Daring In Des Moines

Two leading design firms shake up a staid Midwest insurer with radical changes in its office spaceto favorable reviews

Slide Show >>

Tom Graf earned his corner office at Principal Financial Group (PFG ). Now senior vice-president in charge of investor relations, he had spent 35 years at the Des Moines insurer, trading formica for faux mahogany and cube for office as he moved up from his first position as an actuarial intern. So it was with trepidation that he greeted the news of a radical office overhaul last year. "They wanted to take away my windows and door," he said. Today, Graf phones investors from within a bright low-walled cubicle just one-quarter the size of his old office. And surprise, he digs his new digs.

The renovation is part of an experiment that Chief Executive Barry Griswell launched in December, 2004, to rethink how office design can affect innovation. Griswell worked with designers from Herman Miller (mlhr ) and Steelcase (SCS ) to reconfigure new kinds of work spaces for four operational units within Principal's cluster of downtown office buildings. There were four goals: break down traditional hierarchy and improve collaboration; bridge the different working styles of baby boomers and the twentysomething generation; inspire loyalty in employees; and cut costs.

Now that the last of the groups has been working in new offices for more than six months, Griswell's experiment has yielded some useful conclusions. So far, they're mostly positive: The cost savings are clear. Collaboration is on the rise. And an outside survey suggests greater worker satisfaction. However, many employees, particularly older ones, still grumble about not having enough privacy and needing more storage. Space, after all, is a precious commodity.

Experiments in design are expected in innovation hotbeds like Silicon Valley design shops or New York City ad agencies. Principal, on the other hand, is a sleepy, 127-year-old financial-services firm that handles 401(k)s and underwrites insurance policies. Most of the 9,525 Iowans who report for work daily in its buildings, which dominate the Des Moines skyline, have spent their entire careers there.


For more than a century, Principal was privately held. That changed in 2001. Like many large insurers in the late 1990s, the mutual insurance company, whose shares were owned by its policyholders, went public. Griswell knew that adding a daily stock price would focus management on profitability and allow Principal greater access to capital markets. It worked. The company's profits jumped from $142 million in 2002 to just over $1 billion in 2006. To get there, major organizational and cultural changes were required. The Workspace of the Future project, as Griswell called it, was one way the company hoped to foster a more competitive culture. "Physical space is the window into what you're doing," he says.

Griswell's opinion was brought into relief when he joined designer Herman Miller's (MLHR ) board of directors at the invitation of a former Principal board member. The insurance executive spent time at Herman Miller's Zeeland (Mich.) headquarters, where he witnessed how flexible, open designs promote informal conversations. He reviewed research outlining design's impact on productivity. The CEO then recruited leaders from four main operating units to launch the pilots.

First up were the traders at Principal Global Investors, some of the company's most talented employees. Unlike the wide-open spaces of Wall Street firms, Principal's trading floor had the individual offices and quiet hallways of a stodgy law firm. Group President James McCaughan wanted to get the traders talking to one another, and he wanted to save money. So he teamed up with Herman Miller designers to move the traders from three to two floors in clusters of open cubes arranged by investment portfolio.

It sounded like a smart strategy, but McCaughan didn't do enough to involve most employees in design decisions. Workers muttered that the company was saving money at their expense. "People were asking, What's next? Are they going to stack us?'" said portfolio manager Steve Larson.

As the renovation got under way, Principal executives and Herman Miller representatives responded by setting up a prototype of the new office space and inviting Larson and his colleagues to check it out and talk with the designers. That helped a lot. It was enough to convince Larson that despite the space sacrifice (he, too, lost an office), the move positioned his department as forward-thinking.


To promote informal collaboration, Herman Miller dropped the height of the cubicle walls to 54 inches from the usual 65. Desks are cut at 120-degree angles rather than 90 degrees, creating more usable surface space and angles that provide more privacy. All of the furniture is on wheels, so staffers can pull tables and chairs over to sunny corners for impromptu conversations. Traders, analysts, and administrative teams work in circular arrangements. A low conference table stretches through the center of each cluster.

The traders worried about a lack of privacy. Much of their work is confidential. So theybuilt four office-size rooms where people can join a conference call, call the doctor, or just read. The company also piped white noise, the sound of a whirring fan, through a ceiling sound system to drown out distractions. Increasingly, employees also rely on headphones to block noise.

The final pilot project involved the corporate communications unit, run by Mary O'Keefe. She involved all 50 employees in the design process right from the start. But full-scale participation presented its own problems. Employees said they wanted more privacy and more storage space. But to foster the company's goal of increased collaboration, workers needed to lower their walls, lose their doors, and sit closer together. All this made for less privacy and storage.

To address those concerns, Herman Miller designers visited staffers at their work spaces, discussing trade-offs with a focus on the best environment to help the department work together. O'Keefe showed the plans in advance and explained the choices she had made. "When people saw the plans, they said, It's lighter and brighter—and there is a coffee bar.'"

The change was radical. Everyone had worked from within a dark matrix of traditional, high-sided gray cubes and offices. Employees were shifted into two lines of cubicles that open onto an airy main corridor. Cube walls fell to 60 inches. This allowed the windows to flood the entire floor with natural light. In the middle of the floor, two tiny conference rooms designed to be versatile, ad hoc offices are flanked by two diner-like booths and kiosks stocked with reading materials. And there's a kitchen where stools surround a long bar, perfect for the casual lunchtime conversation.

All the workplaces are the same size, reducing the cost of moves when employees are reassigned from $750 to $250. And because the cubes are smaller, Principal can fit more people into less space. A Herman Miller designer observed each of the 50 employees to help customize the environment. Workers were invited to select from options including small storage units, PC screen setups, bulletin boards, and even the number of cubicle walls (four or five).

Because the communications team was clustered even more closely than the traders, and privacy and noise were an even greater concern, tulip-shaped poles emit "pink noise" (similar to the sound of a TV left on in another room) to shield conversations. Here and there, human-size mesh screens can be used as doors for open-sided cubicles.

Several months after the pilot projects were completed, Principal invited professors from Iowa State University to evaluate the experiment. They surveyed 350 employees split equally between renovated and unrenovated areas and found morale was up and retention slightly higher among pilot participants. Workers in the renovated areas reported more satisfaction with their co-workers and a greater sense of professional control as well.

Staffers aren't ready to provide a ringing endorsement. They have ongoing concerns about privacy and remain uncomfortable about spare storage. But even the once-grumbling traders report they're now excited to bring customers in for a tour. And Griswell has begun to apply Principal's design lessons to the rest of the company. "We now have a template of what the workplace of the future should look like," he says.

By Jessi Hempel

    Before it's here, it's on the Bloomberg Terminal.