Punishment or disciplinary action is often the medium used in this approach. Active transactional leadership uses contingent rewards. With this approach, employees are praised for their performance and may be eligible for pay increases or other incentives (Flannery, 1996).
Transformational leadership incorporates transactional leadership approaches, but moves beyond them. Here, the leader-subordinate influencing relationship is one where relative power is used to pursue organizational and personal goals. Three types of transformational leadership approaches have been identified: charisma/inspirational, individual stimulation and consideration for the individual (Flannery, 1996).
Under charisma/inspirational approaches, the leader demonstrates a high degree of popularity or celebrity status and is held in high esteem by peers, subordinates and superiors alike. Typically, the charismatic leader is also visionary, courageous, value driven and serves as an agent of change within the organization. Transformational leaders who use individual stimulation exhibit a high level of awareness of current employee problems. Ways in which this awareness is created include life experience, the ability to handle ambiguity, the ability to handle complexity and uncertainty, and the demonstration of intellectual courage.