Although contingency models take both the person and situation into account, Edwin Hollander (1985) criticized these “top-down” views of leadership in which workers are portrayed as inert, passive, faceless creatures to be mobilized at the management’s discretion. Instead, he sees leadership as a two-way social exchange involving a mutual and reciprocal influence between a leader and followers. According to Hollander, a good transactional leader is one who gains compliance and support from followers by setting clear goals for them, by offering tangible rewards, by providing assistance, and by fulfilling psychological needs in exchange for an expected level of job performance. Transactional leader- ship thus rests on the leader’s willingness and ability to reward subordinates who keep up their end of the bargain and to correct those who do not.
Transactional leaders do not aspire to change or transform their followers or the future. This type of leadership is effective in crisis and emergency situations or to complete specific short-term projects. They do so by setting goals, making explicit agreements, and setting the conditions for reward and punishment.
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