Over the years, we’ve touched on many leadership topics in our blog posts, and one of the most popular continues to be a discussion of transactional relationships in the workplace. The topic has only increased in importance as psychological safety, inclusion, and connection to the mission have become vital characteristics of a successful work culture. So, we took the time to revisit the topic and dive a little deeper.

A common criticism of C-level executives is that they don’t spend enough time building relationships with their peers on the executive leadership team, or their colleagues within the organization. Shared services leaders (CFO, CHRO, Marketing) often take issue with leaders who don’t recognize the value of involving them more frequently in decision making. Other members of an organization, often at the individual contributor level, commonly feel unheard altogether, despite their hard work and dedication.

And yet, most leaders today will be asked to lead their organization through transformation. Many leaders take on the challenge but underestimate the effort required to transform their organization and earn the following they need among their teams. They are fast to tell others what to do, but don’t consider how these actions impact people’s motivation to help the organization succeed. Empathy is one of the most essential characteristics of an effective leader because it’s a key ingredient of productive workplace relationships. When a leader takes the time to earnestly understand the perspective of their colleagues, and takes other people’s wants and needs into account, they can better understand what’s required to achieve their own and the wider organization’s goals.

These social dynamics boil down to the two main categories of relationships—transactional and transformational. The former often alienates leaders to their peers, while the latter builds strong, trusting relationships with peers, helping them to feel like their work matters and giving them a reason to care. Read on to learn how to navigate the nuances between these two types of relationships.

Transactional Relationship Definition

First things first, you might be wondering what is a transactional relationship? According to Morozko Method editor Thomas P Seager, PhD:

“Transactional relationships are those in which the terms are made explicit, and there is little, if any, expectation of continuance…which is to say that you have an explicit understanding of what each of you is expecting from the other.”

The meaning of transactional relationships within the context of business leadership is more specific. For C-suite executives, transactional leadership is an approach that focuses more on short-term goals than big-picture company improvements and long-term relationships.

Leaders with a transactional mindset have no problem providing an incentive for those within the organization, so long as there is a measurable outcome. Transactional relationships make the negative consequences of not meeting expectations abundantly clear. In organizational cultures that emphasize transactional relationships, people’s attention falls to the rigid “exchange A for B” structure rather than the “outcome C.”

There are scenarios in life where transactional relationships make sense and are necessary. Paying for goods or services at a cash register is one such example. While exchanging pleasantries can be beneficial, the ultimate purpose of the transaction is exchanging money for something else. It would feel off-putting for the cashier to ask questions about why you’re making a particular purchase.

In a workplace setting, it’s true that transactional interactions can be useful at times. Some performance metrics must be met, or the organization will not move forward. When an aspect of the business must be transactional, contingent rewards can provide workers with a motivating force to achieve business goals. The exchange of effort for a recognition still has its place. But it’s only part of the equation.

People at every level of the organization care about their reputation, accolades, compensation and career just like you. They also generally care about the relationships they build at work, where they often spend most of their time. Their motivations or goals may be much different, but they have a unique perspective to share. If you don’t show that you recognize this, they won’t have any reason to care—the all-important “outcome C.”

Transactional Relationship Characteristics

In a transactional relationship, the only time you engage is when you need something. For example, you have a performance issue with one of your employees, so you call HR to find out about the discipline policy. Or you are working on your budget and call finance with questions about expense allocations. These examples of transactional relationships are purely pragmatic but lack a second layer of empathy.

Imagine if the only time you talked to your significant other or a friend was to ask for something. How might they feel about that? How would you feel if you were the one being asked? Remember, a significant portion of people’s lives happen in their workplace. It is a part of their story. Pay attention to it because their next chapter is part of yours as well.

Risks of Transactional Relationships

If you only demonstrate transactional interest in your peers, everything might seem completely fine on the surface. After all, the relationship is meeting your day-to-day needs, why disrupt a good thing? Unfortunately, there are at least three dangers of transactional relationships to consider:

1. Transactional Relationships Breed Resentment: Over time, transactional relationships tend to breed resentment. No one likes to feel used—particularly when the situation involves something as important as their livelihoods. While it’s never obvious, people tune into the way you interact with them. They think about whether you considered their viewpoint during private conversations, team meetings, and collaborative presentations. While these feelings may be left unsaid, they still matter.
   
   
2. Transactional Relationships Lead to Lower Work Quality: People who feel angry or resentful towards you are not eager to respond to your requests. Doubly so if the request is unusual or inconveniences their plans to be productive throughout the day. As a result, the work they complete may not reach the standard it otherwise would. To bring out the best in others, bring a genuine sense of warmth and caring.
   
   
3. Transactional Relationships Damage Your Reputation: In the absence of a mutual, personal relationship, peers are more likely to believe and act on negative opinions expressed by others about you. Many business leaders would rightfully say that these negative opinions are unavoidable to some extent—you will never be everyone’s cup of tea. And while that’s true, it doesn’t eliminate the importance of building an overall positive reputation. The people who will make the biggest impact on your team need to feel valued.

Transformational Relationship Characteristics

The opposite of a transactional relationship is, naturally, a non-transactional relationship or “transformational relationship.” According to Michigan State University:

“Transformational leaders emphasize personal and professional growth and encourage all employees to think creatively in developing solutions to longstanding challenges, but they can be most impactful in leading younger employers, helping to integrate them into the company culture and giving them a sense that their work is a part of something special.”

Transformational relationships infuse a context into personal interactions. Both people go into conversations with an understanding of the other person’s perspective, and they outwardly show that they take that perspective into account. It requires a conscious effort to earn and build a transformational relationship. 

Characteristics of a transformational relationship include:

Knowing Something About the Other as a Person

No matter how much you want your business to run like a well-oiled machine, the people you work with are human. Unfortunately, this is a truth some leaders are unwilling to recognize, or if they do, they don’t act in a way that reflects that belief. Like you, the people in your organization want to feel seen, heard, and appreciated. Learn something about what the people around you are passionate about in their lives—it’s a small gesture with tremendous personal and professional ROI.

Trusting the Other Person’s Good Intentions

If you’re running a business, remember that you are not running a school. You hired your people for a reason, and when you bring a sense of distrust to these relationships, they will notice. No, others will not always do the right thing or perform perfectly. But if you assume the worst in others, that’s exactly what you will get.

Understanding the Other Person’s Priorities

Everyone has their own priorities. These are the sparks that light a person’s fire, and the reasons they get out of bed in the morning. Caring enough to learn about someone’s underlying priorities helps to uncover insights about what makes them tick, and how you can help them reach their fullest potential.

The trick to learning about people’s priorities is to simply listen. Learn about what’s going for them in and outside of work. Note the tone they use when they describe recent events, or the topics they repeatedly discuss. What lights them up and energizes them? Then, consider how they compare to your own motivations. This type of reflection can uncover common ground between your outlooks.

A Regular Cadence of Communication

Even if you don’t have an urgent topic to discuss, striking up a conversation with someone is a simple way to show you care about their wellbeing. Don’t overthink it. Check in every once in a while to see how the other person is doing in general. If you only speak to them when you need something or there’s a problem, their fear instinct will kick in whenever you approach them. There’s no doubt that this is detrimental to the relationship.

Sincere Curiosity About the Other Person

If you’re passionate about something, you want the world to know. The people around you have their own passions, and showing curiosity in these interests is a great way to strengthen your bonds with them. If you know they’re a sports fan, ask them about the weekend’s game on Monday morning. The value of these exchanges isn’t immediately obvious, but it’s there. Other people appreciate when you listen to their thoughts and ideas. Be genuine, and care about what’s going on in their lives.

High Commitment to Each Other’s Success

It’s important to remember that everyone within an organization is on the same team. We live in a competitive world, so this is an idea that some people forget. Success within your organization is not a zero-sum game. When one person succeeds, so does the rest of the team. Instead of thinking about how you can get ahead of someone else in some way, think about ways you can shine light on their achievements. Chances are, they’ll return the favor.

Suggestions to Improve Transformational Relationships

Studies have shown that transformational leadership behaviors are necessary for team cohesion and efficacy. There are a few concrete actions you can take as a first step towards fostering transformational relationships.

Schedule a Regular Meeting

Creating a schedule of meetings at a consistent day and time can help reduce anxieties others may have about your relationship. The reason? It provides everyone in the meeting with a predictable, open platform to share their thoughts about how things are going, and any concerns they may have. Some people are naturally less extraverted than others, and a regular meeting helps these types of people bring up topics that might otherwise fly under the radar.

Ask for Honest Feedback

The “speak first, listen later” leadership method is not one that will resonate with any of your colleagues. It’s critical to show that you value their opinions and make an effort to hear what they have to say. There are many ways to demonstrate a commitment to listening, such as anonymous surveys, dedicated meetings about internal processes, or simply asking important questions during face-to-face interactions.

Some questions to consider asking:

• Have you had exciting successes since our last meeting?
• What are your big priorities right now and over the next month?
• What are some challenges that you are concerned about?
• How can I be helpful?
• What can I do or what can my team do to make your work easier?

Transparent communication is a key cultural pillar of any successful organization. Creating an environment where it happens takes a real commitment from all parties involved.

Setting Expectations for Business Relationships

There is a fine line between business relationships and personal ones. Sometimes, that line can seem blurry, making it difficult to know when a situation calls for a transactional or transformational approach. What many people fail to realize is that transformational relationships aren’t inherently unprofessional ones. 

You can care about someone as a coworker and a person. Of course, that doesn’t mean getting too personal—some topics are better to discuss with friends than colleagues. But showing a real interest in a person’s life can pay dividends when they have an opportunity to help you reach your own personal goals.

Start Your Transformation

The balance between building transactional vs. transformational relationships is one worth taking seriously. It’s the underlying foundation for how people perceive you as a leader. Analyze what’s working, and where you have room for improvement in your personal interactions.

You might be thinking, “I don’t have time for this,” or “this isn’t in my comfort zone.” But remember, this is not just to make your peers feel good. You will be surprised by what you learn in these more genuine conversations and what positive outcomes might result from building stronger relationships within your organization.

The way people interact with one another in the workplace is quickly changing. As a new generation enters the workforce, it will continue to evolve. Want to adapt? Dive into our eBook, “Leaders must grapple with new interpersonal priorities in the 21st-century” to discover the most important considerations.

If you are still having challenges building peer relationships, a TBG consultant can help. Fill out this form for a free consultation from an experienced member of our team.