Transformational leadership can be problematic within bureaucratic organisations where its effectiveness is limited.
  • It can be high risk. Change can be disruptive if it happens all the time and detrimental if a transformational leader is so fixated on their vision that they take unnecessary risks. Transformational leaders are often tasked with driving change – but it’s important that this change is in the pursuit of a clear corporate goal, not just change for change’s sake.

What are the four elements of transformational leadership?

The four characteristics that make a transformational leader (sometimes called the 4 I’s) are:

  • Intellectual stimulation: Transformational leaders challenge assumptions and the status quo, take risks, and encourage others to think creatively, innovate and explore new ideas and ways of doing things. They’re prepared to challenge their own beliefs and values and inspire their people to do the same.
  • Idealised influence: Transformational leaders are powerful role models who are trusted and respected by their people. Followers are driven to emulate their behaviour and buy into the vision shared by their leader.
  • Individualised consideration: Transformational leadership means creating a supportive environment where diversity and individual differences are respected and celebrated. Leaders know their people on an individual level, listen to their concerns and needs, and understand and appreciate the unique talents that each person brings to the team.
  • Inspirational motivation: Transformational leaders have a clear vision that they articulate to their people in a way that inspires and motivates the team. They have high standards and expectations for themselves and their team and look for opportunities to build purpose and meaning into their people’s roles.

We share some tips for keeping staff motivated during the coronavirus crisis and other valuable small business resources on our blog, Town Square.

Examples of transformational leaders

  • Jeff Bezos, Amazon. Jeff Bezos is often referenced as the most effective living transformational leader. Bezos’s belief in his vision and the value of a customer-centric culture has permeated throughout Amazon and allowed the organisation to achieve massive success.
  • Steve Jobs, Apple. Creative, passionate, and visionary, Steve Jobs was known for his unwavering focus on his vision for Apple and his ability to share his passion to motivate his employees to higher levels of performance.
  • Reed Hastings, Netflix. Reed Hastings believes that when employees are given opportunities to make decisions, they’re more likely to be invested in the company’s success. Hastings supports cross-company information sharing to promote growth, innovation and better decision making.