An opportunity but no bonanza

John Pitt has travelled the world, but still calls Tasmania home. He shares his views with  Zilla Efrat on the latest federal Budget and the challenges of building a national engineering consulting firm from its Tasmanian origins.

The Abbott government’s first federal Budget may have upset many, but it was better news for engineering consulting firm, pitt&sherry (now in its 51st year) and its managing director John Pitt FAICD.

While harsh cuts were felt in other sectors, the federal government is set to splurge more than $50.3 billion on road and rail investment over the next six years as part of Prime Minister Tony Abbott’s attempt to deliver on his promise to be an “infrastructure Prime Minister”.

As Pitt observes: “The period following the global financial crisis was a really good period for the building and construction industry, including us, because there was a lot of economic stimulus. But in the past two or three years this stimulus has dropped off.

“At the same time, the economic benefit from the resources investment boom has slowed down. In our sector, we have definitely been feeling the pinch. But there are some green shoots starting to appear and we are looking forward to a more positive future. And, we are now about to benefit from the infrastructure spending.”

Indeed, 50 per cent of pitt&sherry’s work stems from traditional infrastructure projects, such as bridges, railway links and roads, with resources accounting for only around 15 per cent of its business.

Pitt says: “The infrastructure-focused Budget will help Australia maintain the size of its economy as the investment in the resources sector tails off and importantly, it will also boost our productivity in the decades to come.

“The major investments in metropolitan road projects will reduce freight and commuter congestion costs in those economic hubs and improve the connectivity with our major seaports and airports.”

Pitt acknowledges the debate around the relative priority of rail and public transport projects. But he says there is no simple answer to this as there are bottlenecks in these areas as well.

“What we really need is a broader public/private funding model,” he says.

“The National Broadband Network investment is also a very important enabler for a competitive economy. But I believe the Budget has ducked the opportunity to drive further transformation in our energy sector.

“The reality is that we already live in a carbon constrained world. I think it is highly likely that Australia will encounter greater economic costs and a higher level of economic disruption during the transformation to a clean energy future.  This is a consequence of moving away from the previous polluter pays emissions trading scheme approach and taxpayers who ultimately pay under all arrangements will be worse off.”

However, Pitt adds: “Increased infrastructure investment must be good for infrastructure businesses provided they are competitive. The renewed focus on infrastructure offers a strategic opportunity for pitt&sherry, rather than a bonanza. We have invested in our Melbourne, Sydney and Brisbane offices to position us for the opportunity, but we recognise we need to be performing at national best practice level (or better) to secure project roles.”

Pitt was pleased to see that Tasmanian road and rail infrastructure were supported in the Budget, but he notes: “From a transport economic perspective in Tasmania, we need to find a real robust solution to the Bass Strait freight problem. The cost of freighting goods out of Tasmania is proportionately high when compared to mainland competitors, as you would expect because Tasmania is an island. We do need to find a more cost-effective solution to this and that wasn’t delivered by the Budget.”

Pitt&sherry has come a long way since it was founded in 1963 by Pitt’s father, Brian, in Devonport, a coastal city in the centre of Tasmania’s North Coast with a population of 25,000 people today.

Brian, a civil engineer from the University of Tasmania, had spent the early part of his career with the Devonport Marine Board building ferry terminals, wheat silos, breakwaters and other maritime works.

Two years after starting his own business, he was joined by Clive Sherry, a municipal engineer at Devonport Council with experience at state road and bulk water authorities.

They worked together for 25 years and were involved, at one time or another, in most of the building, land development and industrial infrastructure projects in north-west Tasmania.

During this time, John Pitt was growing up in Devonport, “attending local schools and benefiting from a lot of the things we took for granted then – a stable supportive family, lots of sport and outdoor activity”.

He says: “A science and maths education was much more highly valued then, so I naturally gravitated towards that. There’s no doubt that my career choices were influenced by my father. That’s only natural.

“I do consider myself very fortunate in going down a career path that I’ve always enjoyed –  every day brings an opportunity to learn something new or solve a different problem.

“I learnt that engineering is a universal occupation, meaning the skills and knowledge that you acquire are transportable anywhere in the world.”

After graduating from the University of Tasmania in 1975, Pitt worked in Hobart for four years with the Department of Main Roads and then with consultants Philp Lighton Floyd & Beattie. He spent the next six years working and travelling to many parts of the world, mainly based in London and Johannesburg.

“This was a formative period for me, teaching me a lot about self-reliance and further developing or reinforcing the values that are important to me today,” he says.

“I got lots of good engineering experience, but heaps of life experience as well. I had no real intention of returning to Tasmania or working with pitt&sherry, but in the end I was swayed by family and the opportunity to build a business and enjoy the unique natural environment that Tasmania offers.”

In 1985, he joined the family business, opening an office in Launceston, Tasmania. Pitt&sherry employed about four or five people at that time, but has since grown rapidly to 200 employees, partly due to mergers and acquisitions.

However, Pitt says: “Acquisitions in a business of our size are rarely a short-cut to success unless there is a very solid strategic and cultural fit between the two organisations.

“At 200 people, we are still small enough to have very strong alignment between people to ensure success. It’s hard work when this alignment and the commitment that comes with it is missing.”

Pitt&sherry also secured some lucrative contracts.

In 1998, for example, it doubled in size when 30 personnel transferred employment after the company secured a major alliance contract with the Tasmanian Department of Transport.

From 1999 to 2004, it also operated in East Timor, working closely with the UN peacekeeping force and the East Timorese government.

Today, it has offices in Brisbane, Sydney, Melbourne, Canberra and three in Tasmania. It is also involved in projects across Australia and has 22 shareholders, who are mainly partners or long-term employees of the company.

While much of this growth has occurred under Pitt’s helm, he is quick to point out that it is due to the contributions of many people in the business.

He adds: “There are risks involved with family businesses which anyone involved in one would appreciate. The key for me was being able to compartmentalise business and family. Pitt&sherry’s success has largely resulted from its transformation into a private company benefiting from a broad and diverse talent base.

“We’ve always been able to separate governance, strategy and operational activity. Engineers are naturally good at this, but we also benefited from some excellent external advice in structuring our business in the early 1990s.

“We introduced formal board structures and meetings about 20 years ago, when the company and its equity base had grown to the size which demanded it.

“While we have always utilised specialist external advice, we are only now about to appoint a non-executive director.”

Pitt says the particular qualities pitt&sherry is looking for in this new director include stronger networks than it has at present and sound strategic thinking skills.

“This addition will increase the size of the board to seven and change our dynamics. While the managing director and company secretary are permanent appointments, other directors are elected for two-year terms from our shareholder base at our AGM each year,” he says.

“Over time I have learnt that what works for us is the effective separation of board and operational decision-making. There is no doubt our business has made better decisions when this separation is rigidly enforced. For a business of our size, diversity is more important at operational decision-making level than within the board itself.”

Besides a female company secretary, this is a male-dominated board in a male-dominated industry.

Nonetheless, Pitt belongs to the Consult Australia Champions of Change, which is trying to tackle the low levels of gender diversity in the consulting engineering sector.

On the problem, he says: “There are a couple of issues here. One is the pipeline of candidates. The other is the unconscious bias that exists in mature industries. You don’t know what you don’t know and you get this in all sectors.

“People don’t always think about the business benefits of diversity of all types. We are part of society and if your company doesn’t mirror the level of diversity in society, then it is unlikely to be completely in tune with the needs of the communities in which it operates.”

Pitt says young women are better represented in environmental and electronic engineering for example, but not in the traditional civil and structural areas.

“What we are trying to do is to encourage more young women to consider engineering as a very useful career. But this will take some time because of the nature of the industry,” he says.

Pitt sits on several industry related boards, including Roads Australia and the Antarctic Climate & Ecosystem Cooperative Research Centre.

These, he says, give him the opportunity to provide some insights that he has picked up during his career.

“At some stage in the future I may do more of this,” he says.

On the challenges of being a director in Tasmania, he says: “Irrespective of the size of your business, it is necessary to have at least a national perspective. You only practically achieve this by having a national network and a national benchmarking mindset.”

When not busy helping to build Australia’s roads and bridges, Pitt tries to get an hour’s aerobic exercise a day, mainly swimming which he really enjoys.

“I’ve been fortunate enough to have travelled widely and would like to continue to do that with my wife Phillipa, often catching up with our two sons in different parts of the world. I’m actually interested in most things and hope to maintain what has been a lifelong thirst for knowledge,” he says.