New Principal CEO seeks to build business, community
September 16, 2015 by Kevin Hardy
Dan Houston was still receiving congratulatory handshakes for his promotion to Principal Financial Group’s CEO when one board member pulled him aside to ask if he had any thoughts on who might be the company’s next chief executive.
That the company’s 15th CEO hadn’t even left the boardroom before being asked to consider the 16th CEO shows how Principal treats talent development and succession planning, an approach that applies from the lowest to the highest levels of employment, Houston said.
“It is in the DNA. It’s part of the culture. It is what makes good companies great,” he said. “It’s what allows you to ensure that at every level of the organization, if someone gets pushed up, the rest of the organization can follow.”
Aside from developing talent, Houston says he plans to “go deep,” strengthening Principal’s footprint in its domestic and international markets. And he’ll put a focus on consumer education, emphasizing retirement planning.
“I think about the industry in the last 31 years and how much it’s changed,” Houston said. “And yet one thing has remained the same: American workers don’t save enough money for retirement. People aren’t patient enough with their investments. And they tend to overreact to market changes.”
Houston’s own rise to the top followed a familiar path. Houston, like Larry Zimpleman before him, was first named president and chief operating officer before ascending to CEO. Houston has been with Principal since 1984.
During his seven-year tenure as CEO, Zimpleman steered the insurance, retirement and wealth management company through the Great Recession and expanded its international business. He also played a big role in the local business and philanthropic community.
Zimpleman will serve as chairman of the board in coming months as he transitions out of the company.
Principal does about three-quarters of its business domestically and about a quarter internationally. But Houston says those lines are blurring all the time as Principal continues to invest in emerging market debt, equities and real estate.
“I think there will be a day — and I’m sure it will be in my tenure — where you’ll just simply talk about the global footprint of the Principal Financial Group,” Houston said. “And it will be pretty hard to discern where that source of income came from, whether it came from outside the borders or inside the borders.”
Houston isn’t too concerned with worries over China’s economy, which has recently shaken international markets. Houston says China’s volatility is similar to that in other developing nations.
“They have a very large, emerging middle class that is clearly consuming. And like most societies as they continue to evolve, they will have to move away from being an export country to more of a consumption country. And that is not something you just flip a switch and change overnight. That will be unfolding and evolving.”
Smooth transition
Principal Financial Group has a reputation as a strong, steady company with little volatility, said Elliott Smith, executive director of the Iowa Business Council, which represents some of the state’s biggest businesses, including Principal.
“They operate in an industry that certainly has plenty of opportunity for upheaval and anxiety. But they’ve got a culture in place over there and a leadership team that certainly knows the lay of the land in that industry segment and have been a rock solid leader in financial services for decades now,” Smith said.
And some of that stability is credited to thoughtful, meticulous leadership transitions.
“This just follows form for them,” Smith said. “I think Dan was the obvious choice and certainly provides the same sort of steady, solid leadership that the company’s used to.”
John Barnidge, an analyst with the investment firm and brokerage Sandler O’Neill, said Principal is a well-run company.
Barnidge, who tracks Principal, says the company in recent years has become less dependent on insurance sales and more dependent on stable revenue streams in its asset management and fee-related business lines. (Principal is a client of Sandler O’Neill.)
Barnidge said Houston’s promotion comes as no surprise and shouldn’t frighten shareholders.
“He seems to know what he’s doing and is well regarded by investors,” he said.
Committed to community
Houston plans to remain a visible presence in the community, through involvement with nonprofit, business and community groups — following in the example of other Principal CEOs. He’s already a known commodity among the business community, having served on several community boards.
“I think you could do the job and not be engaged in the community. I think that’s the reality. You could if you chose to do that,” Houston said. “I choose not to do that, because the Principal Financial Group’s leadership has a long history of having been influential in a positive way on this great city.”
And so far, Houston appears to have received the nod of local community leaders.
Mary Sellers, president of the United Way of Central Iowa, describes Houston as a deliberate, thoughtful leader.
“His saying is ‘all in.’ To me, that really summarizes his leadership,” she said. “He is all in. He will go as deep as he needs to into an issue or a strategy. He doesn’t do it to micromanage, but he does it to get full understanding of an issue.”
Houston has chaired the United Way board, and in 2014 he and his wife, Joanie, received the Tocqueville Society Award, the organization’s highest honor.
Sellers said Houston is committed to doing the right thing, even if it’s unpopular or makes things harder on himself.
“I know that the shoes that he is filling are big. But he will do great things for Principal Financial Group,” she said. “And he will do great things for our community.”
With more than 7,500 Iowa employees, its sheer size makes Principal a huge player in the state’s business community. But it also stands out for its involvement and investment in the community, said Jay Byers, chief executive officer of the Greater Des Moines Partnership. There’s the Principal Riverwalk, Principal Park and the Principal Charity Classic.
No one’s expecting much of a change in Principal’s corporate citizenship.
“I think it’s been a very smooth and very positive transition,” Byers said. “Dan’s already a well established leader in central Iowa, known by the business community in a big way. He’s a high-energy guy with a lot of passion for Des Moines.”
Houston, a graduate of Iowa State University, has served on the dean’s advisory council at ISU’s College of Business for 11 years.
Business Dean David Spalding says Houston’s leadership and direction stand out on that 25-member panel.
“He’s somebody that others defer to,” Spalding said. “Because he’s very thoughtful and his comments are always very much on point, others will defer to him in a group like that. He doesn’t dominate. He doesn’t speak up all the time. But when he speaks, it’s with authority and with thoughtfulness.”
Zachary Mannheimer, executive director and founder of the Des Moines Social Club, said Houston and Principal have been instrumental in building up the arts and entertainment destination.
“He is a visionary who sees through problems in order to get to what our city should look like tomorrow, next year and 10 years from now,” Mannheimer said. “He leads by example and pushes those around him to achieve more than they thought they could. Whenever I need to reinvest my head in what Des Moines can become, I go talk to Dan.”