Transactional leadership, or managing a static system of institutional exchanges, was the standard for colleges in an era of expanding markets, apparent never-ending growth, and little competition. Current conditions, however, call for transformational leadership, which involves leaders who create new approaches and relate to people in more intuitive and empathetic ways than more traditional, transactional leaders. Transformational leaders use encouragement, motivation, and example rather than position or authority to foster institutional success. The goals of transformational leaders are the renovation and rehabilitation of an institution, and a critical part of transformational leadership is understanding the complex nature of social networks. These networks fall into one of three types of systems: technical, characterized by work-related informational exchanges; political, consisting of influence exchanges; and cultural, featuring the shared values among institutional members. If these elements are understood, transformational leaders can make the constant adjustments needed to assure the success of institutional changes. Finally, because maintaining social networks provides an opportunity to increase organizational effectiveness, transformational leaders must enhance the networking capability of the organization by making use of physical architecture and space; transferring people from one network to another; creating such temporary systems as task forces to bring groups together; and introducing such management techniques as role analysis, in which individuals define needs and roles and discuss these in groups. (MAB)