One of my very first sales presentations was to a small privately owned company that had six retail establishments. The company was in a very competitive industry and many of the businesses in that industry were experiencing financial losses. Profits and revenues were very thin. The CEO thanked me for my time and said that he would give it some thought. Much to my surprise, I did received a phone call from him about a week later wanting me to stop by his office. During our meeting he was very frank. He told me that four of his six locations were losing about $40,000 a year. Two of the locations were making money, but not enough to cover the losses from the other four. If he closed the other four locations, there was simply not enough profit potential to justify the company remaining in business.
We discussed the demographics of each location and the drive by traffic patterns. He could not see any reason why four locations were losing money. He had good
dependable managers at each of his locations. He had increased his advertising considerably and nothing seemed to work. I suggested that we test his store managers
to see if there was a measurable difference between the managers whose locations were making money and the ones that were losing money.
When I returned the employment evaluation reports to him, I advised him that I had placed them in the order of each store's profitability, with the most profitable being on top. He quickly reviewed the order of the reports and his face lit up as he exclaimed, "How did you do that? I never discussed with you which stores were profitable and which ones were not." I told him that we had discussed the demographics and since there were no discernable differences there, I reasoned that the difference had to be with the managers. I had simply organized the reports based on each manager's general management and sales ability. Next we reviewed each report and by the time we had finished, he knew exactly where his problems were and how to fix them.
About a year later, that CEO invited me to lunch at a very nice restaurant. While waiting for the meal to arrive, we reviewed the prosperity that his business had experienced. He summed it up very nicely, "If you had told me a year ago how much money my company would be making today, I would have told you that it would have not been possible. I would have never believed that my business could have ever become this profitable and I want you to know that you were a big part of making that happen." That was after a year of using the pre-employment assessment program and he was just seeing the tip of the iceberg.
Without having to battle people problems, he was able to concentrate more on operations and expansion. When he looks at an evaluation report, he links it directly with profitability. When he reviews a couple of evaluation reports, he will tell you, "this man will make me $20,000 profit and this one will make me $40,000 profit. " He will set both reports on the side because he is hunting for the applicant that will generate $60,000 of profit. He really doesn't mind if he has to assess a number of applicants to find the right one. At the most he will spend $1000.00 to get that extra $20,000 in profit. It's a no brainer.
The people we hire will directly affect the profitability of the company. Some employees will generate profits far greater than their overhead expenses. From a practical standpoint, those employees cost you absolutely nothing since they are contributing to the overall profits of the business. Selecting the wrong employees will cost you money and will eat into the profits that the good employees are making for your company. You will always lose money on a bad investment, so my advice is to invest wisely, especially with the people you hire.