T.C.

YEDTEPE UNIVERSITY GRADUATE INSTITUTE OF SOCIAL SCIENCES

MANAGEMENT PHILOSOPHY

THE MODERN ERA

Presented By Tolga Usluer

STANBUL, October 2012

Table of Contents THE MODERN ERA ................................................................................................... 3 Management Theory & Practice .............................................................................. 3 Fayol Intellectual Heirs ........................................................................................ 4 Management Education: Challenges & Responses ............................................. 5 The Management Theory Jungle ......................................................................... 5 Other Views of Management ................................................................................ 6 Drucker: The Guru of Management Practice ........................................................ 7 From Business Policy To Strategic Management ................................................ 8 Governance & Agency Issues .............................................................................. 8 Strategy and Views of The Firm ........................................................................... 8 Organizational Behavior & Theory......................................................................... 10 Theories X & Y ................................................................................................... 10 Work Design / Herzbergs Motivation-Hygiene Theory....................................... 11 Motivation ........................................................................................................... 12 Leadership ......................................................................................................... 13 Organizations & People ..................................................................................... 15 Organizations as Open Systems ........................................................................ 15 Strategy & Structure ........................................................................................... 17

THE MODERN ERA

The modern management thought which reflects the modern era in the history of the management, is a combination of past developments in four broad areas. The first one is the general management theory of Henri Fayol. Addition to this the thought also stands on the basis of the general management theory including the study of managerial activities as extensions of Fayol. The other three areas were: behavioral developments where human relations and other people oriented approaches had been aroused; evolving notions of the structure of organizations and advances in quantitative and scientific problem solving approaches. Here in this paper, the modern management era is discussed under three chapters which are Management Theory and Practice, Organizational Behavior and Theory and Science and Systems in Management.

Management Theory & Practice

Henri Fayol was the first to propose a general theory of management in history. He defined this theory as the collection of principles, rules, methods and procedures tried and checked by general experience. Theory attempts to bring together what is known in a discipline, to explain the relationship with these knowns and to predict likely outcomes given causes and relationships. Fayols theory consisted of two main parts: 1) the elements, which describes what managers did, such as, plan, organize, command, coordinate and control; and 2) the principles, which were the lighthouses or in other words, the guides, how managers managed. Since Fayol believed that managerial ability was very crucial to organizational success, the purpose of his theory was to provide a body of knowledge that could be taught. Fayol and his general theory of management were criticized in many aspects. The main concern of those critics was the human factor. Theorists said, Fayol ignored the human factor and recognized the human as an economic factor even as robot that should have been directed. Fayol concentrated more on the structure of the organization but ignored the human behavior and phycology. However, despite those deficiencies criticized, Fayols theory became the basis of the modern theory.

Fayol Intellectual Heirs

The first effort in modern period came from William H. Newman (1909 2002) of Columbia University. Newman, in 1948, called administration as the technique of organization and management and defined as the guidance, leadership and control of the efforts of a group of individuals toward some common goal. He developed a logical process including elements planning, organizing, assembling resources, directing and controlling. Seeming very closely akin to Fayols, Newmans theory has some difference features such as the new assembling resources element and the treatment of coordination under directing rather than a separate activity. But beyond these features, Newman also noted the importance of objectives in shaping the character of an organization. According to Newman, basic objectives of the firm should define its place, define its social philosophy and serve to establish the general managerial philosophy of the company. He also used the expression the business citizen while defining the social philosophy of the firm. Newmans works together with James O. McKinsey and his approach to managing and consulting provided the framework for the first textbook on business policy ever, which is Business Policies and Management, 1940 and his effort bridged the years from general management as policy to general management as strategy. George Terry (1909 1979) defined management as the activity which plans, organizes and controls the operation of the basic elements of men, materials, machines, methods, money and markets, providing direction and coordination and giving leadership to human efforts, so as to achieve the sought objectives of the enterprise. Later Terry combined functions of directing and leading human efforts under actuating function and stopped treating coordination as a separate function. Terry, like Fayol, defined a principle as a guide to action. In 1954, the Department of Air Force USA prepared the manual of The Management Process. This manual established five functions of managements which were, planning, organizing, coordinating, directing and controlling. This document had a significant importance. Since it was a training document, it signaled a further interest in the study of management as a separate activity. Harold Koontz and Cyril ODonnell defined the management as the function of getting things done through others in their books Principles of Management. An analysis of managerial Functions, in 1955. They pointed out that, although by some authorities management were seemed as exercising the functions planning, organizing, staffing, directing and controlling in the sequence, in practice managers actually used all five simultaneously. They stressed that each of these functions contributed to the organizational coordination. They underlined that coordination was not a separate function itself, but was the result of effective utilization of basic managerial functions.

Fayols heirs attempted to identify management as a distinct intellectual activity and sought a generally accepted theory that could be distilled into principles and lead to a general theory of management. Some agreed on basic functions of management and for some functions different thoughts were emerged. Throughout efforts, staffing, which was subsumed under organizing achieved some recognition as a separate function as human resources. Coordination begun to be recognized as a separate function until 1954 and it became the integral part of entire process. As these efforts continued and the general management theory was getting advanced, studies of business education became more important and new discussions started on this area.

Management Education: Challenges & Responses

Robert A. Gordon and James A. Howell prepared two separate reports following their exchange of ideas during the preparation on business education in 1959. These two reports had the greatest impact on management education. Both reports stated that school of business administration in the US were in a state of turmoil in trying to define what should be thought and how it should be done. They criticized the universities not preparing competent, imaginative, flexible managers for an everchanging environment. They offered a change in the content of the business school curriculum. According to Gordon and Howell, more stress more stress needed to be placed on general education especially on humanities and the liberal arts, mathematics and on extended study in the behavioral and social sciences. Gordon and Howell noted at least four different aspects of the field of management which were: 1) managerial problem solving through quantitative analysis, 2) organization theory, 3) management principles and 4) human relations. The idea behind was to better prepare future leaders of business rather than managers responsible for fulfillment of tasks.

The Management Theory Jungle

Even Gordon and Howell noted the diversity of the approaches to the study of management, it was Harold Knootz who identified the differences and applied the label management theory jungle. Knootz noted six main schools of management thought. The management process school: Often called the traditional approach, this school which was originated by Henri Fayol, perceives management as process of getting

things done through people in organized groups. The empirical school: Identified management as the study of experience and use case analysis examining the success and failures of managers for further understanding of effective management techniques. The human behavior school: Studied management as interpersonal relations since management was done through people. This approach was also called the human relations, leadership or behavioral sciences approach. The social system school: Studied management as cultural interrelationships where groups interacted and cooperated. The decision theory school: Concentrated on analyzing and understanding who made decision under what circumstances, the process of selecting between different alternatives. The mathematical school: Perceived management as a system of mathematical models and processes. The thought was that management and decisio n making could be expressed in terms of mathematical symbols and relationships. Knootz stated that each school provided tools for management theory but should not have been recognized as equivalent to the field of management. In the hope of resolution, a seminar was conducted in University of California with participation of various lecturers and practitioners of management in 1962. Following the discussions, Knootz concluded that a semantic confusion was evident throughout the discussions. Some individuals remained optimistic that in near future a general theory of management covering all those tools would be stated and generally accepted. On the other hand some were on the opposite side.

Other Views of Management

The Fayols ideas provided the conceptual basis for teaching management. Apart from ideas discussed above, there were other views of different researchers using different methods to understand the nature of management. One of these researchers was John Kotter. Kotters studies found that 1) successful managers could be very different in terms of personal characteristics and behavior, 2) general managers thought themselves as generalists but each had a very strong specialty that fitted the job demands and 3) each had a detailed knowledge of the business and network relationships with other people in business life. Kotter concluded that, management at the general manager level looks far more like an art than a science although there are many regularities. He used the term demands to describe the regularities. Kotter identified the differences in

responsibilities and relationships that cause the job demands to vary such as organizational size, age, performance level, culture, and product and market diversity. Although the irregular forces influenced the demands, they did not eliminate them. Apart from Kotter, other researches such as Henry Mintzberg, Rosemary Stewart, Fred Luthans, Richard M. Hodgetts, Stuart A. Rosenkrantz conducted various researches. The labels used for describing managerial work in those researches were new; however underlying activities of what managers did were supportive of Fayols earlier work. Briefly, planning, controlling and organizing fitted the Fayols framework, human resource management was a modern label for staffing, while, motivating, performance evaluation and routine communication activities fitted well into Fayols directing and coordination functions.

Drucker: The Guru of Management Practice

Peter F. Drucker, stressed the need to define key areas for setting objectives and evaluating results. These were market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance and attitude, and social responsibility. The key point according to Drucker in setting objectives was to ask the right questions. According to him, 90% of the managerial work was generic, working with and through people. The remaining 10% varied according to the mission, culture, history and relevant topics of any specific type of organization. Although many had written about the need for organizational objectives, Drucker was the first to publish the concept management by objective (MBO). Drucker said, A managers job should be based on a task to be performed in order to attain the companys objectives. The manager should be directed and controlled by objectives of performance rather than by his boss. With this, MBO was to replace with management by drive and control was to be self-control rather than control from above. Knowing the objective of the unit under management, managers could direct their activities. MBO was actually practiced by Harold Smiddy at GE, Alfred Sloan at GM and Pierre du Pont at DuPont, before the publishment of Drucker. However, it was Drucker to put it all together, think through the underlying philosophy and then explain and advocate it in a form other could use. The work of Drucker had another important aspect. There was a great gap on what academics focused on and the practice of management. Druckers work was grounded in management practice and had also been able to communicate his ideas to academics.

From Business Policy To Strategic Management Governance & Agency Issues

The owners of the firms are the shareholders of that company. And those who guide the conduct for the enterprise are the group elected by those shareholders, namely the board of directors. Members of the board, are expected to employ managers to oversee the daily operations. In theory and legally, the board and the senior managers are agents of shareholders and are expected to maximize the wealth them. However, in practice, this is not always the case, underlying the vital question of corporate governance. Researches discussed about the possibility of senior management becoming a selfperpetuating oligarchy. Under these discussion, Peter Drucker advocated an outside board, that is, persons who had never been managers of the firm. The point here as stated by Myles Mace, board of directors selected by the president of the firm, did what they were told, being far away from evaluating the performance of the president and typically did not ask challenging questions. The question of corporate governance is a broad one, including issues such as compensation, the size and concept of the board whether there was an inside/outside mixture, risk appetite and so on. The biggest issue and the question is whose interest is being served. Since the people are expected to act opportunistically, means must be designed to reduce the occurrence of opportunistic behavior. These might be performance based compensation, careful design of procedures, objective performance appraisals, close monitoring behavior at work. If errors identified, then post hoc actions such as audits, random inspections and relevant mitigates should be implemented.

Strategy and Views of The Firm

Michael Porters five forces model was a frame-breaking set of ideas that would dominate the strategic management field for nearly a decade. Porter stated that there is no ceteris paribus for managers and the profitability of a firm was a function of five forces of industry structure which were; threat of entry of new competitors, the bargaining power of suppliers, the treat of product substitutes, the bargaining power of buyers and rivalry among existing competitors. Porter made a significant impact on strategic management and changed its direction from case study to industry studies regarding structure, conduct and performance.

In 1960s, the Harvard business policy group started to use SWOT analysis, which was an acronym for strengths and weaknesses within the firm and opportunities and threats outside the firm. By that, corporate strengths and weaknesses were started to be used and took into consideration as part of the strategic planning.

Organizational Behavior & Theory

Modern management made more sense on human relations, the search for harmony of people and organizations. The efforts were directed at adaptation of human needs and aspirations to the requirements and goals of the organization. Under this title we will review some theorists and their works which made significant impact on the organizational behavior and the theory with many debates.

Theories X & Y
Douglas McGregor (1906-1964) from MIT, expanded the idea that managerial assumptions about human behavior were all important in determining managers styles of operating. Managers, based on their assumptions, could organize, lead, control and motivate people in different ways. He generally stated that A manager who believes that people in general are lazy, untrustworthy and etc. will make different decisions from a manager who regards people generally as cooperative and friendly. The first set of assumptions McGregor examined was Theory X, which was to represent the traditional view of direction and control: 1. The average human being has an inherent dislike of work and will avoid it if he can. 2. Because of this human characteristic of dislike or work, most people must be coerced, controlled, directed, threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives. 3. The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, wants security above all. On the other hand the assumptions of Theory Y were as follows; 1. The expenditure of physical and mental effort in work is as natural as play or rest. The average human being does not inherently dislike work. 2. External control and threat of punishment are not the only means for bringing about effort toward organizational objectives. Man will exercise self-direction and self-control in the service of objectives to which he is committed. 3. Commitment to objectives is a function of the rewards associated with their achievement. The most significant of such rewards, such as satisfaction of ego and self-actualization needs, can be direct products of effort directed toward organizational objectives. 4. The average human being learns, under proper conditions, not only to accept but seek responsibility. Avoidance of responsibility, lack of ambition, and

emphasis on security are generally consequences of experience, not inherent human characteristics. 5. The capacity to exercise a relatively high degree of imagination, ingenuity and creativity in the solution of organizational problems is widely, not narrowly, distributed in population. 6. Under conditions of modern industrial life, intellectual potentialities of the average human being are only partially utilized. McGregor stated that Theory Y led to the creation of conditions such that members of the organization can achieve their own goals best by directing their efforts toward the success of enterprise. According to him, managers who accepted the Y image of people would attempt to aid the maturation of subordinates by giving them wider latitude in their work, encouraging creativity, using less external control, encouraging self-control and motivating through the satisfaction that came from the challenge of the work itself. McGregor supported the idea that how people were treated was largely a self-fulfilling prophecy, such that if managers assumed that people are lazy and threated them as if they were, then they would be lazy.

Work Design / Herzbergs Motivation-Hygiene Theory

Frederick Herzberg (1923-2000) researched the importance of attitudes toward work and experiences, both good and bad, that workers reported. From the responses collected through various interviews with workers, he was able to isolate two different kinds of needs that appeared to be independent. Herzberg identified that when people reported unhappiness or job dissatisfaction, they attributed those feelings to their job environment or the job context. When people reported happiness or satisfaction, they attributed the feelings to work itself or to job content. Herzberg called the factors identified in the job context the hygiene factors. These factors included supervision, physical working conditions, salaries, company policies and procedures, administrative practices, benefits and job security. When these factors were below what the worker considered an acceptable level, job dissatisfaction was the result. When the factors were consider optimal by the worker, dissatisfaction was removed, however to some sort of neutral state of neither dissatisfaction nor satisfaction. The factors led to positive attitudes, satisfaction and motivation were the motivators or the things in the job content. These were such factors as achievement, recognition, challenging work, increased job responsibility, opportunities for growth and development. If present, these factors led higher motivation. With these results Helzberg was stating that traditional assumptions of motivation about wage incentives, improving interpersonal relationships and establishing proper

working conditions did not lead to higher motivation. Management should recognize the importance of hygiene factors and provide required level to neutralize dissatisfaction. However to increase satisfaction, motivators should be used.

Motivation
As Herzberg, many scientist researched the factors to increase motivation of workers. Edwin Locke, Gary Latham and their associates examined four widely used techniques and their impacts on employee productivity. Monetary incentives showed the greatest median increase, followed by goal setting, while job enrichment and participation left behind. Whiting Williams, worked to identify the response the question what is on a workers mind. In terms of wages, Williams argued that pay was relative from the workers point of view. A persons perception of salary was based on at least two ratios: 1) the persons pay relative to the pay of others and 2) the persons inputs relative to the persons salary. In first case, workers pay relative was related with what others were being paid for the same job and same responsibility. In second case, the comparison was that of how hard the person worked, how long the person had trained. In this approach, the amount of salary does not necessarily be the absolute source of dissatisfaction, but the salary in relation to others and in relation to inputs does. The other important factor having an impact on employee productivity as stated above was the goal setting. Goal setting theory was provided by Edwin A. Locke. The theory consisted of purposefully directed action in the process of developing and setting specific work goals or targets for employees to accomplish. Briefly, the more specific the goal, the better the result. Namely, produce 10 units of the product that will pass the quality control is more specific than do the best you can target. Further, difficult goals were better than easy ones, in other words goals should challenge the workers abilities. Employees also needed to be able to keep track of their performance by receiving regular feedbacks. Specific goal setting also could provide more accurate feedback for employees. Incentives linked to performance were also necessary to reward the meeting of goals. Addition to those, acceptance of goals by employees depended on a number of factors including the extent to which employees trusted the management, the fairness and the difficulty of goals and the perceived legitimacy of managements demands.

Leadership
The general management theory and followed by the modern management theory, defined broadly the manager in many cases as the one achieving goals working with or through people and other resources. For this reason, the leadership, fits more into the general management theory. Various efforts and researches has been made and still continue to describe the leadership and its styles. This descriptions had ranged from the authoritarian leaders to participative leadership throughout the studies. The earliest leadership notions were mostly focused on the differences of the leaders from the non-leaders. These were labeled as the technical ability, intelligence, energy, honesty and similar personal qualities. This was based on the belief that the people in charge were more stronger, wiser, better warriors and etc. As the list grew, more exceptions were found for this personal qualities and search need increased for other explanations. Early behavioral researches, Kurt Levin was an example, placed leadership in a range of authoritarian to participative where the authoritarian used the formal power, was more production oriented and operated more unilaterally while decision making. On the contrary, participative leaders used formal power less, was employee centered and led employees take part in decision making process. The goal of participative leadership was to decrease the organizational authority of the hierarchy and reduce the differences between the subordinate and supervisor to encourage creativity, give voice to worker in decisions and make people more committed and involved to organizational goals. Rensis Likert (1903 1981), creator of the Likert scale which was used for the attitudes measurement in research studies, was an example of proponents of participative management. He identified four types of leader behavior which were; 1)exploitive authoritative system1, 2) benevolent authorities system2, 3) consultative system3, 4) participative group system4. System 4, the participative group involved 3 basic concepts . These concepts were supportive relationships, use of decision making and setting high performance goals for the organization. The first concept ensures that every worker, member of the group in other words maintained the sense of personal worth and importance. The second concept, the use of decision making process, links each work group to other groups in the rest of the organization and promotes the group decision making. The third concept related to high performance goals states that superiors in system 4 organizations would have higher performance aspirations as would every member of the work group. Even he couldnt finish his study by himself, he also proposed a system 5 structure, a more sophisticated complex and effective system. In this system, the hierarchy was

replace by participation and influence of work groups. In case of conflict, the groups should come and work together to overcome the problems. The organizational chart was not like a pyramid, not tiles existed for people and subordinates would be called as associates. However, as ideas continued to be evolved, some critics for those theories emerged supporting the idea that any of these styles were capable to define the leadership in best way. Neither the authoritarian or the participative. Instead, the focus was shifted to contingency or situational leadership. Fred Fiedler, pioneered the idea that a number of leader behavior styles might be effective or ineffective depending on the important elements of the situation. In his research Fiedler identified leadership with his least preferred coworker (LPC) scale. High LPC persons felt a need for approval of their associates and were less distant describing themselves and others. Briefly they were more consideration oriented. On the contrary low LPC persons were relatively independent of others, were less concerned with feelings and were more task oriented. Fiedler concluded that task oriented, low LPC leaders were more successful in group situations where the people were very favorable or very unfavorable to the leader, while relationship and consideration oriented, high LPC leaders were more successful in situations that the group was in the middle. .As the situational leadership theories proliferated, a term charisma found a place for itself in discussions and researches. Charismatic leaders got things done by virtue of their ability to attract their followers to the goals. Followers would trust, share the vision, attribute mystical powers and offer blind obedience to their leader. Robert J. Houses theory, charismatic leaders seemed to emerge under certain conditions, had certain qualities that distinguished them from others. For Bernard M. Bass, charisma was one of the important features to become a leader, where followers were inspired by high expectations and important goals expressed in influential ways. The debate on the charismatic theories was what would happen if the leaders intents were not socially desirable. A common example given for those cases was Adolf Hitler who had demonstrated a personal magnetism and let followers in blind obedience but toward evil ends. However, Max Weber stated that, charisma was an unstable situation and that after the charismatic leader departed, there could be chaos. Describing the political leaders he studied, James McGregor Burns, used the terms transactional and transformational leaderships. These transformational leaders, appeared more willing to share power with their followers and also seemed to emerge at particular times such as when an organization declined and a renewed vision was needed. In parallel, transformational leaders were often described as those who brought a vision of the major changes needed in the organizations structure, culture or similar things. However, this vision will work only if the leader could transform the vision of the future into localized implementation in present.

From authoritarian leaders to participative and transformational leaders, another debate between the theorist was the connection or distinction between the managers and the leaders. The question was whether manager should have been leaders as well or leadership was contrast to managers. This debates created another concept in combination as managerial leadership in modern era. The core result was that addition of managerial activities to leader behaviors or vice versa would have an positive affect to increase the ability to understand employee satisfaction, commitment and performance. In brief, a leader in an organization without the basic intellectual functions of management like policy making, decision making and control, even charming and attraction people in the organization as followers would least likely to succeed to achieve the goals and objectives of the company and his own.

Organizations & People

. While behaviorists dealt with leadership, motivation and related micro factors on the human within the organizations to achieve the objective and goals, organizational theorists dealt with a more macro point of view with the structure and the processes of the organizations for achieving the same objectives. The types of organizations discussed by different scientist like Daniel McCallum, Harrington Emerson, Max Weber were as product divisions, M-form structure or bureaucracy. In this part of paper, some chosen organization systems will be reviewed and discussed.

Organizations as Open Systems

Organizations are open systems which are both affected by and affect their environments. Ludwig von Bertalanffy ((1901-1972) was the first who noted this. Organizations take inputs from the environment, process those as throughputs and result in outputs which are returned to environment. Form this point of view, organizations are assumed to be influenced by economic, social, political and technological environment. For this reason, environmental changes should closely be monitored and managerial actions should be taken to cope with these changes. Joan Woodward classified the organizations by complexity of the technology used in. His classification was ranging from less complex to more advanced technology used in production. In less complex system, small batch or unit production was in place and the system was based on customized or made to order products, which require more tailor made process and worker intervention. In one step ahead, Woodward told about a mass production or a large-batch which involved a more standardized approach with few

variances in the final appearance. In the more advanced stage, Woodward was pointing out the long-run continuous process of production, with a very standard final product. Woodwards model from less to advanced requires different types of authority and delegation by management. He stated that in less or more advanced models, more delegation and flexibility requires while in mid stage more supervision over personnel and more elaborate control techniques with formal and written communications would bring success. Another approach to organizational design was suggested by Paul Lawrence and Jay Lorsch in 1969 was focusing on environmental factors affecting the organization. They stated that the rate of the change in the environment, the certainty of information available and time span of feedback of results on decision made had a great influence on the form of organization. They found out that, the more successful firms were the ones who adjusted to their relevant environments. In other words, firms that faced more unstable, less certain environments were more flexible and decentralized, while firms facing more stable and certain environments were more formal and centralized. Apart from those above, some scientist took the firm life cycle into consideration as well. The behavior of the organization might change according the age and the size of the firm. In startup, the focus of the organization is totally different from a mature company and the way of organizing differs. However, some organizations dies young while some mange to continue. Researches showed that, technology, environment, the firm life cycle had significant effect on the organizations however neither of them provides a certain best way of organizing. In other word, only the environment, the outside periphery of the organization is not enough to consider. For this reason internal processes became the theme of especially psychologists like Richard Cyert, James March, Daniel Katz, Robert Kahn and Karl Weick in managerial studies. They emphasized the topics as organizational learning, conflict resolution, the adaptive process of decision making, organizational roles, hierarchy and similar. However, the progress of these studies also contributed to the idea of change in the mindset where the focus was shifting from examining the formal structures itself to a more wider interest in contingency notions. In other words, in modern era the external factors were emphasized together with internal processes by researches.

Strategy & Structure

Does strategy follow the structure of the company or the structure of the firm follows the strategy? This question is actually a practical demonstration of the influence of internal and external factors in terms of decision making and organizing. Alfred Chandler, a business historian stated following his researches that the structure follows the strategy. In late nineteenth and much of the twentieth century, organizations integrated vertically to optimize their input-throughput-output operations and horizontally to expand the scope of their distribution and production functions. In US economy for instance, the market was shaped during 1960s and 1970s by two main factors which were the willing lenders together with market boom encouraging firms to expand while politically strict enforcement of antitrust regulations discouraging horizontal integration acquiring firms within same industry. For this reason companies made various mergers and acquisitions outside their industry. As a result of this situation, many firms were dealing with lots of different business out of their core competency and knowledge. There were cases where a firm was selling pens and helicopters, frozen food, computer electronics and etc. at the same time. This led companies to create different types of organizations with many different profit centers to manage the business in unrelated areas. Since a single line-staff did not coordinating such businesses, M-form, multidivisional structures were established to follow the strategy of unrelated product diversification. The higher the level of diversification, the more difficult for management especially the top management to cope with the volume of the information and apply the strategic controls. For this reason, top managers turned to financial controls and performance indicators like return on investment. However, when the political and economic situation changed in time, as more liberal actions taken to deregulate the economy and the slowdown of the growth rate, firms again adopted the environment and took actions and moved towards to businesses they know best. Today some of those companies who could not adopt their processes, strategies and decision making according to environment, are not in the market while remaining are still in Fortune 500. Moreover, even significant part of these biggest 500 companies are over 100 years of age or closer, referring to the life cycle theory, some portion which is not negligible are new companies dealing with more technology and specifically information, which was the new phenomenon of the century. In brief, the companies with the support of their experience coming from the life cycle that can adopt the changing environment and technology, with proper changes in their internal processes seems more closer to success in the dynamic shape of the business world.