What Is Transformational Leadership? The Theory Explained- Foundr

All you have to do is search “presidential speeches” on Google to see examples of transformational leadership.

John F. Kennedy’s “ask not what your country can do for you” speech, Abraham Lincoln’s Gettysburg Address, or more recently, Barack Obama’s “Yes, we can” campaign slogan are all dramatic moments of transformational leadership.

These dynamic political icons used transformational leadership characteristics to tackle the most challenging social problems of their day. But how does transformational leadership translate to business success? In what ways can you utilize transformational leadership to bolster your startup, small business, or side hustle?

There are various leadership styles that you might naturally gravitate toward. To build a business from the ground up, you’ll need to utilize different styles at each stage of growth. If you call yourself an entrepreneur, transformational leadership must be a part of your professional growth strategy.

In this article, we’ll define transformational leadership theory, list its characteristics, showcase examples, and empower you to apply it to your business.

What Is Transformational Leadership Theory?

Transformational leadership theory was popularized by James Burns in his 1978 book Leadership. The book outlines the theory as “one or more persons engage with each other in such a way that leaders and followers raise one another to higher levels of motivation and morality.”

Burns explains transformational leadership by contrasting it with transactional leadership theory. Transactional leadership is when a leader rewards a follower for the service they provide the leader. For example, a transactional leader at a grocery store tells their employee to stock the shelves for 8 hours and then pays them x dollars per hour worked.

In his theory of transformational leadership, Burns describes the style as going beyond reciprocity.

“The result of transforming leadership is a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents.”

Back to the grocery store example. A transformational leader at a grocery store tells an employee that the business’ goal is to make the most elderly-friendly grocery store in the world. The leader gives the employee the resources and freedom to stock the shelves however best they see fit to serve the elderly community.

See the difference?

Transformational leadership motivates others based on a set of shared values. It creates a system that inspires others and cultivates unity. Now let’s review the characteristics of transformational leadership that make this theory effective in practice.

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5 Transformational Leadership Characteristics

Transformational leadership isn’t just for presidents. Here are the universal transformational leadership characteristics that can make you a better leader.

1. A Vision For What’s Ahead

Transformational leadership is about inspiring change. Leaders who utilize transformational leadership skills can see possibilities amongst a group of people and identify the steps needed to achieve an outcome.

Having vision could be as simple as running a strategic planning session or as grandiose as plastering your business values across an office wall.

2. A Desire to Inspire

To inspire is to identify the motivations of an individual and encourage them to reach an outcome. As a transformational leader, you must understand what makes your team tick and motivate them to achieve a goal.

Inspiring others as a business leader involves how you speak to customers, employees, and colleagues. But your actions matter more. It’s why people decided to work with you in the first place.

3. Challenging the Status Quo

Transformational leadership elevates an existing position or solves a problem. In business, it materializes when an organization stalls or a specific industry requires a new solution.

Your entire business idea could be centered around challenging the status quo. The key is to identify opportunities within your business and have the confidence to pursue them.

4. Contagious Confidence

Having confidence is a touchy subject when it comes to entrepreneurship. Some people have too much confidence, while others don’t have enough. Confidence comes from wisdom—not acting like you’re God’s gift to earth.

The more you see success (or overcome failures) in your business or strategies, the more confidence you’ll gain and transfer among your team. Through transformational leadership, confidence comes from a moral standard that is accessible to everyone. Transformational leadership should ooze confidence across an organization, not just in the C-suite.

5. Supporting and Rewarding Others

Because transformational leadership theory is about creating a set of shared values, you should be aware of others’ beliefs and emotions. To be a successful transformational leader, you need to be a good listener.

Rewarding people for performance and integrity reinforces that you care about the individual’s contribution to a vision, and more importantly, that you care about who the person is. Through listening and response, a supportive atmosphere will cascade across an organization from your actions.

Benefits and Downsides of Transformational Leadership

Transformational leadership sounds like the perfect way to lead a business but before you roll out a podium and give a rousing speech at your next team lunch, review the benefits and downsides of the leadership style.

Benefits of Transformational Leadership:

  • Brings innovative ideas to a traditional or new business
  • Can execute complex change within an organization
  • Can shift public perception of a brand
  • Can lead into the unknown with confidence

Downsides of Transformational Leadership:

  • Can initiate costly projects without guaranteed success
  • Requires a drastic change in historical personnel or processes
  • Can confuse employees or customers if changes aren’t clear
  • Executing a transformational vision requires a majority buy-in

4 Transformational Leadership Examples

It’s time to move from theory to practice. Here are 4 examples of business leaders that have used transformational leadership to positively change their organizations.

1. Marc Benioff: Salesforce

As the CEO and cofounder of Salesforce, Benioff transformed how companies manage customer relationships. Salesforce was the first cloud-based CRM (customer relationship management) system and even went so far as to transform the industry by making their corporate mascot a “No Software” button.

Benioff views business (specifically Salesforce) “as the greatest platform for change.” This shared value inspires the company’s practices in generating profit, rewarding their employees, and giving back.

Read Benioff’s business book or tune into a Salesforce virtual event. You’ll quickly understand how the characteristics of transformational leadership are carried out every day at Salesforce.

2. J. Patrick Doyle: Domino’s

In the late 90s, Midwest pizza chain Domino’s was known for its cardboard-textured pies and guaranteed delivery in less than 30 minutes. Former CEO J. Patrick Doyle stepped into a leadership role at a company with a poor public perception that was quickly losing market share.

Doyle transformed Domino’s by reframing them from a pizza company to a food technology company. Under his tenure, the company’s sales nearly doubled and he is lauded as one of the best restaurant CEOs ever.

Domino’s became a leader in online ordering, providing a pleasurable digital customer experience that made it easier than ever to order pizza. By transforming the ordering process, the food-making operation became more automated, allowing Domino’s to invest in better ingredients and formulations.

Through Doyle’s transformational leadership, Domino’s was able to create better quality pizza without sacrificing the delivery experience the brand was known for.

3. Whitney Wolfe Herd: Bumble

Bumble began as an alternative dating app focused on offering women a supportive and safe digital experience. It quickly became the second most popular dating app as well as a trusted brand for women.

Whitney Wolf Herd, founder and CEO, had a vision beyond just dating. She wanted Bumble to be a platform that supported women in all aspects of relationships—both personal and professional. Now Bumble offers its users the ability to network for business and build friendships through the platform.

By challenging the status quo of dating apps, Herd has transformed Bumble into a tech giant that makes Wall Street buzz.

4. Yvon Chouinard: Patagonia

Yvon Chouinard never wanted to start a company. He openly despised the way businesses had treated the environment for the sake of profits.

With Patagonia, Chouinard created an apparel business model based on selling fewer products. For 50 years, Patagonia has been on the cutting edge of sustainability. The company creates products that last and encourages its customers to repair and reuse them.

Because of Chouinard’s transformational leadership, Patagonia is a brand synonymous with quality and the highest environmental-friendly standards. Customers are more loyal than ever, building Patagonia into a company Chouinard never expected to lead.

How Can You Be a Transformational Leader?

Some leaders aren’t born with the charisma to step on a stage or present a strategy in a boardroom of investors. But that doesn’t mean you can’t develop the characteristics of transformational leadership that can help your business grow. Here is a list of ways to nurture the transformational leader within you.

  • Communicate your values: Regularly tell your team why they are working. You might naturally have a vision of what your business cares about but your team can lose focus if the values are not consistently shared.
    Tackle opportunities: Doing the same old thing as an organization can be a death sentence. The same goes for leaders. Find opportunities to improve your business and never relent.
  • Listen, listen, listen: There’s no way you can inspire and motivate your team if you don’t listen. Schedule regular sit-downs with your leadership team or schedule an AMA (ask me anything) session at team meetings. Create a structure for honest communication. The more you listen, the more you can understand what your team needs to be successful.
  • Hire and promote leaders: If you want to transform your business, sheer willpower or innate skills won’t cut it. Promote and hire leaders that share your values and can articulate them to others.
  • Invest in branding: The way to control how your business is perceived externally and internally is by branding. A brand is the megaphone of your business values. Branding can be as complex as a logo refresh or as simple as giving your team t-shirts with your business mission on them. Repetition of the iconography and messaging associated with your business will instill change holistically.
  • Bring in a third party: When your business hits a challenge, hiring a third-party consultant or creating an advisory board can help catapult your team to success.

Be Prepared to Lead

Ready to grow your business through transformational leadership? Make sure you have the other characteristic of a successful leader—knowledge.

See our catalog of free masterclass courses from business leaders who’ve been there. From ecommerce to deal-making, we’ll provide you with the rounded skills to succeed as a leader.

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