The integration of digital technologies into public administration has transformed decision-making processes, organisational culture, and leadership dynamics. As governments worldwide adopt artificial intelligence (AI), big data, and automation, leadership models must evolve to ensure efficiency, innovation, and institutional resilience (Mergel et al., 2019). Among the most widely studied leadership paradigms, transformational and transactional leadership provide distinct approaches to navigating the challenges of digital transformation (Bass, 1990).
Transformational leaders inspire change through vision, motivation, and innovation, encouraging employees to embrace digital tools and adaptive work environments (Northouse, 2021). Conversely, transactional leaders emphasize structured processes, performance monitoring, and reward-based motivation, ensuring stability during technological transitions (Podsakoff et al., 1990). While both leadership styles contribute to public sector efficiency, the digital era presents new psychological challenges, including decision-making under uncertainty, workforce adaptation to technology, and resistance to change (Kotter, 2012).
This paper examines how transformational and transactional leadership approaches influence decision-making, innovation, and organisational culture in a digitalized public sector (b, Irfan et al., 2024;Bryson et al., 2014). It further explores psychological factors that determine leadership effectiveness in managing digital transformation (Yukl, 2013) and assesses the impact of digitalization on leadership adaptability, employee motivation, and institutional resilience (Kotter, 2012). Finally, the study provides evidence-based recommendations for leadership strategies in digital governance (Mergel et al., 2019).
Decision-Making in a Digitalised Public Sector
Leadership plays a critical role in strategic decision-making in public administration, especially in the face of technological disruptions. Transformational leaders promote collaborative decision-making, creativity, and long-term vision, which are essential for digital initiatives (Čadová, 2024; Northouse, 2021). They encourage employees to explore emerging technologies and integrate data-driven solutions into governance processes. In contrast, transactional leaders prioritise efficiency, rule compliance, and incremental changes, ensuring that digital transformations align with existing policies and frameworks (Bass, 1990).
Studies suggest that transformational leadership enhances digital adoption, as employees are more likely to take risks and embrace innovation when they feel supported by visionary leaders (Podsakoff et al., 1990). However, in bureaucratic institutions, transactional leadership provides necessary structure and accountability, ensuring that digital policies are implemented systematically (Gigliotti, 2020). The effectiveness of either leadership style depends on the complexity of the digital initiative and the adaptability of the workforce.
Fostering Innovation in Public Administration
Innovation is essential for public sector modernisation, yet many institutions struggle with digital inertia. Transformational leaders promote a culture of experimentation, where employees are encouraged to propose and implement tech-driven solutions (Antonakis & House, 2014). They emphasise psychological empowerment, fostering intrinsic motivation and creativity (Avolio & Bass, 2004).
Conversely, transactional leadership supports process-oriented innovation, ensuring that technological changes adhere to regulatory frameworks and risk assessments (Bryson et al., 2014). While this structured approach prevents costly errors, it can also hinder innovation by discouraging flexibility (Kotter, 2012). A hybrid model that balances transformational vision with transactional oversight is often the most effective in fostering public sector innovation.
Shaping Organisational Culture in the Digital Era
Organisational culture is a critical determinant of digital transformation success. Transformational leaders cultivate adaptive cultures, where employees are open to learning, digital upskilling, and cross-departmental collaboration (Yukl, 2013). This leadership style strengthens psychological resilience, helping employees navigate uncertainty.
In contrast, transactional leadership maintains stability and order, ensuring that employees comply with digital policies and cybersecurity protocols (Podsakoff et al., 1990). While structured environments reduce risk, they may also lead to resistance to change, particularly if employees perceive digitalisation as a threat to job security (Kotter, 2012).
Psychological Factors Determining Leadership Effectiveness in Digital Transformation
Adaptability and Cognitive Flexibility
Effective leadership in the digital age requires psychological adaptability and cognitive flexibility (Čadová, 2024; Mergel et al., 2019). Transformational leaders embrace uncertainty and reframe digital challenges as opportunities, fostering a proactive workforce (Antonakis & House, 2014). In contrast, transactional leaders rely on predictability and structured decision-making, which can slow adaptation to emerging technologies.
Employee Motivation and Digital Transformation
Transformational leaders enhance intrinsic motivation by linking digital innovation to a broader organisational mission (Northouse, 2021). This approach increases employee engagement and willingness to acquire digital skills. Conversely, transactional leaders utilize extrinsic motivation, such as performance incentives and compliance rewards, to encourage participation in digital initiatives (Podsakoff et al., 1990).
Resistance to Change
One of the main barriers to digital transformation in public administration is employee resistance to change (Kotter, 2012). Transformational leaders address this issue by building trust, providing digital literacy training, and involving employees in decision-making (Gigliotti, 2020). In contrast, transactional leaders manage resistance through policy enforcement and performance monitoring, which may be effective in the short term but does not foster long-term adaptability (Bryson et al., 2014).
Recommendations for Leadership Strategies in Digital Governance
Based on the analysis, the following evidence-based recommendations can enhance leadership effectiveness in digital public administration:
• Hybrid Leadership Approach – Combining transformational vision with transactional structure ensures both innovation and accountability in digital initiatives.
• Psychological Support and Training – Implementing digital upskilling programs and psychological resilience training reduces resistance to technological change.
• Data-Driven Decision-Making – Leveraging big data and AI insights enhances transparency and efficiency in public administration (Mergel et al., 2019).
• Incentivising Digital Innovation – Integrating both intrinsic and extrinsic motivation strategies fosters digital adoption across the workforce (Avolio & Bass, 2004).
• Adaptive Organisational Culture – Developing a culture that prioritises continuous learning, agility, and cross-functional collaboration strengthens institutional resilience (Yukl, 2013).
To conclude, the digital transformation of public administration demands a nuanced leadership approach that integrates psychological adaptability, innovation, and structured decision-making. While transformational leadership fosters creativity and long-term vision, transactional leadership ensures stability and risk mitigation. By balancing both leadership styles and addressing psychological factors such as adaptability, motivation, and resistance to change, public administrators can navigate digital challenges effectively. Implementing evidence-based leadership strategies will be essential for enhancing institutional resilience and ensuring sustainable digital governance.
References
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