(FORTUNE Magazine) – The 1960s and the 1980s both will be remembered as decades of wrenching change for business and society. Both periods brought breaks with the past and a reevaluation of conventional relationships. The ferment of the 1960s helped foster the birth of conglomerates; that of the 1980s is spurring their transformation. Along Wall Street and in many boardrooms, one casualty of the new conditions has been belief in Sixties-style synergy -- the notion that, in combining businesses, two plus two might equal five. Back in the 1960s, pioneers like Tex Thornton of Litton Industries and Charles Bluhdorn of Gulf & Western perceived that investors put a higher value on companies whose earnings growth remained stable year after year. If one division slipped at a given point in the business cycle, another was on the rise. The best of the conglomerate managers also made the new arithmetic work by giving the businesses they acquired easier access to capital and higher-powered staff work. Like many of the social changes in the 1960s, conglomerates were not well understood and thus made the older generation uneasy. The men who built them were outsiders -- young, savvy, aggressive, and optimistic. Many operated with their own convictions and their own rules. Some were thought of as audacious and irreverent wheeler-dealers. Yet they also sometimes evoked awe. They were favorites on Wall Street for a while and then saw the price-earnings multiples of their companies sag. Conglomerates were very much a reflection of the era. In the 1960s, after all, the U.S. was headed for the moon. America was a go-go society with a limitless horizon. Authority was being questioned. As Gulf & Western declared in its 1968 annual report: ''Spawned by a managerial revolution, in which many of the traditional ways of doing business have given way to new methods and techniques, the multimarket company is a fresh -- and often misunderstood -- phenomenon on the American economic scene.'' One is tempted to call the conglomerate structure a corporatized version of a commune. The conglomerators brought disparate bodies together toward a common purpose. Collectively, each would prosper by sharing its repast with the others in the best of times while being provided sanctuary in the worst of times. By 1969, when the multitudes at Woodstock became a symbol of the 1960s generation, a convening of operating executives at Gulf & Western would have brought together the managers of 11 groups. G&W's mix of businesses literally spanned the alphabet, from auto parts to zinc. The conglomerate idea worked well until 1969, when a change -- the first serious recession in eight years -- interrupted the steady earnings gains. The 1970s brought a resurgence, however, and many conglomerates prospered again. By 1978, when G&W commemorated its 20th anniversary, the company's earnings were more than 2 1/2 times what they had been in 1968. The first dramatic shift in corporate direction at G&W occurred in 1981 when the company began to divest some capital-intensive units. Two years later, before restructuring (selling operations that no longer fit a company's strategy and buying ones that do) exploded into vogue, G&W announced a far- reaching realignment to reflect changing conditions. The program was later expanded to include the divestiture of the original units that had been joined to start the enterprise. It seemed to some as if the heritage of the company had been rebuffed. Had G&W finally begun to acknowledge that the critics of the conglomerate form had been correct? THE QUICK ANSWER is no and yes. To make the conglomerate theory work, a company required a careful matching of businesses to achieve a cushioning balance. It also required relatively predictable operating conditions. And conglomerates, like corporate America in general, confronted radically changing conditions in the late 1970s and 1980s: rapid technological gains, deregulation, tougher worldwide competition, fluctuations in inflation and interest rates, and changing consumer tastes. Gulf & Western, with its tremendous span of products, became something akin to an overstocked merchandiser. It was time to sell off cement and zinc, cribs and curtains, fabrics and fan blades, handbags and hosiery, mattresses and mechanical assemblies, race tracks and refrigeration equipment, sugar and swimwear, wallpaper and pistons. G&W's metamorphosis into a much more narrowly focused company with operations in entertainment, publishing, and financial services presaged most of the restructurings we see today. Structural changes in the economy ordain structural changes in corporate strategies. Vertical integration has given way to ''outsourcing.'' Uniformity has given way to broader choices. Regulatory restraints have eased. Mass markets have splintered. Size has lost significance as it becomes increasingly clear that a company's rank in the FORTUNE 500 is of limited importance. The prime measure of a company's progress must be the growth of shareholder value. Restructurings are not one-time events. A well-managed company must fine-tune continually. It's a process fueled by constant changes in competition and worldwide growth. Restructuring may entail rebuilding balance sheets as well as contracting or expanding in response to changes in strategic direction and opportunities. Flexibility is a necessary ingredient of long-term planning, and many companies today still lack a sound long-term orientation. In the business world the greatest esteem tends to be granted to those viewed as builders, the individuals who create a product or service and then go on to develop enterprises based on their creations. The conglomerators were not credited with the same sense of mission or commitment to innovation as predecessor executives who sparked growth. Yet they can be seen as advocates of organizational restructuring, influenced by the conditions they saw around them. They took enormous risks at a time when many old-line companies had become complacent. They advanced diversification when many companies were too dependent on narrow product bases. They were experimenters. They tested unconventional management theories, instilled flexibility, and encouraged ''intrapreneurialism'' before the word was coined. They nurtured a new awareness of asset values and developed new financial mechanisms. They questioned the status quo and broadened the perspective of the corporate body. They showed what can work and, ultimately, what won't. But no management has been so successful or so prescient as to avoid at least an occasional stumble. Companies viewed as marketing masters have seen their market shares erode. Companies viewed as technological leaders have been embarrassed by technological disappointments. Managements have come to realize more fully that they still have much to learn. The business climate has inspired extensive analysis of competitive conditions, a spate of new management guides, and a new age of supermergers, some with familiar rationales and others motivated by new circumstances. The testing of new operating formulas continues. Over the course of our own expansion and redirection at Gulf & Western, assisted by acquisitions and divestitures, some fundamental lessons stand out: In the global economy of the 1980s, what a so-called cyclical business is must be redefined. Some cyclical businesses are in fact contracting or fading ones, faced with declining product demand due to changing technology or lifestyles. As a result, attempts to strike a balance between companies presumably operating through counterbalancing cycles have become increasingly difficult. Complexity has narrowed the capacity of managers. There are limits to the information they can absorb and the operating details they can monitor. Managers can be spread so thin that they overlook areas of true opportunity. The information age has not necessarily been accompanied by an ability to interpret and use the greater fund of information advantageously. Complexity also narrows financial capacity. Broad diversification can dilute financial resources so that all company components cannot be funded adequately to meet changing competitive forces. There are few bona fide superstars, and even they can't do it alone for very long. A company whose reputation depends on one man is destined for difficulty. It is a time for ''we'' rather than ''me'' managers. Rhyme should underlie reason. There must be some kind of fit among diverse operations. A degree of stretching may be acceptable, but compatibility is essential in managerial personalities and points of view, if not totally in operations. Stretch too far and the result is greater strain rather than greater strength. The organization depletes its energies simply trying to communicate and reach common ground. Acquisitions related to core operations are much more likely to succeed than ones that merely add sales. A company does equal the sum of its parts. Some synergies can be attained in day-to-day operations, but the theory that two plus two can equal five doesn't prove out in practice. AMERICA'S MANAGERS have come through economic trials far tougher than they were accustomed to. Along the way they have learned that some old precepts they had abandoned still have validity, while some new approaches have proved fallacious. Regardless of their age or the age of their organizations, they are coming through another stage of corporate maturation. They are experiencing a new self-awareness, and seeking to change about themselves what they recognize needs to be changed. Many are answering the question ''What do we want to be?'' in a different way. It is not a painless process, but it is a process that cannot be avoided if there is to be progression. Every generation needs to establish its own identity, to make its own mark. The process should not be construed as rejection of the past or an admission that past practices were in error. We build, in part, on the legacy of those who have gone before us. The greatest reverence one can show for an organization is to arm it with the resources necessary to thrive.