Leadership without ethics is like navigation without a compass. You might ultimately find your way, perhaps with good luck, but there will be an incredible amount of time wasted and your team will lose faith as they are unsure of the path.

Ethics simply define "good" versus "bad" behaviour and as such, they are incredibly important. They have quickly become a major topic in corporations today since they define our moral principles and our rules of conduct. Yet, each month there are examples reported in the media of senior leaders in renowned corporations producing ridiculously shameful examples of just how far our moral compass has gone astray.

Because of these scandals, we have witnessed an unprecedented decline in the trust and respect that society gives to corporations that had been revered for decades. In fact, according to the latest Edelman Annual Trust Barometer (2011), only 50% of 5,075 participants surveyed in 23 countries think CEOs are credible sources of information. Trust in the US has dropped from 53% (2008) to a paltry 42% (2011). And in another major study by ethics guru John Della Costa, it was reported that 40% of employees have witnessed ethics transgressions of varying magnitude.

Without trust, customers will not stay loyal. In fact, they will rarely buy the products and services of companies that they distrust. But that's just the tip of the proverbial iceberg. The costs to the organization to compensate for the trust deficit can easily become extraordinary with demands for stricter and higher regulatory compliance, slower decision processes, ‘over' diligence and even brand equity erosion. Promoting and restoring an ethical work environment, therefore, is ultimately about building trust.

HR should be the functional custodian charged with the responsibility of creating an organization's "ethical alignment'. This would entail both promoting and fostering the development of those ethical behaviours and actions that every organization needs from each employee if it is to achieve its strategic priorities with honesty and integrity. To that end, I propose that HR should take the following steps.

Articulate an Ethics Code

To lead in the creation of an ethical work environment, HR must first define what constitutes an organization's ethical orientation. This is usually expressed in the form of an ‘ethics code' which details in precise terms both acceptable and unacceptable behaviour. A well crafted code, however, not only describes what not to do but also what the organization looks like when everyone is operating ‘at their best'. A truly marvelous example of this style of code can be found at the website of the Kraft Foods Company. See http://www.kraftfoodscompany.com/assets/pdf/codeofconduct.pdf.

HR should then build their ethics code into all of their standard practices to instill and maintain a culture of trust that is real for every single employee. Four examples of this follows.

Ethics and the Hiring Process

During the interview process, potential new hires should be invited to discuss the degree to which the ethics code aligns with their personal ethics. They should be asked for specific examples and ultimately to express their acceptance of the code. Also, the ethics code should form part of the orientation process and individuals should be asked to describe specifically - in behavioural terms - how it will affect their work.

Ethics and Role Descriptions

For all employees, job descriptions should make reference to the code and state explicitly the expectation that every employee will adhere to it. Indeed everyone should be asked to sign, on an annual basis, both their understanding and acceptance of the organization's code.

Ethics Training and Development

Unfortunately, knowing what to do and why it should be done is sometimes not enough to get the ethical behaviours. Surprisingly, even with 90% of Fortune 500 companies reporting to have codes of ethical conduct, only 45% have training programs specifically related to them. HR must mount a comprehensive training program to ensure that the values detailed in the ethics code have meaning for each role. Role playing, simulations and case examples should all be provided to demonstrate the organization's new commitment to the code.

Align the Ethics Code and Performance Management Systems

HR must champion the effort to adjust an organization's performance management system by including ethical behaviour as an important criterion for performance measurement, promotion and possibly even termination. This is the acid test that determines just how seriously a company takes its own ethics code because it means being prepared to fire those managers who, despite having ‘delivered on the numbers' do not ‘live the company's values'.

Employee surveys also need to be adjusted to measure the perception – particularly of the organization's front line workers – regarding the impact that leadership behaviours are having on them. It then becomes HR's responsibility to be transparent, to report on those results and to initiate ways to take corrective action.

Creating an ethical work environment, however, is not just a professional responsibility for those in the HR function. It is what organizational leadership – the real business of HR - is all about.