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14 FORTUNE.COM March 15, 2016

“Today, human capital is the most valuable capital in every company, no matter what industry it is in.”

So says my colleague Geoff Colvin, and I’m inclined to agree. In a world where many of the most valuable products can be produced in infinite quantities at no ad- ditional cost, where money is lent by central banks at zero interest rates (or less), and

where innovation is the only thing that provides sustainable value, talent is key.

That’s why our annual Best Companies to Work For list, now 19 years running, has become our most popular franchise (see our package of stories that begin on page 141). Companies fight to get on this list each year because they know it will help them attract the very best talent. Potential em- ployees refer to the list year-round to line up their dream jobs. It drives change: The best workplaces get a little better each year in a race to the top. All we can say is, You’re welcome.

But what defines a great workplace? It’s not just free food, generous benefits, and nap pods (although those clearly don’t hurt). You’ll see one word throughout this issue that attempts to capture the essence: culture. Today’s workers are looking for a corporate culture that values them and their contributions. That’s particularly true for members of the millennial generation, who are less likely to

be married and less likely to participate in organized religion than previous gen- erations, and therefore more likely to see their employers as a principal connection to society. Closely tied to culture is purpose. Steve Howe of EY tells us the two go hand in hand: “To improve its culture, a company must first define its purpose: Why does it exist, and what greater good does it serve?”

In this issue we offer a number of stories that shine a bright light on com- panies that have successfully answered that question, and others that have come up short.

On the positive side there is Publix (page 166), where our own Christopher Tkaczyk went underground to capture why the 86-year- old grocery chain is so satisfying to employees. That stands in contrast to Jennifer Reingold’s story on Zappos (page 206), which provides a fascinating window into a company that has always attempted to make its em- ployees’ happiness a top goal, but has recently faltered.

Geoffrey Smith and Roger Parloff take a deep

The Pinnacles and Pitfalls of Corporate Culture

alan murray Editor

@alansmurray

dive into Volkswagen (page 98), a company whose culture badly failed it—and then some. We still don’t know how high up the corporate ladder knowledge of the “defeat device” used to fool U.S. regulators went. But if higher-ups didn’t know, that leaves the ques- tion: Why not? What was it about the company’s culture that led engineers to think they could undertake such a fraudulent effort and not let managers know?

Leadership is critical to culture, but fixing a broken one is no easy task—as Erin Griffith’s sharp analysis of Jack Dorsey’s efforts to turn around Twitter (page 116) demonstrates. Then there is Palantir (page 124), which began life in the defense business but has readily ad- opted the “change the world” rhetoric of Silicon Valley and now finds itself on the knife’s edge in the battle between security and privacy, as Michal Lev-Ram writes.

So read this issue and take heed. Creating a suc- cessful business culture isn’t easy. But it is more impor- tant than ever before. We hope these stories will serve as a guide.

p h o t o g r a p h b y WESLEY MANN

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O F F I C I A L A I R L I N E P A R T N E R

I N T H E A T E R S M A R C H 2 5, 2 0 1 6

YOU ARE ONLY AS GREAT AS THE CHARACTERS ON YOUR TEAM.

THANKS TO THOUSANDS WORKING TOGETHER HELPING MILLIONS PLAY TOGETHER.

FORTUNE and FORTUNE 100 Best Companies to Work For are registered trademarks of Time Inc. and are used under License. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Activision Blizzard.

10%25% 15%20%

Lower Risk Standard Deviation of Annual Total Returns (1985–2015)*

Health Care

Consumer Staples 14.5%

Consumer Staples 14.3%

Energy

Financials

Consumer Discretionary Materials

Industrials

Technology

Telecom

Utilities

Consumer Discretionary

Financials

Industrials Materials

Utilities

Telecom

Energy

Greater Return Annualized Total Return by Sector (1985–2015)*

6% 8% 10% 12% 14%

Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully. Past performance is no guarantee of future results. Because of their narrow focus, sector funds tend to be more volatile than funds that diversify across many sectors and companies. * Source: Haver Analytics, Fidelity Investments, as of July 31, 2015. Past performance is no guarantee of future results. Sectors are defi ned by the Global Industry Classifi cation Standard (GICS) and are based off the top 3,000 U.S. stocks by market capitalization.

Annualized Total Return by Sector (1985–2015): Health Care (14.93%); Consumer Staples (14.47%); Energy (11.15%); Consumer Discretionary (11.13%); Industrials (10.94%); Technology (10.73%); Utilities (10.49%); Financials (10.41%); Materials (10.04%); Telecom (9.16%). Standard Deviation of Annual Total Returns (1985–2015): Technology (25.45%); Materials (20.73%); Consumer Discretionary (19.27%); Financials (19.26%); Energy (19.08%); Telecom (18.93%); Industrials (17.72%); Health Care (15.93%); Consumer Staples (14.32%); Utilities (14.02%). Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2015 FMR LLC. All rights reserved. 727880.2.0

Fidelity.com/staples 800.FIDELITY Or call your Advisor

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Strong performance and lower risk aren’t boring. The consumer staples sector has historically delivered relatively low risk and high return, plus dividends, through steady demand in up and down markets over the past 30 years.*

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