Much of today’s leadership practice is still shaped by a 20th-century idea: that efficiency comes from controlling employees, processes, and resources. That model, however, is collapsing as work becomes more knowledge-based, global, and interdependent. Hybrid work, generational shifts, and decades of social science research have accelerated a trend that was already underway well before the Covid pandemic: employees who are trusted and empowered are more engaged and thus productive.
In fact, over the past decade, trust-based leadership has become a dominant ideal, and we have seen the purpose economy take hold, especially since 2015. Purpose, autonomy, psychological safety, and more agile ways of working have been introduced not simply as moral aspirations but sources of competitive advantage. High-profile CEOs and brands help reinforce this message of a trust-based agenda, with the likes of Microsoft’s Satya Nadella transforming company culture from “know-it-all” to “learn-it-all” and emphasizing empathy, collaboration, and growth.
And yet, despite the benefits of high-trust organizations, not enough has changed in how many large organizations operate. Under pressure from slowing growth, geopolitical insecurity, and massive AI-driven disruption, leaders are again prioritizing efficiency, tighter performance management, and a return to more centralized control from the top.
The problem right now is not conviction, but capability.
Many leadership teams lack the capabilities and practical skills required to implement change and make trust-based leadership function at scale, in the day-to-day, and in unison with performance measurement. Leadership in times of uncertainty is less about defining what to do and more about mastering how work gets done. Research from McKinsey shows that 70% of transformation efforts fail, with contributing factors including insufficiently high aspirations, lack of engagement within the organization, and insufficient investment in building capabilities to sustain change. Critically, these failures occur not because strategies are flawed but because organizations struggle to implement new ways of working. The good news is that those leaders and businesses that are adept at implementing changes to how they work are outperforming their peers.
Five leadership capabilities that separate organizations that talk about trust from those that make it work:
1. Leading with agility
Geopolitical instability, industry transformation, climate risk, and rapidly changing consumer behavior require organizations to adapt with speed. A command-and-control culture might work in stable environments, but cannot move fast in periods of transformation. Decentralized decision-making, collective intelligence, high engagement, and low-fear cultures are all key drivers of organizational agility and long-term performance.
Agility matters even in very large organizations, where roles are evolving quickly. But agility will not succeed without clarity on what “good” looks like. This means goals must be transparent – whether KPIs, OKRs, or other similar targets – and simple ways for individuals and teams to measure how their work impacts business goals and company-wide outcomes.
Leading with agility also means making difficult top-down decisions. A decentralized and independently minded organization is not a virtue in itself. Effective leaders give space to colleagues to take initiative while ensuring that high-level, top-down decisions are communicated clearly and implemented quickly. Too often, empowered parts of an organization become out of sync with the senior leadership, while necessary top-down changes are introduced without sufficient explanation or engagement.
Empowerment and central decision-making are not opposite philosophies. When clearly framed within the context of being fast and adaptable, they reinforce each other and enable organizations to operate within a quickly changing world.
2. Leading for innovation
Companies must continuously innovate their business models and value proposition, in addition to their products and services. Psychological safety, where employees feel free to share ideas without fear of retaliation or judgment, is a clear driver of innovation, because it allows diverse ideas and perspectives to surface and lead to greater creativity. Purpose alignment matters too: when employees understand how their work contributes to meaningful outcomes, engagement and creative problem-solving increase.
Innovation also depends on an organization’s ability to operate as a network and to welcome expertise from outside, for example start-ups, stakeholders, and industry leaders. This can help accelerate learning and experimentation. The challenge again is that many innovation efforts stall. Agile, lean and other methods are introduced but get stuck before they can translate into sustained business value.
The difference is not the choice of method but the relentless focus on implementation. What matters is disciplined execution, and combining broad employee engagement with authentic and transparent communication about where the company is and the ability of leaders to drive multiple short-, medium-, and long-term priorities simultaneously. When innovation is treated as an organizational capability rather than a series of initiatives, everyone begins to move in the same direction.
3. Leading multiple generations at work
For the first time in history, five generations are currently working side by side, each bringing unique technological experiences and formative life events to the workplace. The experiences characterizing each generation – from paper-record environments before 1990 to Gen Z’s internet-native upbringing – create real challenges for collaboration, communication, and decision-making.
Leading across generations requires an ability to integrate experience and energy in ways that strengthen execution. This means intentionally creating multi-generational teams, breaking down hierarchies, and moving beyond generational stereotypes. Practices such as reverse mentoring and shadow boards can provide fresh perspectives that would otherwise be missed.
Different generations prioritize different workplace values. While younger employees may seek rapid career progression and purpose-driven goals, others prioritize work-life balance and positive work environments. Leaders must tailor development opportunities, communication styles, and recognition programs to meet these diverse needs while fostering knowledge-sharing. When generational diversity is managed well, it can become a source of resilience and strength for an organization.
4. Leading a learning organization
In an era of constant disruption, the ability to learn faster than the competition is perhaps the only sustainable competitive advantage. A learning culture isn’t built on training programs alone, but must be embedded in everyday work, feedback loops, and an environment that treats mistakes as opportunities for growth rather than failure. Leaders must model curiosity and intellectual humility, demonstrating that learning is expected at every level. This means creating mechanisms for capturing and sharing knowledge across the organization. As technology and AI accelerate the need for upskilling and reskilling, organizations must invest in personalized learning pathways that align with both business priorities and employee aspirations.
Critically, learning organizations don’t just focus on technical skills; they develop the human capabilities of critical thinking, collaboration, and emotional intelligence that machines cannot replicate. These organizations that embed learning into how work gets done, on the day-to-day level, are better equipped to evolve as conditions change.
5. Leading by making sense of an uprooted world
One of the most underestimated leadership capabilities today is sense-making: the ability to help others navigate ambiguity. Our current timeline of constant uncertainty creates a baffling flow of information and much of it is ambiguous or simply contradictory. Leaders must act as translators, connecting global trends and articulating their implications for the organization in ways that empower rather than paralyze.
Sense-making requires pattern recognition across diverse information sources, the intellectual courage to say, “I don’t know,” and the wisdom to distinguish between noise and signal. It also depends on creating forums for collective interpretation – bringing diverse perspectives together to understand what is changing and what it means for the business.
In practice, this means regular strategic conversations that go beyond financial metrics, scenario planning that prepares teams for multiple futures, and transparent communication about both challenges and the reasoning behind strategic choices. Leaders who excel at sense-making do not offer false certainty, but help their organizations build resilience and strategic agility in the face of continuous upheaval.
From principle to practice
The leaders and organizations that will thrive in the near future are those that master the implementation capabilities that make trust-based leadership work in practice. These include transparent goal-setting, psychological safety combined with accountability, multi-generational inclusion, continuous learning, and the ability to make sense of complexity for their teams. The evidence is clear that these approaches drive better outcomes. The question is whether leaders have the courage and capability to implement them well.
© IE Insights.
