Transformational leadership is a style of leadership that motivates, encourages, and inspires employees to contribute to company growth. Leadership expert James McGregor Burns first described the concept of transformational leadership in a 1978 book entitled Leadership. Although Burns’ research was focused on political leaders, the term is also applicable for businesses and organizational psychology.

Understanding transformational leadership

Burns noted that transformational leadership was a process in which “leaders and followers help each other to advance to a higher level of morale and motivation”. 

He also noted that transformational leaders:

• Create significant change in employees, organizations, and communities.
• Challenge expectations and aspirations.
• Lead by example.
• Articulate a vision that is likely to inspire or energize. 

In the years since the original study, researchers such as Bernard M. Bass have contributed to developing the concept further. This research culminated in the creation of four elements of transformational leadership which will be discussed in the next section.

The four elements of transformational leadership

1. Intellectual stimulation. Transformational leaders enjoy challenging the status quo and encourage creativity in employees. 
2. Individualized consideration. The transformational leader is also empathic. They offer support and encouragement to followers who demonstrate an ability to think independently. They keep lines of communication open and encouraging a two-way flow of information and ideas.
3. Inspirational motivation. These leaders can also articulate visions that are both appealing and inspiring to those under them. Visions are realized through the establishment of high standards and cautious optimism. Most importantly, transformational leaders are great motivators because they instill a sense of purpose and meaning into every action they take. Among other things, this increases employee well-being.
4. Idealized influence. Transformational leaders are perfect role models. They back up their visions with action and embody the qualities they espouse. This builds trust and respect among their followers.

Examples of transformational leaders

In a study of Fortune 500 companies in America, Harvard Business Review found that many were led by transformational leaders sharing common traits and strategies.

Here are some of the more notable examples:

• Heinrich Hiesinger, ThyssenKrupp. In 2011, Hiesinger was appointed CEO of a steel manufacturing giant experiencing intense pressure from Asian competitors. In response, he shifted the core focus of the business to high-tech componentry and industrial solutions with an emphasis on clean energy.
• Jeff Bezos, Amazon. Bezos was noted as someone who brought fresh perspectives and a focus on employee involvement to the e-commerce model from his years of experience in the finance industry.
• Reed Hastings, Netflix. Hastings has a similar story to Bezos in that he spent many years in the software industry. As a result, he was able to challenge the status quo of the television industry to develop the now hugely successful subscription model.

Key takeaways

• Transformational leadership is a leadership style that motivates and inspires others through the setting of challenging goals and the embodying of certain values.
• Transformational leadership has four key elements: intellectual stimulation, individualized consideration, inspirational motivation, and idealized influence.
• Transformational leadership is a style that many of America’s largest 500 companies have adopted. Examples include Netflix, Amazon, and ThyssenKrupp.

Main Guides:

• Business Models
• Business Strategy
• Business Development
• Distribution Channels
• Marketing Strategy
• Platform Business Models
• Network Effects

Main Case Studies:

• Amazon Business Model
• Apple Mission Statement
• Nike Mission Statement
• Amazon Mission Statement
• Apple Distribution

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