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Analysis

How to build business success from Adelaide

Analysis

Great leadership, customer focus and investment in staff are some of the keys to building a competitive company. Richard Blandy explains why one very successful engineering firm chooses to work out of Adelaide.

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GPA Engineering Pty Ltd is a classic example of a highly successful, medium-sized, South Australian services company.

It started 28 years ago with three partners in a four-roomed villa in Mile End. It now employs 160 staff and contractors, the large majority in its substantial offices at 121 Greenhill Road, Unley, but with offices also in Brisbane and Perth.

About 60 per cent of GPA Engineering’s sales are to locally-headquartered companies, 25 per cent are to Queensland-headquartered companies, and the balance are to other Australian-based companies, and some overseas. GPA faces national,  and sometimes international, competition for its work.

Secrets of success

The reason for GPA’s success is that it is highly competitive. The formula depends on classically-great management, which any company in any field can emulate: real leadership → high staff morale → low turnover → high returns to investment in staff → high productivity and innovativeness → low cost, high innovation → highly competitive, high profit business.

As a result, GPA has clients that have used its services for a long period. It has received negligible government assistance.

About 50 per cent of GPA’s work is in oil and gas (and associated pipelines), about 20 per cent in water, 20 per cent in mining and minerals, and about 10 per cent in electricity generation and distribution. Competition in these areas is fierce, particularly in the current economic environment.

With the recent decline in engineering projects in the oil and gas, mining and power industries in which GPA mainly operates, the past two years have been a major challenge for the company. GPA’s competitiveness is shown by the fact that it has been able to continue to grow modestly while its competitors have been slashing staff numbers.

GPA has a very flat organisational structure, with all the directors (including the managing director) actively involved in “the work”. The present MD, Alf Sanzo, strongly believes that the executive team needs to stay involved in GPA’s work, and with its people and clients.

Management is “by wandering around” – as in all great companies. GPA’s competitive culture is built by staff learning from one another, reinforcing the culture and vision of “business by example”.

As is also typical in great companies, staff turnover is very low, giving rise to “implicit long-term employment contracts”. A large number of present staff were selected as undergraduate engineers on work experience, for example. Implicit long-term contracts are known to make company investments in staff highly economic. This is a major reason why GPA is highly competitive. It has cutting edge knowledge and technology embedded in its staff. GPA rightly places great weight on “investing in the development and wellbeing of its people”.

It is unsurprising, therefore, that GPA has a significant staff training program. All staff are encouraged to undertake formal training courses each year. GPA financially supports all training activities and funds training and certification programs such as the Institution of Engineers Chartered Engineers career development program.

It also maintains a strategy to stay as diverse as possible in terms of industry sectors, services offered, and geographically. This philosophy was developed in GPA’s earliest years – that the company was better off with six small jobs than one large job.

GPA’s focus is to maintain a “value in engineering” approach which becomes particularly appealing to clients in difficult times.

GPA is, effectively, a very well-managed, old fashioned, “engineering house”, where the focus is always on a solution to a client’s technical or construction problem.

Employing engineers of all ages from different fields and with different experience across design, construction and operations activities, helps GPA to apply fresh perspectives to solving technical engineering problems.

The company focuses on what the client’s real end requirements are so as to deliver best value for money options. GPA is always questioning assumed approaches, including conventional interpretations of Australian and International standards and legislation.

Alf Sanzo regards Adelaide as an ideal place to headquarter a business, because the costs of operating a business are lower than in the eastern states or in Western Australia. Just as important, Adelaide is a great place to live and bring up a family, which suits the typical personality profile of GPA’s employees.

Modern tele-conferencing and communication facilities make communication with interstate clients straightforward. Most business locations are less than a two-hour flight away. If a client wants GPA staff to be embedded in their office, GPA obliges.

The offices in Perth and Brisbane provide the ability to have GPA staff more readily accessible to clients, as required.

Beginnings

GPA Engineering began, in typical style, when its three founders, Glen Parkinson (a chemical engineer, 46), Phil Morrell (a mechanical engineer, 41) and Geoff McKinnon (an electrical engineer, 36) were made redundant by oil and gas company, Delhi International Oil Corporation (then owned by CSR Ltd), as a result of a downturn in the global oil and gas market, which led to the sale of Delhi by CSR in 1987.

Their retrenchment led to their receiving several months’ pay in lieu of notice, which they decided to invest in their new contract-engineering venture. Each partner made a capital contribution of $10,000 into GPA Engineering.

For its first four years, GPA kept its head above water by taking on a variety of projects, including in the wine industry (where they redesigned a cork processing machine, for example), with Broken Hill Associated Smelters (now Nyrstar) at Port Pirie, and with SANTOS, which turned out to be the beginning of a long association.

GPA’s watershed year was 1991.

It was awarded the development contract for the processing plant at the Katnook gas fields in the Otway Basin, in the South-East of South Australia. This was followed in 1992 by the award of the development contract for the processing plant at the Beharra Springs gas field 290 km north of Perth, near Dongarra (on the Indian Ocean) in Western Australia.

In 1993, GPA won its first operations support contract with SANTOS. In 1994, it undertook several gas development projects in the Taranaki region of New Zealand.

In the same year, GPA solved a problem affecting Magellan’s Palm Valley gas processing plant near Hermannsburg, west of Alice Springs. Magellan was so impressed that they gave GPA their gas engineering work for many years thereafter.

Soon GPA was expanding into pipeline construction, water, electricity and mining. By 2001, it was employing 25 staff, by 2007, 55, by 2010, 100, and by 2013, 150.

GPA undertook its first major high pressure natural gas pipeline project in 1998 (the Berri to Mildura pipeline) and since then has been designing and building pipeline and compressor projects across Australia.

GPA has two main areas of expertise in the water industry: handling process water in the oil and gas and minerals industries, and the development of remote monitoring and control systems for water and wastewater treatment plants.

GPA has provided engineering services to a variety of power generation and distribution projects throughout Australia, ranging from generator installations at remote oil and gas facilities to gas turbine driven power stations up to 800 MW. In addition, GPA has provided a variety of engineering services for wind turbine and solar-powered electricity systems for remote data acquisition and control systems in the water and oil and gas industries.

In the broad mining and minerals processing industry, GPA provides a large range of engineering services, from concept and scoping studies, to project management and decommissioning.

GPA also provides broad operational support to many major processing and manufacturing plants throughout Australia.

Richard Blandy is an Adjunct Professor of Economics in the Business School at the University of South Australia and a weekly contributor to InDaily.

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