From the editor: Thunderbird strategy rejected

The plight of Thunderbird will be watched closely by other US business schools

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.

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