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How Will Your Ethos Be Valued?


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The Ancient Greeks used the word ἔθος, meaning custom, or practice—from which we, of course, get our word ethos, which has similar but broader interpretations including disposition, character, and beliefs. This root word also brings us the term ethics. It occurs to me that nowhere is reflection on this word ethos more important that in our own journey from management to leadership. There have now been some four experiences in my career where I have witnessed the phenomenon that the collective output of a group of co-workers has far exceeded the actual combined abilities and skills of those co-workers. Something happens. There is a flourishing that is borne by the co-operative effort of these co-workers that is ignited by trust and a deeply shared ethos. In such environments effort seems effort-less!

Financial analysts can find trace evidence of such a phenomenon in elements of corporate valuation. These days we have so many approaches to enterprise valuation, many of them building off the standard discounted cash flow model. We look at stock price to book ratios, price to earnings ratios, price to sales ratios, price to ‘earnings before interest, taxes, depreciation and amortization’ ratios, beta comparisons and price to you-name-it ratios. Indeed, if we look simply at the difference between the accounting enterprise value of a publicly traded company and its total market capitalization, investors are usually banking on a future that is better (or worse) than the present situation of a company. Well how about a price to ethos ratio? In fact I believe that such work can be done and it shines a light on the enduring ability of leadership to make the proverbial whole bigger than the sum-of-the-parts.

I think that often, when a manager recognizes that she or he is the custodian of the company’s ethos, it actually marks the transition from management to leadership. When our colleagues, employees, stakeholders and customers know exactly what we stand for, our price-to-ethos valuation not only rises, but it will surely be noticed.  

Published with acknowledgement to Thomson Carswell, publishers of the 2nd edition of Sales Force Management in the Financial Services by Paul K. Bates, from which parts of this article were drawn.


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