CPA Mong’are Kevin
Transactional leadership can be defined as a leadership style that exchanges targets and rewards between the leader and the support staff. Small-scale enterprises exist to make money for their owners, just like any other type of business. They offer a variety of products and services that customers can select from. The Central Bank of Kenya (2023) reports that many small-scale enterprises employ fewer than ten people and bring in less than five million Kenyan Shillings annually.
The success of these businesses will depend on how well they accomplish their goals. As such, the company’s business divisions are managed by several people. Many factors have been found to influence a business’s capacity to meet its organizational goals. Research has shown that the leadership philosophies employed by small-scale enterprises impact employee performance, which in turn impacts the organization’s ability to achieve its objectives.
Because of the flawed leadership philosophies, many of today’s small-scale enterprises don’t have clear organizational structures that motivate employees to supply services consistently. This has resulted in the proliferation of companies that flourish briefly before stagnating or collapsing entirely due to a lack of best leadership. Therefore, businesses collaborating with these organizations should attempt to implement corporate leadership development. As per Veliu et Hilosophies al. (2017), to achieve optimal organizational results, leaders need to employ the most appropriate leadership style based on the specific circumstances within the organization.
It has been demonstrated that adopted leadership philosophies directly affect how the company achieves sustained organizational performance, either by enhancing or detracting from worker performance. Africa and Asia have significantly different business contexts than those found in Europe and America, where most leadership studies have been conducted. Research revealed that informal organizational frameworks were prevalent in Asia and Africa (Kurtulmuş, 2017). Exploring leadership styles and their ethical implications has gained significance in the contemporary organizational landscape, particularly in the context of diverse cultural backgrounds. Leaders play a crucial role in shaping organizational culture, influencing employee behaviour, and driving performance. Understanding the factors contributing to leaders’ tendencies toward unethical or dishonest behaviour is essential for fostering environments that prioritize integrity and mutual benefit for companies and their employees.
In many countries, especially within various African contexts, leadership practices are often influenced by historical, cultural, and socio-economic factors that can lead to different outcomes in organizational behaviour. These factors may include communal values, hierarchical structures, or a focus on transactional leadership, which can hinder the adoption of more progressive leadership philosophies like transformational and democratic leadership.
Transactional leaders give something to their employees in exchange for work performed. Such leaders reward their support staff with a pay increment, a promotion, performance-based rewards, and added responsibilities that motivate them to commit to achieving organizational goals (Frangieh & Rusu, 2021). Recognition, rewards, and punishment have confirmed this notion about transactional leadership by motivating employees to use new viewpoints and techniques to perform their responsibilities efficiently.
Transactional leaders create and sustain an organizational context where support staff are maintained by rewarding them for their sustained achievement of targets. Support staff receive both tangible and intangible benefits as a direct benefit of achieving their targets. Despite support staff being rewarded for achieving organizational goals, their creativity and innovation are not encouraged, making it difficult for support staff to fully utilize their talents and, hence, not perform as per the organization’s expectations.
Transactional leadership can be classified into three types:
a. The conditional incentive defines the exchanges and deals between the leader and employees, setting out what is expected of each other. In this case, the leader has conditions that need to be met to achieve the desired goals of the follower relationship.
b. Management by exception, where the leader focuses on correcting faults and maintaining performance. The leader’s sole responsibility is to solve faults.
c. Active Management by Exception, where the leader only intervenes when problems are established to be considerable. In this perspective, the leader acts as a monitor.
Transactional leaders motivate employees with rewards that make them want to perform their tasks, leading to high organizational objectives achievement. Employee motivation for excellent performance and reaching the established targets is influenced by achievement expectations (Nzeneri, 2020). The theory focuses on the nature of employees’ work duties and how they are driven to complete them, which improves employee happiness and performance (Northouse, 2019). The method through which leaders encourage, inspire, and guide their teams to accomplish their objectives is known as leadership.
The leader develops and communicates the organization’s future vision, inspiring workers to do their tasks. As a result, they become more involved with the organization as they work towards their common objective, opportunities for employee development, and engagement beyond mere transactional rewards. This can include training and development programs, empowering employees to share ideas, and facilitating open communication channels. These efforts can create a more engaging work environment that encourages creativity, inclusivity, and long-term commitment to the organization’s goals.
Furthermore, while transactional leadership might effectively achieve short-term targets, its limitations must be acknowledged, particularly in the ever-evolving market landscape. In small-scale enterprises, the ability to adapt to changes, embrace innovation, and foster a culture of continuous improvement is crucial. While transactional leadership effectively focuses on immediate outcomes and operational efficiency, it may need to focus more on cultivating a vision for the future and nurturing employee potential. Research indicates that integrating transformational leadership principles—such as promoting a shared vision, fostering a supportive culture, and encouraging employee autonomy—can complement transactional practices to drive sustainable growth in small-scale enterprises (Nguyen, 2021).
The transactional leadership style significantly influences the performance of small-scale enterprises. By providing clear guidance and establishing reward-based incentives, transactional leaders facilitate the achievement of targets and enhance employee performance. However, the informal nature of SSEs, particularly in contexts like Kenya, may pose challenges that inhibit the full effectiveness of transactional methods. A balance between transactional leadership and fostering creativity and innovation is essential to realize sustained performance improvements. Therefore, organizations should consider integrating elements of transformational leadership to complement the transactional approach, creating an environment conducive to high performance and innovative growth.
