Thunderbird: A Case Study In Organizational Decline

by Taylor Ellis on


The Thunderbird campus in Glendale, Arizona

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.”


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.


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.

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  • Old T-bird

    While I appreciate many of the intelligent postings on here, I continue to be amazed at the people who repeatedly post rather rude and even “hater” type comments. Why must you be so angry and hateful? Can’t you post a civilized comment without attacking another school or the students? How sad for you. Posting your opinions (even critical opinions) can be done in a way that is civilized and not so rude and disrespectful. Many of you who write these hateful comments say you are from top schools, but you do your school and yourselves a discredit by your attitude of hate and snobbery. The mark of great people and civilizations are tolerance, acceptance, understanding and appreciation for differences including choice of business schools.

  • guest who is tired of bashing

    it’s good to know that snobs like you are still around in the world. If you are a representative of schools like Wharton or Haas then I wouldn’t want to be a part of your school or alumni and would shun it like I’d shun a leper’s colony. Did you even go to one of the top MBA schools or are you just a bitter complainer who likes to bring everyone down? If you can’t say anything nice, maybe you should shut your mouth.

  • m7sympathetictotbird

    I attend an m7 on a scholarship, was admitted to multiple top schools, have a Wall St job offer, and I can say that while I didn’t apply to Thunderbird, more than one close, well-respected adviser (people with income streams several multiples of mine, more experience, with strong educational and corporate brands on their resumes) recommended I consider T-Bird. I’m fond of the school, though I didn’t think it was right for me. Let me explain: I think that T-Bird, overall, is a different value proposition. If you are a top 15 kind of candidate i.e. 3-6 years of strong work experience, you have a track record that showcases intellectual ability and professional aggressiveness, etc, then T-Bird won’t serve your needs. However, there are plenty other able people out there who can be well-served by T-Bird. I have clever friends who went to T-Bird, and what they shared were smarts (explicitly, some very solid GMATs), ability to speak more than one language (they’d be in the minority in the m7), and usually coming from a completely non-business academic and professional background. They were trying to get their first bits of exposure to international business and in that sense, T-Bird was a good platform for them to do it. Not all, but plenty of these folks end up having great careers later on. And in that sense, I think it’s awful that 1. it’s getting shat on so much and 2. the school has been so awfully mismanaged.

  • Michael Flannery

    One would hope that these over-paid, non-performing, global nobodies would have the good grace to pocket their ill-earned salaries and disappear. These are parasites who have drained Thunderbird of its financial and moral capital. Mssrs. Penley, Ramaswamy and co., kindly take your hats off the nail and head for the hills. You’ve done enough (possibly irredeeable) damage to our Alma Mater. For you to linger is embarassing to all of us.

    You, and the inept, vastly-overpaid former president, have compromised a unique educational institution with your shallow posturing. Sadly,none of you ever grasped what Thunderbird is all about – thus waffled on about global greatness, while engineering a fire-sale. Shame on you!

    A bitter member of the
    Class of ’66

  • Bill Mullane

    You hit the nail on the head my friend. The year and a half I spent at Tbird in the mid 80’s was the best. Living and learning among students with such high AQs (adventure quotient) led to memorable experiences and lifelong friendships around the world.

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