Executives can use many styles when leading a business, but research defines two major approaches to leadership – transactional and transformational. Transactional leadership includes a system of rewards and punishments that depend on the completion of tasks by employees (Ahmed, 2022). Such firms focus on performance and achievement of short-term goals, and motivation for workers is material and financial rather than intrinsic. An example of such leadership is Kenneth Lay, the chief executive officer (CEO) of Enron. Lay concentrated on an aggressive expansion and did not pay much attention to cultivating an inspiring corporate culture, prioritizing sales instead (Woollacott, 2018). Moreover, his push for growth and lack of oversight led to financial machinations, which eventually resulted in the fall of the entire business. The CEO’s use of transactional leadership was ineffective, as he failed to properly motivate employees while also controlling their ethical behavior.
Another approach to leadership is transformational – leaders of this type create long-term goals for the company and choose to create motivation by example and inspiration. An example of a transformational leader is Lee Iacocca, the CEO of Crysler from 1978 to 1992 (Lindberg, 2022). Although the company had problems, Iacocca helped transform the business into a successful venture. His attention to the company’s vision and culture of innovation made him an effective transformational leader.
Overall, both approaches to leadership can lead to negative and positive results. However, it can be seen that transformational leadership shapes culture and unites employees. In contrast, unregulated reward and punishment systems can lead to the failure of a CEO to engage employees in pursuing a unifying goal of innovation and growth. Thus, while culture is directly and indirectly influenced by the two approaches, transformational leadership pays more attention to how employees see the business and connect to its vision, increasing the chances of long-term success.
An organization’s culture depends on many factors, including its executives, employees, goals, and previous history of successes and failures. As culture is a set of values, missions, communication practices, and implicit and explicit rules, it is a complex system that requires time and effort to change. The human factor makes it extremely challenging to change any aspect of organizational culture because people tend to resist change (Priyadharsan & Nithiya, 2020). The failure to explain why the culture needs alterations is the error that executives make – this barrier to change results in conflicts and misunderstandings. Moreover, the lack of engagement in and commitment to change further slows down any efforts to improve the environment of a business. For example, if both managers and workers do not want to implement new values, the company will not see any developments. Therefore, cultural change requires careful planning and preparation before any alterations are suggested and implemented.
Nevertheless, organizational culture plays a significant role in business performance, job satisfaction, and employees’ view of the company. For example, Priyadharsan and Nithiya (2020) find that culture is tied to excellence, flexibility, and strategic development. A positive corporate environment that fosters innovation, teamwork, open communication, and constructive feedback can create strong values that employees uphold. Thus, the performance of workers improves as they find intrinsic motivation to deliver better results (Priyadharsan & Nithiya, 2020). Employees’ contribution to organizational culture and their commitment to their jobs also result in higher chances of growth and success. Although corporate culture may be inflexible and resistant to change, improving it is worth it for the business and all people involved in it.
Ahmed, T. (2022). What is transactional leadership? Is it still effective?
Lindberg, C. (2022). Transformational leadership – Explained by a CEO: Examples, pros/cons.
Priyadharsan, S., & Nithiya, P. (2020). Association between the organizational culture and employees’ performance. International Journal of Research and Innovation in Social Science, 4(8), 692-696.
Woollacott, E. (2018). Lessons from history’s worst CEOs. CEO Magazine.