Trust as Strategy: How Credibility and Moral Leadership Activate Sensing, Seizing, and Transforming

Organizations today are facing a widespread loss of trust, and this decline is no longer just theoretical. It directly weakens their ability to adapt and change. Global data from the Edelman Trust Barometer shows that trust in institutions is at record lows (Edelman, 2025), and the same trend holds true within organizations, where trust is built through relationships rather than formal structures. Scholars like Nonaka and Zhu (2012) highlight that trust is socially constructed through daily interactions, while Sanchez et al. (2020) and Scott (2017) demonstrate how quickly it can deteriorate when communication becomes inconsistent or unclear. In this environment, even well-meaning leaders find it difficult to foster honest conversations because people tend to protect themselves when trust feels uncertain. This issue extends beyond culture; it becomes a strategic barrier. Without trust, behaviors that support adaptation, such as speaking up, experimenting, and challenging assumptions, begin to fade. That is why trust is central to this paper: it is the foundation that enables dynamic capabilities.

WHAT TRUST IS

Trust begins as both a thinking process and a gut-level judgment. People look at whether leaders are capable and whether their intentions feel genuine, a point Nooteboom (2009) makes, and one that shows up across leadership ethics research. Studies on ethical leadership consistently find that honesty, fairness, and value alignment shape people's decision to trust someone (Brown & Treviño, 2006; Johnson, 2020). In practice, people are watching for alignment between what leaders say and what they do. Trust is not just an emotional reaction. It is the belief that leaders will act with both skill and integrity. But it is also not something individuals decide on their own. It is created between people. As uncertainty grows and institutional trust declines, organizations need a steadier foundation to navigate decisions and relationships. That makes it important to be clear not just about why trust matters, but what it is and how it actually works inside complex systems.

Trust is not something people build on their own. It grows through the way they talk, work, and make sense of things together. Constructionist researchers show that trust forms slowly, as people watch how others show up in conversations and how they handle uncertainty over time (Sánchez et al., 2020; Scott, 2017). This fits with what we know from sensemaking. Trust comes from shared interpretation, not job titles. In the end, trust lives in everyday interactions. These are the small moments where people decide whether they can be honest, whether someone will listen, and whether it is safe to speak up. Policies can set the tone, but they cannot replace the genuine, lived relationships where trust actually takes shape. This relational side of trust matters because it shapes how people judge a leader’s intent when things get uncertain. Once people decide they can rely on the relationship, they start looking to leaders for the moral signals that guide behavior when the path forward is not obvious.

Trust also serves as the moral grounding people rely on when things are unclear. In uncertain moments, people look to leaders who can use practical judgment and make choices that reflect shared values. Nonaka and Zhu (2012) describe this as the moral side of phronesis, which is the ability to pair ethical reasoning with timely action. Hannah et al. (2011) add to this by showing that when leaders act with moral courage under pressure, people read it as a sign of honest and principled intent. When leaders make steady, values-based choices, trust becomes something people can lean on. It calms the anxiety that comes with uncertainty and gives the whole system a sense of stability as it adapts.

WHY TRUST MATTERS IN COMPLEX SYSTEMS

In complex systems, strategy does not develop through formal plans. It grows out of everyday interactions. Stacey (2001) and Groot and Homan (2012) argue that strategy forms through conversations, the interpretations people share, and the relationships that shift as people try to understand what is happening around them. This aligns with sensemaking research. Weick (1995) shows that meaning emerges through interaction rather than through top-down direction and that organizations interpret their environments collectively. Complexity theorists point to the same insight. Organizations move and adapt through ongoing conversations among people, not through predetermined steps in a strategic plan. Trust becomes essential in this environment because it shapes whether those daily conversations lead to alignment or confusion. When trust is strong, people share what they see and help each other build a clearer picture. When trust is weak, those same interactions can split into silence or mixed messages. The quality of trust ends up deciding whether insight appears early or only after the moment has passed.

Sensing depends on the free flow of unfiltered information. Teece (2007) argues that early detection is central to dynamic capabilities, and it requires people to share what they notice without worrying about repercussions. Research on psychological safety reinforces this point. Edmondson (2019) and Sánchez et al. (2020) show that people speak up when they believe their honesty will not be punished or dismissed. This also aligns with learning organization research, which finds that information flow shuts down when people fear judgment (Senge, 2006). When trust is low, conversations become filtered or overly cautious. Sensing gets distorted, slowed down, or silenced completely. Trust becomes the condition that allows real information to move through the system quickly enough for learning and adaptation to take place.

Defensive routines can block this learning. Senge (2006) points out that blame, avoidance, and denial are common patterns that stop organizations from seeing what is actually happening. These routines surface when people do not feel safe enough to admit concerns or uncertainty. Trust helps break these patterns by giving people permission to raise issues early and to talk them through openly. Sánchez et al. (2020) and Edmondson (2019) show that relational trust and psychological safety create conditions in which people can learn publicly rather than privately. When leaders strengthen this kind of trust, organizations spot problems sooner, share interpretations more freely, and test assumptions together. These behaviors directly shape the organization’s ability to sense what is changing in its environment and respond with speed and clarity.

TRUST IN SENSING

Sensing starts with the simple but demanding need for honest information flow. Teece (2007) argues that early detection depends on transparent sharing, and Edmondson (2019) shows that people communicate more openly when trust makes truth-telling safe. These insights align with complexity research, which highlights how leaders cannot see everything themselves and depend on the information others are willing to surface (Stacey, 2001). When trust is present, people speak up sooner. That alone prevents small issues from snowballing and helps the organization notice weak signals it might otherwise miss. But sensing is not just about individual input. It relies on shared attention across the system, and trust ensures that this collective awareness actually works.

Effective sensing happens when people across different roles and functions look at what is going on together. Nooteboom (2009) explains that knowledge grows through interaction, not through the isolated expertise of a single person. Sánchez et al. (2020) add that identification-based trust helps people see things from each other’s perspectives, making shared interpretation easier. This fits with research on strategy work, which shows that people make better sense of changes when they talk openly, compare what they notice, and learn from one another (Groot & Homan, 2012). Trust encourages this kind of honest exchange. It helps people put their observations on the table so the group can build a clearer picture of what is shifting in the environment. These patterns show that sensing is never something one person does alone. It is always something people do together. And this shared approach becomes even more important once sensing stretches beyond the organization, where no single person has enough information to understand the whole system.

Today’s organizational ecosystems rely on this kind of shared sensing among interconnected partners. Adner (2017) explains that ecosystem coordination depends on aligned expectations and transparent communication because each partner holds only part of the information needed to understand the system. Teece (2007) echoes this, noting that sensing across organizational boundaries requires relational alignment and trust in partners’ intentions. When trust is weak, partners hide or filter information, creating blind spots and slowing down collective responses. When trust is strong, partners share what they know without waiting for certainty. That openness strengthens the entire ecosystem’s ability to sense and respond. Once sensing improves, trust becomes just as important for taking action.

TRUST IN SEIZING

People take action when they trust the person asking them to move. Research keeps showing the same pattern. Credibility is what turns alignment into real effort. Kotter (2012) and Kouzes and Posner (2017) explain that credibility turns urgency into shared purpose, and their findings support Teece’s view that seizing opportunities depends on confidence in leaders who turn sensing into clear decisions (Teece, 2007). When people trust the judgment and intentions of the person calling them to act, they join in with more commitment and less hesitation. Trust becomes the bridge that moves a group from cautious agreement to real involvement. Moral courage strengthens that credibility at moments when it matters most.

Challenging change asks people to live with uncertainty, and they are more willing to do that when leaders show they can hold steady under pressure. Hannah et al. (2011) show that people trust leaders more deeply when those leaders act on their values, even when the situation is stressful or politically sensitive. This fits with Nonaka and Zhu’s view that practical wisdom depends on moral steadiness, especially when choices affect relationships and long-term goals (Nonaka & Zhu, 2012). When leaders make decisions with transparency, fairness, and integrity, people see that their trust is well placed. This builds the collective resolve needed for difficult transitions. Moral courage shows people that the leader will not abandon the principles that guide the group. These dynamics matter even more as work becomes more interconnected. Once organizations begin coordinating across functions, trust shifts from a personal reassurance to an operational need.

Connected strategies make trust even more important because coordination depends on honest, fast communication. Siggelkow and Terwiesch (2019) show that real-time work only succeeds when people trust that information will be shared accurately and without political filtering. This supports Adner’s argument that ecosystems rely on shared expectations and dependable interdependence, in which each partner contributes information others need to act (Adner, 2017). When trust is low, information slows down or becomes incomplete, breaking up coordination at exactly the moment alignment is most important. When trust is strong, teams and partners operate with more confidence even in shifting conditions. As organizations move toward more connected operating models, trust stops being a bonus and becomes a key enabler for seizing opportunities. As coordination becomes more interdependent, the pressure of change moves from processes to people. The challenge is no longer just aligning tasks, but helping individuals understand who they are and how they fit within a changing system.

TRUST IN TRANSFORMING

Transformation challenges the self-concept, not just the process or the structure. Anderson and Ackerman Anderson (2010) describe transformation as a shift in identity, where people have to let go of familiar ways of thinking in order to see new possibilities. Sánchez et al. (2020) reinforce this by showing that identity is shaped through relationships, which means transformation affects how people see themselves in relation to others. This reminds us of something we often underestimate. Transformation is not only a structural change, it is also emotionally heavy for people on the ground. Trust becomes essential because it helps people engage with change without fearing they will lose their place, competence, or status. When trust is present, people are more willing to try new ways of working and being. Transformation also forces people to navigate competing demands, increasing the need for trust even further.

Transformation brings forward tensions that cannot be neatly resolved but have to be managed. Johnson (1992) explains these tensions as polarities, such as speed versus inclusion, that show up in every major transition. Complexity scholars point to the same thing. Adaptive environments naturally generate competing demands that pull people in different directions (Stacey, 2001; Groot & Homan, 2012). Trust becomes the condition that allows people to stay engaged with these tensions instead of becoming defensive or shutting down. When people trust their leaders and each other, they are more likely to stay in the conversation rather than retreat into rigid positions. Leaders need to use sound judgment because how they handle these tensions shapes whether people experience the transformation as coherent or chaotic.

Transformation also requires ethical and context-aware decision-making. Nonaka and Zhu (2012) describe this as practical wisdom, or phronesis, in which leaders combine moral reasoning with a clear understanding of the situation. Their work connects with research on moral courage, which shows that trust increases when leaders demonstrate fairness, transparency, and steady judgment during uncertain transitions (Hannah et al., 2011). These moments matter because people watch closely to see whether leaders will uphold shared values when conditions become unclear. When leaders act with phronesis, trust grows, and the transformation feels grounded instead of destabilizing. This highlights the essential role of executive leadership in guiding how transformation unfolds.

EXECUTIVE LEADERSHIP AND THE MORAL WORK OF TRUST

The way executives behave shapes the whole relational climate of the organization. Research across sectors shows that employees pay close attention to senior leaders when deciding whether trust is warranted. Edelman (2025) reports that people look to executive leaders for ethical behavior, consistency, and steady judgment, which reinforces how closely their actions are watched. Kouzes and Posner (2017) add that credibility is the trait most associated with trusted leadership. Together, these findings point to a simple truth. Trust rises or falls based on the behavior of those in top positions because their actions set expectations for everyone else. When executives act with steadiness and clarity, it becomes easier for people to extend trust. Their role in honest communication is just as important.

Leaders often ask for openness, but they cannot expect it unless they model it first. Scott (2017) describes openness as a form of relational currency because it signals respect for the people affected by decisions. Edmondson (2019) and Sánchez et al. (2020) support this view by showing that credibility grows from the quality of conversations leaders have, not just from the messages they deliver. When executives avoid telling the truth or soften difficult realities, relational trust weakens because people notice the gap between what is said and what is meant. When leaders speak clearly and with care, trust grows, and people become more willing to engage. Executives also have a responsibility for managing the tensions that influence trust.

Executives must work with the unresolved tensions that show up in everyday organizational life. Johnson (1992) explains that these tensions are rarely simple either-or decisions. They are ongoing balances leaders need to hold, such as supporting individual needs while still maintaining collective direction. When leaders manage these tensions with clarity and fairness, trust grows because people can see that both sides matter. Poorly managed tensions create confusion or a sense of favoritism, while well-managed tensions strengthen trust by showing that leaders can hold competing needs without dismissing either. The most important requirement for this work is moral leadership.

At its core, trust depends on moral leadership. Nonaka and Zhu (2012) describe effective leadership as practical wisdom, where ethical reasoning guides actions in context. Ethical leadership research supports this by showing that fairness, integrity, and moral clarity create conditions in which trust can grow (Brown & Treviño, 2006; Hannah et al., 2011). Executives have an outsized impact on shaping meaning because people pay close attention to how leaders respond to uncertainty, conflict, and opportunity. Through their choices, leaders model the ethics that define the system. When this moral foundation is present, trust becomes not just an outcome but a capability that strengthens the organization’s ability to sense, seize, and transform.

INTEGRATION: TRUST AS A MORAL DYNAMIC CAPABILITY

Trust is what connects dynamic capabilities to the day-to-day reality of how people actually interact inside organizations. Teece (2007) argues that abilities such as sensing, seizing, and transforming depend on relational quality and internal confidence, suggesting that trust is already embedded in capability development, even when it is not named directly. Stacey (2001) and Sánchez et al. (2020) add that strategy takes shape through interaction, shared interpretation, and the micro dynamics of conversation. When trust is strong, these interactions become more honest, faster, and more generative, helping people make sense of uncertainty and coordinate action with greater clarity. In this way, trust becomes an enabling capability in its own right because it supports the conditions that dynamic capabilities rely on.

Trust often works quietly in the background, but it is what keeps the adaptive cycle from stalling. Edmondson (2019) shows that learning only happens when people feel safe enough to take interpersonal risks. Kotter (2012) and Anderson and Ackerman Anderson (2010) highlight that trust is essential for commitment during times of change, and Nonaka and Zhu (2012) explain that wise action grows from relationships grounded in ethical intent. Taken together, they tell a pretty clear story. Trust decides whether organizations learn, mobilize, and transform. When trust breaks down, the capabilities that depend on relationships begin to falter. When trust grows stronger, adaptability improves. Leaders should therefore see trust as both a moral responsibility and a strategic requirement.

Trust is both a moral obligation and a strategic skill. Sánchez et al. (2020) show that trust grows through interaction patterns, which means leaders have an ethical duty to care for these relationships. Teece (2007) emphasizes that the strength of dynamic capabilities depends on the quality of these relational processes, making trust an organizational asset rather than a cultural afterthought. Leaders who understand this dual nature of trust design systems that can actually change because they focus on both the ethical and operational aspects of how people work together. This perspective reinforces the practical importance of viewing trust as an intentional capability, not something that develops by accident.

IMPLICATIONS AND CONCLUSION

If dynamic capabilities rely on trust, then trust cannot be treated as something that magically grows on its own. Leaders have to build it deliberately. Even though different researchers describe it differently, they end up in a similar place. Trust grows through steady behavior that people can count on. Edmondson (2019) shows that psychological safety reflects repeated signals of openness. Kouzes and Posner (2017) highlight credibility as the heart of trusted leadership. Sanchez et al. (2020) show that trust forms through ongoing interactions and shared meaning, not through titles or polished messages. When you put all of this together, it becomes clear that leaders need to show trustworthiness in the day-to-day choices that people can see. That means honest communication, reliability, and following through until those patterns become normal. There is another important piece here. Leaders also shape the environment in which conversations take place, and it is in those conversations that trust actually forms.

Because trust is built through conversation, leaders have to make sure people can speak honestly without being punished or dismissed. Stacey (2001) and Groot and Homan (2012) show that strategy emerges from these interactions, not from formal documents. Scott (2017) argues that truth-telling only works when leaders make room for direct and respectful dialogue. Edmondson’s work (2019) shows that people speak up when they believe their input will be treated fairly. Leaders help create this environment by removing blame, addressing conflict early, being curious rather than defensive, and treating learning as a normal part of work. When these conditions are missing, communication starts to break down. People soften the truth, avoid risk, or pull information apart. Once that happens, sensing and seizing stop working the way Teece describes. This adds another expectation leaders must meet. In uncertain or uncomfortable moments, people seek moral clarity.

When situations feel unclear, people want to know what is right, fair, and aligned with the values the organization claims to stand for. Nonaka and Zhu (2012) call this practical wisdom, which leaders use to guide sound judgment when rules or plans do not provide sufficient direction. Ethical leadership research supports this. Brown and Trevino (2006) and Johnson (2020) show that moral behavior strongly shapes whether people see a leader as trustworthy. Hannah et al. (2011) explain that moral courage builds trust when choices involve risk or discomfort. When leaders explain the reasons behind their decisions, treat people fairly, and act with integrity when it matters most, they provide the clarity people need. That clarity lowers fear, stabilizes relationships, and makes coordination easier. All of this points to something simple: trust is not optional, it is the condition that makes change possible.

Trust forms the backbone of dynamic capabilities. Teece (2007) argues that sensing, seizing, and transforming depend on relational confidence and the belief that people will share information honestly. Sanchez et al. (2020) and Stacey (2001) show that trust influences how people interpret uncertainty and work through complexity. Kotter (2012) and Anderson and Ackerman Anderson (2010) show that commitment, identity, and transformation all depend on the strength of relationships. When trust is steady, organizations learn faster, adapt more quickly, and carry change with less resistance. When trust weakens, people hold back in an effort to protect themselves. Information gets filtered, and even well-designed strategies begin to fall apart. In the end, trust shows up as both a moral responsibility and a strategic resource. A practical next step is to look more closely at how trust can be developed as a dynamic capability, including the specific conversational practices and leadership behaviors that strengthen the social foundations of sensing, seizing, and transforming. It brings us back to the main argument of this paper: trust is not just a cultural idea, it is the moral capability that allows all the others to work.

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AI Use Disclosure
In preparing this paper, I utilized ScholarGPT to support my research, generate a comprehensive outline, and facilitate the synthesis of course readings with additional scholarly sources. I also used Grammarly for writing support to refine clarity and grammar. The final arguments, structure, and analysis reflect my own academic work and interpretation.