In his article, The Test That Most Executives Fail, Lee B. Salz describes a hypothetical situation that occurs in most corporations. He introduces a manager and the CEO of the fictional The Magic Mirror Company. The manager would like a $25,000 investment in a new sales initiative. Before the executive can approve the funds, the manager must provide a significant amount of data to “justify” the investment. However, when the manager asks for $25,000 to hire a new sales person, the CEO approves immediately.
“If your firm operates like The Magic Mirror Company, it just failed the Revenue Investment Test – by viewing an addition to the sales team as merely hiring, and not as an investment in revenue. Companies taking this approach risk incurring huge and unnecessary costs in the forms of high turnover, under performance, and lost sales.”