Last updated: March 21, 2014 4:14 pm

From the editor: Thunderbird strategy rejected

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Della Bradshaw©Ed Robinson

Alumni have a vested interest in promoting their business school, or so it has always seemed. But at Thunderbird, in Arizona, all the accepted wisdom has been thrown out of the window.

The announcement last Friday by the Higher Learning Commission to reject the proposed joint venture proposal between the business school and the for-profit Laureate Education was devastating news for the Board of Trustees at Thunderbird. The board had hoped the deal would safeguard the school’s future and allow it to expand globally. But the decision left one group of alumni whooping with delight.

The Thunderbird Independent Alumni Association, which has been campaigning against the alliance since it was announced a year ago – and members of which actively lobbied the HLC to reject the proposal – is confident it can do a better job in deciding the future of the school than the trustees. The HLC decision is just the first step, it says. Now the TIAA wants the trustees to go.

So how did the school come to this sorry impasse?

Alumni at the TIAA say they have been annoyed that they were not consulted in the decision to partner with Laureate. According to Will Counts, executive director of the TIAA and a 2009 alum, the alumni build the brand of the school and as such are Thunderbird’s “most important constituency”. Current students and professors, who might think they also have claims as important constituencies, have been caught in the middle, both groups clearly anxious about the future of the school.

The TIAA is convinced that Laureate should be ditched, but the school administrators do not agree. On March 14 Larry Penley, President of Thunderbird, wrote to alumni and faculty to say that the school was “exploring various strategic alternatives, including models of collaboration with Laureate, which would respond to the specific concerns expressed by HLC”.

But whatever the basis for alumni claims of misguided strategy, it is hard to imagine how alumni can disregard the financial realities of the full-time MBA market in the US. Indeed the travails of Thunderbird will send a shudder down the spines of many business school deans, who see their own plight potentially mirrored in that of the Arizona school.

Writing on the wall

The writing has been on the wall for a decade, as the number of MBA programmes mushroomed, fees increased and the return on investment for graduates shrank. In 1955 around 3,000 MBA degrees were awarded in the US; by 2000 that total was up to 100,000. All this was against a backdrop of falling demand as the number of Americans in their twenties – prime years for MBA applicants – fell.

In 2005, Yale dean Edward Snyder, then dean of the University of Chicago GSB (now Chicago Booth) told the Financial Times the market had “got the feel of a shakeout”.

Over the intervening nine years a growing number of deans have come to agree, as US business schools built their undergraduate programmes, one-year specialised masters degrees and part-time and online MBAs to help diversify and offset risk. Just this month Richard Lyons, dean of the Haas school at UC Berkeley, told Bloomberg BusinessWeek: “Half of the business schools in this country could be out of business in 10 years – or five.”

Growth of international programmes

As a standalone business with no university to back it up, Thunderbird was always more vulnerable than most in a contracting market. The growth in top-notch European business degrees, which specialise in MBA programmes with a strong international student mix and global perspective on the curriculum – the ground that Thunderbird has always claimed as its own – only compounded the problem.

Even in Thunderbird’s back yard, the US, business schools have become increasingly international in their views. In the ranking of US business schools compiled by US News and World Report, and published earlier this month, Thunderbird lost out to the University of South Carolina in the international business ranking after 18 consecutive years in the top slot.

In spite of this, the acrimonious dispute of claims and counter-claims looks set to continue for several months, with a number of groups – including a second seemingly disenfranchised alumni group, Free Thunderbird – ranged against each other.

In this downward spiral there seems little regard by the alumni for the damaging effect on future student enrolments and on the job prospects of those students that will graduate in 2014. Statistics from Thunderbird submitted to the FT for its Global MBA rankings show the depth of the problem. In 2013 the school enrolled just 143 students on the first year of its MBA – it was double that number just a few years ago. And in 2013 more than a third of graduates – 63 out of 169 – had not found jobs within three months, substantially more than any of the top 50 US MBA programmes.


Thunderbird invites alternative bids for partnership deal


Thunderbird is throwing open its doors to a range of potential partners to try to secure the financial viability of the Arizona business school and to help it develop internationally.

The move follows the decision late last week by the Higher Learning Commission (HLC), the US university accreditation body, to reject Thunderbird’s plans to establish a joint venture with Laureate Education, the for-profit education company. However, Thunderbird president Larry Penley said that Laureate would be welcome to submit a proposal alongside other technology and publishing companies and other universities.

“We’re not working exclusively with Laureate,” says Prof Penley. “We’re open to any number of alternatives.”

One potential alternative could be a proposal from the Thunderbird Independent Alumni Association (TIAA), which has lobbied tirelessly against the Laureate deal. Will Counts, executive director of the TIAA and a 2009 alum, told the FT that alumni would be prepared to stump up the money for such a deal. “There are funds available from hundreds of alumni,” he said. “To be honest, I think [we] could raise whatever it needed.”

The TIAA represents a small but particularly vociferous group of alumni. Others are more circumspect.

“The idea of Thunderbird doing a JV with a for profit education institution is fine by me,” says Adam Nilsen, who graduated from Thunderbird in December. “I even find it quite innovative and refreshing considering the changing landscape of graduate business education. I don’t believe that the overall concept is a problem for most people. Non-profit and for-profit education models both have pros and cons.”

The concern for Mr Nilsen is the choice of partner, he says, adding that he believes this is the issue for most students and alumni that have concerns. “We view Thunderbird as a top tier institution while we view Laureate as a second rate institution.”

Mr Nilsen is still undecided about the Laureate partnership. “There has been an ongoing, open dialogue on campus and I’ve fallen on both sides of the fence a few times,” he says. “I just wish that we could get resources from an equally prestigious partner.”

According to Prof Penley, the school needs $24m to clear its debts. “We’ve got to pay our debts but we have to have the capital to move ahead.”

The decision by the HLC to turn down the Laureate proposal was completely unexpected, says Prof Penley – he was “startled” by the news, he says. “To me higher education at this point needs innovation. To me it [the decision] is inconsistent given the way education is going.

“The divide between a for-profit and a not-for-profit is eroding,” he adds. “In my mind we have to look at the outcomes, not whether the organisation is a for-profit or a not-for-profit company.”

Timescales for negotiations with potential partners are necessarily tight, says Prof Penley. “We must move quickly to remove ambiguity for prospective students and to retain high-quality faculty and staff.”

This article has been updated since initial publication

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