There is an informal organisation within any formal one. This is made up of the relationships, communications patterns and perceptions on the individuals. The informal organisation is a powerful controlling force. The third stage of the Hawthorne studies was about 14 men in the Bank Wiring room. The researchers discovered that the group managed the level of output and that incentives offered by the company had little effect. The group had decided what was a fair day’s work for a fair day’s pay.
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Mayo’s studies were then followed up by various psychologists, including Herzberg and McGregor who shifted the attention to the ‘higher’ psychological needs of human beings for growth, challenge, responsibility and self-fulfilment. Herzberg distinguishes between Hygiene factors – those that will not increase motivation as such but will certainly decrease it if standards are not right – and motivating factors.
Hygiene factors include working conditions, salary, job security and company policies. Get these wrong and motivation will decline but add to them over a certain standard and there will be no more effect on motivation. Motivation, says Herzberg, derives from people having a sense of achievement, recognition, responsibility and opportunities for personal growth. He criticises management for ignoring the motivational factors and trying to motivate through things like money and benefits – expensive and not successful. He is also famous for his acronym KITA, which has been politely translated as a kick in the pants! He says that KITA does not produce motivation but only movement.
The work of James McGregor Burns is the in the tradition of the thinking of other people, it has a moral dimension. Transactional leadership is what we would recognise as good, effective and proper management based upon the techniques of management developed over the last 50 years. It recognises the need for and implements such processes as performance appraisal, performance related pay, job descriptions, management by objectives (MbO), organisational process analysis and clarification and job grading. It also recognises and uses praise, recognition and the delegation of responsibility. Such leadership puts into practice the insights of Herzberg, leveraging both motivation and hygiene factors.
One might argue that such leadership is rare enough. Indeed, if more companies practised transactional leadership, the world would be a better, happier and more productive place. However, it is insufficient for James McGregor Burns. He argues that beyond this is transformational leadership. Transactional leadership is still top down. It is fair, process oriented, system driven, as objective as it can be but the decisions on goals and rewards are still made at the top and cascaded down. The ultimate aim of management by objectives, for example, would be that the objectives for every person and department in an organisation could be logically deduced from the objectives of the organisation as a whole. No such logical tree of objectives has ever existed but that is the thinking behind MbO.
James McGregor Burns’s view of transformational leadership is less about management by objectives and more about management by vision. You might think of a rank order of types of management starting with Management by Command – proceeding through MbO, moving on to Management by Communication and ending with Management by Vision. This is not what James McGregor Burns says but it would place his work in perspective.