Thunderbird: A Case Study In Organizational Decline
To Larry Penley, the president of the Thunderbird School of Global Management, the deal is pretty much a no-brainer. With the school’s 2012 fiscal budget $4 million in the red, he has agreed to sell the Arizona campus to a for-profit education company in exchange for sorely needed cash that would allow the business school to survive.
But to many alumni and several board members, the partnership with Laureate Education Inc. is nothing less than a sell out. At least two board members have resigned in protest and nearly 2,000 of the school’s alumni have signed a petition contending that the agreement with Laureate Education Inc. would “cheapen the value of the (Thunderbird) degree.”
Penley, who only took over the job as president last November, believes their concerns are understandable yet invalid. “That intimate nostalgia for what we experience causes us to be resistant to change,” added Penley. “And then the bias that Americans especially have because of what’s been discovered about for-profits causes resistance. However, the facts don’t line up with Laureate behaving like these other for-profits.”
EVIDENCE OF WANING INTEREST IN THE MBA OR SELF-INFLICTED TROUBLE?
Many enraged alums, however, aren’t buying it. “This is the end of Thunderbird as we have known it,” wrote Merle Hinrich, a director and alumnus, in his resignation letter. “The Laureate transaction is a tragedy for Thunderbird and a total windfall for Laureate.” Thomas Greer Jr., another board member who resigned, called the decision to sell Laureate a campus built with tuition funds and donations “unconscionable.” Greer vowed to no longer contribute either his time or his money to the school.
Some observers say the deal is evidence of waning interest in the MBA degree. In fact, many of the institution’s troubles have been long lasting and self-inflicted, making it a quintessential case study in organizational decline. The new partnership reflects years of deterioration due to increased competition from rivals, lackluster fundraising, insufficient resources devoted to getting jobs for students, and overly generous compensation for some of its faculty.
The school’s endowment, which in recent years has been below $20 million, is meager compared to many of its business school competitors. It didn’t help that a $60 million naming gift, at the time in 2004 the largest pledge ever made to a business school, never fully materialized.
ONE PROFESSOR AT THUNDERBIRD IS MAKING MORE THAN $700,000 A YEAR
Yet, even though the school lacks a significant endowment, several of its professors have been paid extraordinarily well. Kannan Ramaswamy, a global strategy professor who teaches in Thunderbird’s executive education programs, had a total compensation package with benefits of $700,096 in fiscal 2011. That is munificent pay for an academic who is not known as a superstar outside his school in Glendale, Arizona. It even exceeded the total pay of then Thunderbird President Angel Cabrera whose compensation totaled $584,749, a sum that included a housing and auto allowance and a country club membership. The Thunderbird academic, for that matter, makes even more than Harvard Business School Dean Nitin Nohria whose compensation package came to $662,054 in 2011.
While Ramaswamy is the highest paid employee at Thunderbird, according to the school’s government filings, he is hardly alone in being so highly compensated. Andrew Inkpen, another global strategy professor, was paid $565,457 with benefits in the same year. Graham Rankine, an associate professor of accounting, was paid $492,908. The compensation for three other faculty members—Robert Hisrich, a professor of global entrepreneurship; William Youngdahl, associate professor of operations management, and Mansour Javidan, dean of research—all easily topped $400,000 a year.
It’s not unusual for world class faculty to be paid so generously, but the most highly compensated business school professors tend to be more widely known and publicly visible figures at universities that can afford them—not at a troubled school that has been in a long-term fight for its very survival. Indeed, the compensation of the top ten most highly paid professors at Thunderbird–$4.3 million in all–exceeded the school’s $4 million deficit last year (see The $4.3 Million Bunch At Thunderbird).
The school’s full-time MBA enrollment has been steadily declining for years, falling to just 380 from more than 1,500 in 1990. Last fall, its entering class totaled only 140 students. The placement stats for last year’s graduating class, meantime, were among the worst reported by any business school in the U.S. Some 76.1% of Thunderbird’s Class of 2012 were without jobs at commencement.