They can inspire and unite followers, but effectiveness and ethics can suffer.
President Bush has cast himself as a transformational leader. He disdains what he calls "small ball." Many people assume that leaders with transformational objectives and an inspirational style are better or more ethical than leaders with more modest objectives and a transactional style.
Transformational leaders provide an inspiring vision of goals that can help overcome self-interest and narrow factionalism in organizations and nations. They summon new and broader energies among followers. Groups and nations that are rent by cleavages and factions can benefit from a Gandhi or Mandela who raise people's sights to a common cause.
In contrast, transactional leaders lead by using a normal range of rewards and punishments rather than inspiration.
Common causes, however, are not always more moral than individual interests. If a government official chooses to go to his daughter's softball game on a Saturday afternoon rather than serve the public interest by working in the office, which is the higher need? When the transformational leader Mao Zedong rallied the Chinese people around collective interests in the Great Leap Forward of the 1950s and the Cultural Revolution of the 1960s, the result was millions of unnecessary deaths.
More than two centuries ago, the newly independent American colonists had a transformational leader in George Washington. Nonetheless, they invented a very different type of institutional leadership when James Madison and other transactional leaders negotiated the Constitution and later explained it in the Federalist Papers.