TRANSACTIONAL VS. TRANSFORMATIONAL LEADERSHIP

<< SOME BASIC CONCEPTS AND DEFINITIONS

THEORIES OF CHANGE IN ORGANISATIONS >>

Change Management MGMT625

LESSON# 6

TRANSACTIONAL VS. TRANSFORMATIONAL LEADERSHIP

Transactional

This means an approach going by legal contract or agreement, job-description, and hence no concern

with employees or managers beyond contract. It is considered a bureaucratic or mechanistic way of

organizational life, essentially a fragmented approach followed by most of the developed world states,

and societies are known as litigious societies.

Transformational

Organizational life goes beyond legality and bureaucratic administrative values. Effective organizations

are those where leadership is inspirational, role model, learning & grooming of followers. Individuals

feel involved because of humane concern of their leaders and hence become more productive. Contrary

to the transactional style of management this is considered organic, holistic & more comprehensive

approach, to leadership and management. Asiatic style of management and learning is considered

transformational while that of Western is more transactional. For example viz. role of teacher should he

be bound by his legal contract and a role which is just limited to class room or he is considered an

overall role model, inspiring leadership and ethical values.

Continuous or First - order change

Two frameworks in which change can occur; continuous or first order change and the other is

discontinuous or second order change. Change that occurs in a stable system that itself remains

unchanged. These changes and variations are necessary for business to grow and thrive in a competitive

environment. Evolution theories describe the first-order changes that industries experience. Natural

selection mechanism views the entry and exit of firms in an industry as the primary method of

evolution. (Changes within particular stage of organisational life cycle). In other words this refers to

gradual changes in organization such as refining existing processes and procedures

Discontinuous or second-order change

Change that occurs when fundamental properties or system itself has changed, for example, the fall of

communism in Europe and former Soviet Union. Or revolutionary changes in technology, competition,

socio-economic conditions like in telecommunication, banking, health-care, and electronics are

considered discontinuous change as it leads restructure these industries, relocate industries and change

the bases of competition. Change of stage on organisational life cycle is a discontinuous one. Quantum

change is perceived better to make organizations High Performing Organization (HPO)

Middle order change

It is defined by one author as a compromise between the two; the magnitude of change is greater than

first-order, yet it neither affects the critical success factors nor is strategic in nature

Micro-changes

Another practical classification is owing to the difference in degrees e.g. modifications, improvements,

enhancements & upgrades

Mega-changes

These refer to the differences in kind a structural one, for example when we refer to a new system.

Human Capital

Change Management MGMT625

Is learning (knowledge creation) a personal or individual phenomenon or is it a social/collective

phenomenon (discourse/dialogue)? Its answer will lead to the definition of human and social capital.

Human capital refers to the full range of knowledge, skills & abilities an individual can use to produce a

given set of outcomes. Practically at upper echelon manager are able to scan internal/external

environment, solve problem, seize opportunities, etc. Firm-specific human capital means knowledge of

one's own operation, strengths, weaknesses, tacit knowledge, operational personnel and communication

styles etc. General human capital deals with knowledge of and about larger environment, competitors,

suppliers, customers, stake holders, and about dealing with human capital

Social capital

Is learning essentially a social phenomenon? It refers to the linkages between social actors, the strengths

of those linkage, and resources that flow from them (networking). The key dimensions include structural

(relationship pattern among actors), relational (trust, norms, obligations, ethics that thru the relationship

flow), and cognitive (shared beliefs and languages). Linkage between upper echelon and Board of

Directors (BOD) in the form of information, advice, trust, and other organization processes like

problem-solving, decision-making, coordinating. A very thought provoking and interesting question

would be what if organization has human capital minus social capital, and vice-versa?

Four types of organisational change

1. Power culture

Following are the attributes of power culture. In such organizations individual is told what to do, power

is exercised by leaders about changing behaviour, extraneous pressures to perform role and extrinsic

motivation results are focussed.

2. Role culture

Where individual acts within the limits of job-description. For e.g. stenographer in public sector refuse

to learn or do the job such as fax or e-mail as per his job-description (narrower interpretation of a job)

3. Task/ achievement culture

Individual acts in a suitable way to complete tasks. People are motivated intrinsically (autonomy and

sense of satisfaction

4. Person/Support culture: Individual uses own initiative

Organisation Development

OD is a system wide process of data collection, diagnosis, action planning, intervention, and evaluation

aimed at:

1. Enhancing congruence between organisation structure, process, strategy people and culture;

2. Developing new and creative organizational solutions;

3. Developing the organization's self-renewal capacity

The difference between OD and change management is difficult to delineate as it is overlapping but OD

context essentially deals with internal aspects of organization while change management tends to be

broader in its scope and concerns with both internal and external aspects of organization.

Change Management MGMT625

Organisational meme

Definition: Any of the core elements of organisational culture, like basic assumptions, norms,

standards, and symbolic systems that can be transferred by imitation from one human mind to the next.

In simpler words it is the replicating or copying behaviour. It is very fundamental way of learning

borrowed from child psychology. Individual learns from other by following him as a role model. For

example students getting admissions in any one popular subject or profession at any given time; be it

medical, engineering, information technology, just because of imitating behaviour. This is also known

as band wagon effect or mass movement. In consumer behaviour the same thing known as life style or

fashion. Bench marking at organisational level represents mimicry especially when one organization

(industry leader) does something new and all tend to follow the same. Even states follow other states in

terms of economic and development policies considered successful such as export promotion, FDI,

trade-liberalisation, nationalisation, import-substitution policy, or entrepreneurship promotion etc.

Scholars have different opinions in advocating the efficacy of mimetic process as some believe in

favour and for others the process could be imperfect in transferring knowledge, and hence lead to

genetic distortion.

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