As you encounter people and situations on a daily basis, you develop responses. After a while, these responses become habits, some good and some bad. For example, after you’ve had to step in to settle an argument between two team members, you put a note in their personnel files about how they need to find a way to work together. This strategy is what you always turn to because it saves you time and trouble. This habit is also transactional and will likely not improve your organization in the long term.

Jeffrey Schwartz, research psychiatrist at UCLA School of Medicine and Art Kleiner, editor-​in-​chief of PwC’s strategy+business management magazine, recently discussed this topic. They participated in a podcast on Knowledge@Wharton and highlighted how leaders can become more strategic, based on principles they outlined in their book: The Wise Advocate: The Inner Voice of Strategic Leadership.

Transactional versus Strategic Leadership

As managers, we know how easy it is to get lost in the day-​to-​day details of running our departments, division or companies. Thousands of little issues require attention. Most of us enjoy making these decisions. We’ve encountered them before. We have patterns and habits honed over many years that help us solve these problems quickly. 

Schwartz calls these responses transactional leadership. The organization needs transactional leaders. Making these decisions quickly keeps your team and organization on track. For example, when you take care of a customer problem, you’re increasing loyalty and building profitability. 

Today’s business climate doesn’t allow for leaders who rely on their transactional strengths alone. Technology is changing quickly and so is the competition. If you don’t develop your other leadership style, strategic, you’re in danger of falling behind.

Transition to Strategic Leadership

Schwartz encourages leaders to dig into applied mindfulness when they’re thinking strategically. In these cases, you need to call executive functions to the forefront. You don’t rely on familiar habits and routines when making a decision. Instead, you should be asking yourself. “What am I thinking? What am I going to do and why?”

When you use strategic decision making, the action you take to settle down two squabbling team members may change. Perhaps you’ll encourage one of them to move to a different division because their talents would work better in that environment. Instead of routinely putting notes in their personnel files, you’ll stop and think about what these team members really want. And you’ll make a decision that will benefit the organization’s bottom line tomorrow and five years from now.

When you don't allow habitual responses to rule your leadership, your strategic decision making improves for the long term.