Most of the focus in finance and investing is on numbers. When making investment decisions, ratios, equations and statistics tend to be the most utilised.

This bias towards quantitative analysis doesn’t always provide the full picture of a business and often qualitative metrics are required.

There are tremendous number of variables that are not measurable in a traditional quantitative way, such as customer satisfaction, firm culture and the quality of the relationships a firm has with suppliers and partners.

Often in finance, proxies are used to quantify these factors. For example, employee satisfaction if often measure with employee retention. The assumption is that if few employees leave a company, that they must be happy.

This approach doesn’t provide a full picture though as there are often other factors at play.

For instance, in the finance industry, institutions often reward employees with very large bonuses that are locked for 5 year periods. If employees leave before that 5 year period ends, they lose their bonus – which could be worth millions of dollars.

For every bonus that is issued, employees have to wait 5 years to get their hands on it. As each year passes by, they have a clear financial incentive to stay at the company.

Put it this way, imagine if your salary was $30,000 a year but that your bonus was $200,000. After 5 years, you have $1,000,000 in bonuses.

However, you’d have to stay at the firm for 10 years to get the full amount. If you simply wait for 5 years, get the $200,000 and quit, you’d lose out on $800,000.  

Employees may be really unsatisfied with their job but they might stay simply for the financial incentives.

This shows you that a proxy is not always the full picture. Employee satisfaction is important because if employees are not satisfied with their work, they may do a less good job that may ultimately have an impact upon the value of the firm.

Firm culture

The culture that a firm implements is an important qualitative factor that often gets overlooked by finance professionals.

Employee satisfaction makes up one factor of firm culture but there are a number of other factors to consider.

Firm culture is important when it comes to the future of a business because it can have an impact upon the relationship that it has with its partners/suppliers as well as how it is viewed by customers.

When assessing firm culture, analyst tend to focus upon the values, attitudes, goals and behaviours of the firm.

It can be difficult to examine firm culture as an outsider because firms can often try to manipulate public perceptions through marketing spend. Insider information is typically hard to come by.

Reading the annual report is an obvious place to start as you can analyse the type of language that is utilised by a firm.

Media reports can also provide some insights into the culture of a firm and many finance academics implement cross sectional techniques to deduct specific information from a group of media reports.

This could be used in a variety of ways, such as by examining misconduct disclosures from whistleblowers.

The misconduct record of a company can sometimes give insight into a firm’s culture. If a company has a lot of misconduct chargers that are very frequent, it could a sign that things are not so good inside of the company.

For instance, if it is regularly reported that an oil company has spilt oil and damaged the environment, that may be a sign that the company is not following the right procedures in terms of health and safety.

How a company responds to bad situations is also insightful. If a firm doesn’t respond in the right way to a major incident, like an oil spill, it could give you an idea about the attitudes and valued promoted within the firm. 

If a firm has a lot of misconduct and doesn’t respond in the right way, it can have a big impact upon customer perceptions. If customers do not have good perceptions of a firm, they may decide to stop buying products or services from that company – which clearly can have a big impact upon the performance of a firm.

At the same time, if a firm has a lot of misconduct, suppliers and partners may decide to drop them as they do not want to be associated with such behaviours. The breakdown of such relationships can also have a big impact upon firm performance.


When it comes to qualitative analysis, ethnography can be used in a variety of ways.

Ethnography is essentially about making observations in the real world. The issue with this approach is that companies often operate globally so localised ethnographic information might not be so useful.

Anyway, Warren Buffett famously utilised ethnography when deciding to invest in Coca-Cola. He simply went to soda machines to see what bottle caps were the most discarded, assuming that this would tell him which was the most popular drink.

This is an example of what investors can do to assess how satisfied customers are with a company.

It’s not possible to use ethnographic techniques in every industry but there are a lot where it might be useful.

For instance, you might count how many cars there are on the road from a specific brand, compared with others brands.

Alternatively, you might observe how many customers there are inside of a supermarket when compared to other supermarkets. 

Both ideas could give you some concept of how popular a company is when compared to another.

Obviously, you don’t want to make observations once, it is better to make several observations over a period of time for assumptions to be considered valid to some extent.

Other qualitative methods

As mentioned, qualitative methods can be hard because companies can be very closed off to outside attention.

It’s not exactly easy for an ordinary investor to sit down and chat with the CEO of a company or to their employees.

The only option may be to watch interviews from media outlets on platforms like YouTube.

In terms of interviewing, the only group that are easily reachable are customers. There’s nothing stopping an investors from asking customers what they think about a company. Many investors don’t have the time to carry out such a task though.

A more appropriate thing to do may simply be to ask friends and family members about their opinions of a company.

If you know someone that has actually worked in a particular company, they may be willing to give you some insight. With that said, you need to ensure that the individual is objective and that they are not giving you biased information in response to their emotions.

If someone you know was fired by a company, they may not say nice things deliberately. At the same time, if they are still working at the company, they may tell you good things on purpose.

Reading media articles or industry reports can also give you an idea of the culture of a firm, their customer satisfaction and their relationship with suppliers/partners.