Nicholl has been in charge of the Edinburgh side since Pat Fenlon's departure and he watched on as Butcher's current side Inverness took the points at Easter Road.
He said: "He's going to have to prove that.
"You get excited about a job and a big club but he's going to have to prove he's got what it takes to turn things around here and get them going."
"But I said to the players (on Friday) that they would be on a 90-minute audition. It would be like being on the X Factor.
"I told them to go and prove for 90 minutes that they are good enough to be in his plans for the future. But confidence is low."
Nicholl fully expects the defeat to Inverness to be his last game at the club.
He said: "You know what it's like in football.
"People come in and they bring their own people in and rightly so. I would do the same thing myself.
"We will wait and see what happens. Until you get a phone call you have to prepare to come in on Monday morning, although I did clear my desk (on Friday)."
- Sports & Recreation
- Pat Fenlon