Momentum Podcast: 56
Transactional Management vs Transformational Leadership
by Alex Charfen
One of the biggest challenges in business today is that the vast majority of entrepreneurs are running their business, growing their teams, transactionally. And here's what that means. Transactional management is like force of personality management. It's where you tell people what they need to do, check that it got done, and tell them what they need to do again. It is exhausting. It will wear you out. You literally feel like you're doing everything.
And, if you're an entrepreneur, and you're growing a team, and you're leading transactionally, you know what this feels like. It feels like you're doing everything. It feels like you work for the company, not the company working for you. It feels like you're carrying all of the weight of the organization, and it feels overwhelming.
Growing a business through transactional management is overwhelming, exhausting, and will rob you of your momentum.
Managing transactionally means you do the following:
Tell people what to do -> make sure it got done -> tell them what to do again…
This won't only wear you out, but you will chase away A players and people who can help grow your company fast. Unfortunately you will only hold onto the most loyal for those who don't have the talent to go somewhere else. This will cause your company to stagnate and for you as an entrepreneur to feel like you are doing everything.
When you transition to transformational leadership, the process is completely different:
People clear outcomes -> coach them along the way -> get leveraged results…
This will change the dynamic of your entire business because instead of you as the owner and entrepreneur trying to grow everything, each person becomes an owner of the outcomes they are creating.
Full Audio Transcript
I'm Alex Charfen, and this is The Momentum Podcast, made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum, so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so that we can bend them, break them, and then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop, and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few, who are willing to hallucinate that there could be a better future. And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly, the most important people in the world because entrepreneurs are the only source of consistent positive human evolution, and we always will be.
Ah, I almost made if through the whole manifesto without a slip, but that last line caught me, and I just want to thank you for being here with me. This is episode 56 of the Entrepreneurial Personality Type. This is transactional management versus transformational leadership.
One of the biggest challenges in business today is that the vast majority of entrepreneurs are running their business, growing their teams, transactionally. And here's what that means. Transactional management is like force of personality management. It's where you tell people what they need to do, check that it got done, and tell them what they need to do again. It is exhausting. It will wear you out. You literally feel like you're doing everything. And, if you're an entrepreneur, and you're growing a team, and you're leading transactionally, you know what this feels like. It feels like you're doing everything. It feels like you work for the company, not the company working for you. It feels like you're carrying all of the weight of the organization, and it feels overwhelming.
Now, the shift here, from transactional to transformational, changes everything. It doesn't just relieve the pressure off of you as an entrepreneur. It doesn't just make it feel like you no longer are doing everything, but it will functionally and irrevocably change the way your team responds to you, and change how your company works.
So transactional, again, it's you tell people what to do, verify it got done, and tell them what to do again. You get caught in this endless loop, which is literally like the definition of micromanagement. No matter how big those tasks are, it still feels like you are literally pushing or pulling the company to grow. The shift to transformational is, you give people clear outcomes, coach them along the way, and you get leveraged results.
So, rather than trying to do it all yourself, you tell people what you want, you coach their progress along the way, and you get leveraged results. And, literally, with transformational leadership you can't fail because this is the process through which you spend time with your team. You are involved with your team. You're coaching their success. You're showing them how to do more because you're telling them what outcome you want and you're letting them choose the process, the way to get there, the details, and you coach so that you're there making sure that they don't go in the wrong direction. Or, they don't get the outcome you want, so instead you're there with them.
Now, this changes the entire dynamic of your business because in transactional management, here's what happens. You are literally getting up every day and pushing the business to grow. You're pushing it to grow through telling people what to do. You're pushing it to grow through verifying that they got it done. You're pushing it to grow by understanding what everyone's doing every day. That in and of itself is exhausting for an entrepreneur.
And in my world, in my life, I ask the question over and over again, how do you make business grow? And it's a quick pivot to, how do you make people grow? Because businesses grow when the people within the business grows. I'm going to say that again, businesses grow when the people within the business grow. Because what is a company? What is a business? A business, a company, an organization, is a group of people who have all decided to work on the same results. Of course, they're getting paid. Of course, there's other reasons, but it's a group of people who have all decided to work on the same results.
And so, how do you grow that business? You lean in to the people within the organization, and the fastest way for us to do that, as entrepreneurs, is transformationally. Because here's what I know about you, as an entrepreneur, I know that you're just like my client, Layla Hormozi. Alex and Layla Hormozi run a company called Gym Launch. And, as an aside, if you're in the fitness business, if you own a gym, if you are opening a gym, if you have a gym that isn't doing well, if you have a gym that's doing well, you owe it to yourself to go to the website, IDontHateMoney.com. I know that's kind of funny, but it's Alex's website, IDontHateMoney.com, and check out their company.
Alex is the visionary, the marketer, the one whose created the products. And Layla, is one of the most talented operators I've ever worked with, one of the most talented entrepreneurs I've ever had the privilege to work with. She is absolutely amazing. And here's what I know about you, what I know about Layla, what I know about Alex, just by the fact that you're listening to my podcast, you are an evolutionary hunter. You are a transformational leader, and here's what that means, you want to have a huge effect on the world. You want to have an outcome that where you helped the people around you. You want to transform things, change things, and make them better.
Here's what I want you to know, regardless of what you do in the world, the greatest impact you will have is on the people who are most proximal to you. The greatest impact you will have is on your team. When you look at the history of great entrepreneurs, whether they were in a large company, or ran the company on their own, there is a cascade of leaders that come out of those organizations. One of the things that I am incredibly proud of is, I've employed over a thousand people. I guarantee you, at least 200, maybe more of those, are either running their own business, or running a business on the side, or making income without having to be in a job, and they are doing things on their own. They're out transformationally leading. I hold that out as a badge of honor that I can help people transition into entrepreneurship, become independent because I want to have that impact on the world.
And here's what happens, when you take a human being and you tell them what to do, check that it was done, tell them what to do again, they learn almost nothing. It's like you're almost like training a dog, "Hey, jump up and down, here's your treat. Jump up and down, here's your treat." No human being grows when they have that kind of conditional training, but here's how human beings and your business will flourish, explode, you'll see people grow, you'll see them change before your very eyes, you'll see talent come out that you didn't even know people had, you'll see initiative go crazy, and you will see your entire company explode because you'll start getting the discretionary effort of people. You'll start getting their discretionary time, and here's what I mean by that. When they're driving to work, they'll be thinking about the business. When they're going to sleep at night, they'll be thinking about the business. When they're doing their workouts, when they're walking, when they're running, they'll be thinking about how to grow the business.
That discretionary time is everything. Why? How do you do that? How do you get that time? How do you make people that involved that it becomes a part of their life to grow the business? You give them ownership because in a transactionally run company, the owners are the ones who have ownership over the growth of the business. They tell people what to do, they check that it was done, they tell them what to do again, and those owners are exhausted because they literally feel like they're pushing and pulling the business every day. The converse of that is to do it like Layla has been doing it.
So, just a few months ago, Gym Launch was only three people. I think they're 22 right now. And the way that Layla has grown that company so fast, and really Alex and Layla, but primarily Layla, she's the operator. She's the one who's hiring. She's the one who's onboarding. She's the one who's building the systems, building the team, and the way that she's done that is by hiring people, giving them clear outcomes, and then, coaching and supporting them along the way, and getting massive leveraged results. Just, if you want an idea of the leveraged results, they've gone from three to over 20 people. They've gone from six figures to well over seven figures, and they're approaching eight figure run rates. They are changing the lives of gym owners. I'm telling you, if you're a gym owner, go to IDontHateMoney.com and you will thank me later because this business is one of the most intense that I've ever seen.
And when I talk to Layla, I hear that transformational management discussion every time we connect. She tells me about how she's giving her team outcomes. She's supporting them. She's telling them how good they are at what they do. She's giving them accolade, letting them know that it's okay when they miss, it's okay when they make a mistake because here's what happens, when you shift from transactional to transformational, you eliminate failure. You might have the wrong person in the role, you might find that in trying to coach them, they're not the right person, but here's what you'll find more often, is that because you've given a clear outcome, and you're supporting that person in getting there, you can't fail. You're coaching them day to day, they're moving forward, you know what's going on, they're coming to you when they have questions, and they are pursuing that outcome. When you trust people, you hire good people, who are obsessed with getting results, and you trust them to get there, they will. When you manage transformationally, you take everyone from being an employee, which man, what a terrible word, to being a team member, and more importantly, to being an owner. They own their outcomes. They start acting like owners. That will change who they are in the world.
When somebody has ownership over an outcome, when they can see the effect they're having in a world, even if it's through your business, you give that person the privilege of creating success, the privilege of creating momentum, the privilege of moving things forward, and you have to look at it that way because human beings want to succeed. The people coming to you for jobs want to succeed. Everyone, when you do this, everyone's not only an owner, everyone learns at an accelerated rate, they learn to work better with you, they learn to work better with each other, but they also learn how to go through this process of creating an outcome, creating a plan, receiving coaching, getting to that outcome, and you know what you can do right after they do? You give them a bigger outcome, and a bigger outcome, and they can pursue bigger objectives, and help you in different ways in the company because when you grow your people, the organization grows.
And this might be the most important effect of transformational leadership and I've been watching it at Gym Launch. When you hire extraordinary people who are obsessed with getting results and who want to work with a company who's making a difference, and then you coach them in a transformational way, where you give them the outcome, you coach success, and then you get leverage results, everyone in the business transforms. Everyone in the business becomes someone new because most people who come to work with you are looking for an opportunity different than what they would get at a corporation, different than what they would get being a number at a multinational, different than what they would get if they went to work for some big conglomerate. They're coming to you because in some way they want to grow, they want more opportunity, they want a smaller organization that they can have a bigger impact in, and when you shift to transformational leadership you change everything in that dynamic for them, and you allow people to transform at a much more rapid rate.
And here's what happens, the person you hired as a tech support person, or a customer service rep. Like as an example, Lewis, who is absolutely amazing. Lewis Pike now runs a business, he's my outsource CTO, but he started with me in 2009 as a customer service rep, like literally answering the phones, but we gave him outcomes, coached success, and then he created bigger outcomes, and bigger outcomes, and the most recent position he held in our company was CTO, and now our technology is gotten simple enough that we still have him as our outsource CTO, but he works with now tons of my clients doing the same things. So, here's someone who started as a customer service rep, now runs an independent business helping multimillion dollar companies all around the world, including mine, that is transformation.
And I look at Layla, who just a few months ago, had very little experience in interviewing and onboarding and bringing people into a company and building a team, and she is building a formidable team of tightly knit individuals who in and of itself, Gym Launch, as a community of people who are helping gym owners, and they're taking over that market. And the reason is because she and Alex have committed to transformational management. They are consistent in giving everyone who works with them outcomes. They are consistent in making sure that they have the resources, the tools, the coaching that they need, and they are consistent in coaching success along the way.
And here's an important part of this, when you manage transformationally, and you give someone an outcome, and you're coaching success along the way, when they make a mistake, you make sure they're okay with it. When they fall, you make sure you help them back up. When there's a challenge, you go directly to them and say, "Hey, it's okay. It's not a big deal. Don't worry about this. We will move forward. We're going to be okay." I think back to a few, maybe five or six years ago, and I had a writer on my team, one of the most talented guys I've ever worked with Ryan Shuhart, and this, Ryan is, he's now an independent business owner. And Ryan was capable of doing more for me, as a writer, than most writers I ever worked with. And then there was this fateful day where Ryan had been getting a ton of stuff done, he'd been getting communications out to our team, communications out to our members, getting stuff executed like just finishing far more than he should have been able to, and he sent an email to our entire database with nothing more than an unsubscribe link.
Can you imagine the impact that it had? Tens of thousands of people got an email from us that just said, "unsubscribe" and I remember getting the email and thinking, "Oh my goodness. Who sent this?" And two minutes later, Travis, who was my CTO at the time, walked into my office and said, "Hey, Ryan just sent an email." And I said, "I know." And I got up, I went over to Ryan, and I said, my first words out of my mouth were, "Ryan, it's okay, we all make mistakes." I get it, do not beat yourself up, we're going to fix this, we're going to be okay." Because I knew, given how conscientious and how caring he is as a human being, that he was completely beating himself up.
And you look at a normal work environment where the CEO gets up and runs across the room and starts yelling at someone, you know what that person's going to do? They're never going to take initiative again. And when somebody makes a massive mistake, you do not have to reinforce it, in fact, you have to reinforce their confidence. You have reinforce their clarity. You have to reinforce their commitment because any move to reinforce the mistake is only going to drive them further away from being that owner that you want.
And so, if you're building a team, I want you to think about this all day today, tomorrow, start keeping it in the back of your mind, am I acting in a way that is causing my team to be transactional? Am I telling them what to do? Checking that they did? And telling them what to do again? Or, am I determining what outcomes I want in the business, splitting those up among team members, coach success along the way, and creating leveraged results? Because, here's what I know about all of us as entrepreneurs, money is important, growing a business means a lot to us, having a team around us changes who we are, but every one of us is driven by the impact and the contribution we will make in the world.
And I want you to know, it doesn't matter what your business does, what you sow, what you market, what you're putting out there, what service you provide, if you make the decision to manage transformationally, that business will transform the world beginning with the people who have chosen to be part of your team.
Thanks for being here with me for this episode. I know you can tell, this is a topic I'm incredibly passionate about. If you are an entrepreneur who's building a team, and you are looking for support, and want to grow really fast, and have an opportunity that you know you can grow really fast, reach out to us. Contact me through Face Book or through Instagram and get in touch, and will jump on a call with you and determine if we can help you because our world is about helping world changing entrepreneurs like you, grow and scale businesses as fast as possible. Thanks for being here with me on the Momentum Podcast for the Entrepreneurial Personality Type. We're going to hit 43,000 downloads today, and it's only accelerating, there's no way we could do it without you. So, I appreciate you being here. Please share this, leave me a comment, let me know what you think, and shift from transactional to transformational management. You will see your business, you will see your team, and you will see your world, and the world in general, transform before your very eyes.