Which type of leadership involves managing through exchanged rewards and consequences?

Transactional leadership is characterized by a focus on the exchanges that occur between leaders and their followers. In this leadership style, the leader promotes compliance and achievement by offering rewards for good performance and establishing consequences for underperformance. This method creates a structured environment in which roles and expectations are clearly defined, facilitating a clear path for individuals to achieve specific tasks or objectives.

By using incentives such as bonuses, promotions, or recognition, transactional leaders motivate their team to meet defined goals. Conversely, consequences such as reprimands or loss of privileges may be imposed if expectations are not met. This leadership style is particularly effective in situations that require routine performance and is often seen in environments like sales, manufacturing, and other operational settings.

In contrast, other leadership styles like transformational leadership prioritize inspiring and motivating followers to exceed their self-interests for the sake of the group or organization, which does not primarily rely on tangible rewards or consequences. Servant leadership focuses on the growth and well-being of individuals and the communities to which they belong, emphasizing service over exchange. Authoritarian leadership exerts strict control and direction, which may not depend on the reciprocal exchange of rewards and consequences in the same way that transactional leadership does.