The Cost of Transactional Leadership

The Cost of Transactional Leadership

Quinn McDowell November 14, 2016 4 min read

Warm Up

Transformation lies at the heart of all great leadership. Effective leaders are the transformative conduits that move a person from where they are to where they want to be.

The opposite of a transformative leader is someone who approaches leadership transactionally. Transactional leadership has hidden costs that can destroy a team from the inside out.


Effective leaders are transformational, but ineffective leaders are nearly always transactional. Transactional leaders put a premium on accomplishments over process which creates a results-driven culture. This kind of thinking is ultimately short sighted because it shines the spotlight on producing a specific set of predetermined outcomes rather than simply controlling what you can control.

The ramifications of this approach can be detrimental to your team’s success, so here are five hidden costs of transactional leadership that every good leader should seek to avoid:

Transactional leaders cost their team relationships

A transactional leader uses manipulation to leverage those around them to advance their personal gains. Teammates that feel like they are pawns in the leader’s personal game of chess, will become resentful and unresponsive.

Transactional leaders cost their team time

Transactional leaders will make “tough decisions” in the name of becoming more efficient, but in reality, the inverse is true. When you take a transactional approach to leadership by cutting corners, your team will ultimately spend more time unraveling the mess of dysfunctional decisions that were originally made in the interest of maximizing productivity.

Transactional leaders cost their team energy

Transactional leaders are energy vampires. They suck the life and energy out of everyone they come in contact with as they manipulate the people around them to elevate themselves to the highest possible position. Teammates then feel the need to use their energy to jockey for inside position so they don’t end up on the outside looking in.

Transactional leaders cost their team growth

Transactional leaders put such a massive emphasis on outcomes that the entire team becomes fixated on only doing whatever produces immediate results. Instead of creating the habits that will produce long-term excellence, teammates feel the pressure to produce immediate results to satisfy a quota.

Transactional leaders cost their team wins

When leaders focus solely on winning they will resort to manipulation, dishonesty, and transactional behaviors which destroy a team’s culture. A weak culture is like a house built on the sand—a house with an ocean view is great until the storms come and a flood sweeps it off the foundation.


A transformational leader takes the longview.

They hold the belief that success comes when you build your house on the rock. In the short run it might be possible to be “successful” as a result of using manipulation and coercion, but sustained excellence is only possible by building your house on a solid foundation.

We were created to build our leadership approach on a solid foundation. A foundation that is built on the principles of loving people, working with excellence, and serving others.

Jesus said it best:

24 “Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. 25 The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock.

To implement this idea into your own life, create a clear distinction in your mind about the difference between transactional and transformative leadership by taking five minutes to do the following exercise.

Here’s what you should do:

  • Take a piece of paper
  • Draw a line down the middle
  • Put “Transactional” on one side and “Transformational” on the other
  • Think about the leaders you respect the most and write down descriptive words that accurately describe them in the “Transformational” column
  • Do the same for leaders you don’t like in the “Transactional” column
  • Compare and contrast

Take a look at list and see which characteristics best describe you and make a commitment to improve in the areas you are weakest.


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