TRANSACTIONAL VS. TRANSFORMATIONAL LEADERSHIP:Micro-changes, Organisation Development

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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

Change Management MGMT625

Mega-changes

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

system.

Human Capital

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;

Change Management MGMT625

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.

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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