The term transformational leadership was first coined by J.V. Downton in 1973 in Rebel Leadership: Commitment and charisma in a revolutionary process.
Management guru James MacGregor Burns first introduced the concepts of transformational and transactional leadership in his treatment of political leadership, but this term is now used in organizational psychology as well. According to Burns, the difference between transformational and transactional leadership is what leaders and followers offer one another.
Transformational leaders offer a purpose that transcends short-term goals and focuses on higher order intrinsic needs. This results in followers identifying with the needs of the leader.
The four dimensions of transformational leadership are:
Charisma or Idealized influence: the degree to which the leader behaves in admirable ways that cause followers to identify with the leader. Charismatic leaders display convictions, take stands and appeal to followers on an emotional level. This is about the leader having a clear set of values and demonstrating them in every action, providing a role model for their followers.
Inspirational motivation: the degree to which the leader articulates a vision that is appealing and inspiring to followers. Leaders with inspirational motivation challenge followers with high standards, communicate optimism about future goals, and provide meaning for the task at hand. Followers need to have a strong sense of purpose if they are to be motivated to act. Purpose and meaning provide the energy that drives a group forward. It is also important that this visionary aspect of leadership be supported by communication skills that allow the leader to articulate his or her vision with precision and power in a compelling and persuasive way.
Intellectual stimulation: the degree to which the leader challenges assumptions, takes risks and solicits followers' ideas. Leaders with this trait stimulate and encourage creativity in their followers.
Individualized consideration or Individualized attention: the degree to which the leader attends to each follower's needs, acts as a mentor or coach to the follower and listens to the follower's concerns and needs. This also encompasses the need to respect and celebrate the individual contribution that each follower can make to the team (it is the diversity of the team that gives it its true strength).
Apart from its central role in transformational leadership theory, charismatic leadership has been the basis of its own distinct literature. Transformational leadership and charismatic leadership theories have much in common and complement each other in important ways.