What transactional management fails to realize is that you cannot save your way to prosperity, and you have to learn from lessons
the same way by making a series of decisions to move the organization forward. Assessing the business environment and making course corrections is key. In essence, it is simply a series of decisions that anticipate trends and events without throwing the strategy out altogether, or changing the entire implementation plan. But there is a catch. Not all decisions work. What if we make the wrong decision in a corporate culture that looks to blame someone and punish the guilty? Can we reward failure? In many management teams, fear of failure equals organizational paralysis. It is like letting the wind steer the ship and the current set the course. What separates dynamic companies from companies caught in a slow decline is a combination of two important tools at their disposal: having a proactive agenda for growth, and retaining senior managers that have moved from transactional leadership to transformative leaders.
Transactional vs transformative leadership
Transactional leaders strive for the status quo – keeping the ship afloat. They keep the engines running and the passengers fed. Their focus is operations, constantly reminding the organization to reduce costs. How to know if your organization is transactional focused? Listen for these key phrases: “We need a 5% across-the-board cost reduction” “Don’t replace people, our staff just needs to work harder” “This hasn’t worked, let’s bin the initiative”
What transactional management fails to realize is that you cannot save your way to prosperity, and you have to learn from lessons. No matter how hard you focus, you will never drop your cost to zero; you will never have 100% success in all new initiatives. The cycle of continual, generic cost-reduction and fear of failure becomes a self-fulfilling prophecy; it sends two clear messages to the organization: people (our greatest asset) will be cut loose at the first sign of trouble, and costs are not examined in the context of business processes – so, management doesn’t understand the complexities of the business. Transactional management teams use compensation systems and set key performance indicators to optimize the costs of facilitating the transactions of the day-to-day business by
exchanging rewards for eﬃcient performance. Transformational leaders, on the other hand, look beyond day-to-day activities, questioning the status quo, asking: “Is this the best way to do these things?” “Can we apply our products in new ways?” “Is this delivering the highest quality – or highest value – to the customers?” “Can other types of customers use our products in ways we haven’t imagined yet?”
Transformation management asks a lot of questions but gets few answers, because the aim is to encourage the organization to think. Proactive leaders want the organization to think about the external and internal setting, not just the activities contained within their business processes; they want people to look at the externalities and think about how these trends or events will change what we do, what we make, and how we add value to customers. Transformational leaders outsource innovation, new ways of thinking, questioning of the status quo and the establishment of key performance indicators to the people who are at the coalface of the business: their employees.
The best laid plans…
For any leadership style to be eﬀective, communication is key. In ineﬀective leadership styles, those that are reactive and prone to escapism, communications are often also reactive, transactional, convoluted and hard to tie back in to the corporate strategy. Staﬀ see through it – they realize it’s inconsistent and often contradictory. Creating a strategic vision for the organization is not describing some imaginary state of the organization in five years; it is the process of providing clarity in what the organization will become. Many people throughout the organization will participate in the process of strategy creation and setting the vision for the organization. Transformational leaders take each component and seek clarity (finer course-corrections) and communicate these changes to all stakeholders, always referring back to the corporate strategy. This continual feedback loop between the management team and the operational side of the business will transform the organization. It will make it eﬀective and resilient, able to sustain itself through thick and thin. — Joe DiVanna is a member of the Duke Corporate Education educator network, a Møller By-Fellow of Churchill College, University of Cambridge, and author of Strategic Thinking in Tactical Times Q2 2018 Dialogue