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What Is Transformational Leadership?

Imagine running a business where drama is at a minimum and productivity, innovation and creativity are at an all-time high. Everyone on your team is happy and loyal, and they’re striving to win every day. And the best part: You actually enjoy coming to work again. Is any of this even possible? Ab-so-freakin’-lutely.

So how do you create such an amazing atmosphere? One of the best ways is through a style of leadership called transformational leadership. Wait, what? That sounds way too corporatey.  Actually, it’s anything but.

What Is Transformational Leadership?

Let’s start with a bit of history. The term “transformational leadership” was first introduced in the 1970s by sociologist J.V. Downton. But the theory really caught fire after James MacGregor Burns, a leadership expert and political historian, wrote the book Leadership later that decade. Burns describes transformational leadership as a process where “leaders and their followers raise one another to higher levels of morality and motivation.”

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Simply put, it’s a style of leadership where the person in charge—through their actions and example—inspires and motivates their team to come together and work toward a common goal, as well as develops leadership potential in others. They make change happen and look after the best interests of their team and their organization by supporting everyone’s work. 

Related: What Is Servant Leadership

The 4 Components of Transformational Leadership

Burns’ work on transformational leadership was just the start. In 1985, Burns’ fellow scholar, Bernard Bass, expanded the transformational leadership theory by identifying four components of it in his book, Leadership and Performance Beyond Expectations. He dubbed the components the 4I’s. They include:

  1. Inspirational Motivation: Transformational leaders inspire and motivate and are able to clearly cast their vision to their team. They also get everyone on board to work toward a common goal.
  2. Individualized Consideration: Transformational leaders know that people matter most and that they need to be supported and encouraged. They make sure team members are regularly recognized for their contributions and support the sharing of ideas.
  3. Intellectual Stimulation: Transformational leaders encourage new ways of thinking and creativity, and always challenge the status quo. They are market disruptors who are innovative and know the only thing consistent is change.
  4. Idealized Influence: Transformational leaders lead by example. They walk the walk, not just talk the talk. They’re amazing role models for their team.

What Are the Benefits of Transformational Leadership?

So now that you know what transformational leadership is, why should you adopt this style at your company? Because it works. The benefits of transformational leadership include:

  • Lower Turnover Rates
    At the core of transformational leadership is the ability to bring out the best in each employee, which leads to job satisfaction and loyalty to the company. That equals less turnover.
  • More Responsive to Change
    A transformational leader is skilled at casting a vision, which gets everyone else on board. If you’re going to make a big change, you need your team behind you.
  • Engaged and Motivated Employees
    When a leader truly values their people and shows them they care, there’s nothing they can’t accomplish together. The more your team is engaged, the more everyone can win.

Qualities of Transformational Leaders

So how can you become a transformational leader? Let’s look at some of the characteristics of leaders who do it well. Transformational leaders:

  • Influence
    As a leader, it’s not enough to be right—you need buy-in from other people. The ability to influence others is key. Transformational leaders do this all day. They’re good at getting their coworkers to participate. They know how to appeal to others. They take initiative or step up to the plate when others don’t. They make a lasting impact.
  • Give Their Team Ownership
    What’s the quickest way to stifle creativity, lower morale and generally make your team members miserable? Hover over everything they do. Transformational leaders never micromanage.
  • Makes the Hard Decisions
    One of the hardest parts of being a leader is making those tough calls, especially when you know that whatever you decide affects others around you. Transformational leaders don’t avoid difficult decisions. They face the fear head on.
  • Put the Team First
    Transformational leaders look for every opportunity to show their team that, although the leader is still in charge, everyone is in this together. They live out servant leadership through their actions—they serve their team and everyone around by putting them first. This characteristic has been one of the most important keys to Ramsey Solutions’ success, and it's something any leader could—and should—implement immediately.
  • Repeatedly Cast Their Vision
    If you play for something bigger than yourself, you play much harder and smarter. And the same holds true for your team. They work harder because there's a sense of calling. So how do you let your team know they are doing something important? Transformational leaders repeatedly show their team what they're working for and why. They share their vision early and often.
  • Seldom Use Power
    A boss has an iron grip on his team, expecting every employee to immediately jump at his command. He has more rules than Stalin and spends all of his time ensuring that his mandates are followed. Workers know “the boss” holds all the cards. Disobey, and you could be gone in an instant.A transformational leader, however, realizes the only power they can use is persuasion. If you want employees, then boss them around. If you want team members, explain why you do what you do. Don’t lead with threats and fear.
  • Give Praise
    Transformational leaders make a habit of catching people doing something right and letting them know about it. A sincere compliment is so unusual that it immediately sets them apart.
  • Know the Why
    The reason for being in business is the foundation for everything you do—the DNA of your company. It helps you focus on what matters most, drives decisions, creates your culture, and fires up your team. Companies that are winning know the why of their business and repeatedly share it with their team.
  • Shoot Sacred Cows
    This one might sound a little odd, but it’s is a key core value at Ramsey Solutions. Shooting sacred cows means we stick by our principles but always challenge processes. Transformational leaders don’t do things “because we’ve always done it that way.” If something isn’t working, change it. If something is broken, fix it. Obey the principles, not the process.

Examples of Transformational Leaders

In addition to our CEO, Dave Ramsey, other fans of transformational leadership include:

  • Jeff Bezos
    Amazon’s founder inspires others with his vision of making the impossible possible. “If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table,” he says.
  • Richard Branson
    The founder of Virgin Atlantic Group is famous for treating his employees like family. “If you take care of your employees, they will take care of the clients,” he says. 
  • Condoleezza Rice
    What’s the secret of Condoleezza Rice’s success? It just may be the former Secretary of State’s ability to inspire. “Power is nothing unless you can turn it into influence,” she says.
  • Sam Walton
    Another believer in transformational leadership was the late Sam Walton, founder of Wal-Mart. “Outstanding leaders go out of their way to boost the self-esteem of their personnel,” he said. “If people believe in themselves, it’s amazing what they can accomplish.”

Become a Transformational Leader Through EntreLeadership

Although the theory of transformational leadership is nearly half a century old, it’s still wildly popular—because it works. Every leader at EntreLeadership and our parent company, Ramsey Solutions, practices it. And this type of leadership has enabled us to be named one of Nashville’s Best Places to Work eleven times.

Interested in becoming more of a transformational leader? Start by evaluating your current leadership style. Check out the EntreLeadership Leadership Growth Assessment test to get started.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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