Labour intensity, quite simply, measures the ratio of labour to capital used to generate revenue in any given business. Sounds boring? Absolutely! But if you’re running a business, it’s a must-know.
Say you provide in-home care under NDIS. That’s extremely labour intensive, because you employ skilled nurses to help your clients one-on-one. Most of your revenue bleeds out in wages and administration.
On the other hand, imagine running Qantas. Right now, that sounds like a nightmare, but stay with me. Qantas is a capital intensive business, because you have so much money tied up in aircraft and infrastructure. Your labour costs are a fraction of your capital investment.
But whether you are employing forty nurses or running an international airline, it’s important for you as a leader to reduce your level of labour intensity, too. You’re not on the front line, changing bandages or loading baggage. You’re strategising the best ways to grow your business, to hire and keep the right people, to improve your cashflow, and increase your profitability.
Sometimes, that means getting out of your own way. Delegating the small stuff to those who do it best, and giving yourself space to focus, to think, to generate those powerful ideas that will take your business to the next level. Every successful businessperson I know—without exception—has taken deliberate steps to reduce their level of labour intensity. Have you?