As alumni and a handful of board members of the Thunderbird School of Global Management protest the independent institution’s pending alliance with the for-profit company Laureate Education Inc., top leaders of the Arizona-based business school are trying to counter the dissent by painting a clearer picture of just how badly the struggling institution needs a boost.
Five trustees have bolted from Thunderbird since the $66-million deal was announced, in March, saying the relationship with Laureate will damage the business school’s brand and erode academic quality. The move is pending approval by the school’s accreditor, the Higher Learning Commission of the North Central Association of Colleges and Schools, in October.
But Thunderbird’s president, Larry E. Penley, and Laureate’s chief executive officer, Douglas L. Becker, said in interviews this week that the deal would put the school on a faster track to growth and would give it greater autonomy than would a partnership with another nonprofit college.
Alumni concerns that a deal with his company would hurt Thunderbird’s name are misguided, Mr. Becker said, especially as the free-standing business school had already seen fund-raising declines, a $4-million budget deficit, and drops in the rankings. “What I have not heard from [critics] is what is their thoughtful and cogent plan to have the school thrive against the challenges higher education faces at this point,” Mr. Becker said.
“They fell out of the Financial Times Top 100 [global M.B.A. programs] on their own, not because they’re not good but because they don’t have the resources necessary to keep those high rankings,” he said. “Now they will have the resources necessary to climb back up in the rankings.”
‘Need the Additional Capital’
Negotiations between the two organizations—and the subsequent outcry—spotlight the tough terrain for a cash-strapped business school that’s trying to compete in an age when many colleges have international outposts and program expansions.
Laureate, a private company that operates a network of about 70 universities in 29 countries and says it takes in about $4-billion a year in revenue, now provides those opportunities for Thunderbird, Mr. Becker said. It provided instant relief from the $25-million that Thunderbird owed JPMorgan Chase, Mr. Becker said. The Wall Street Journal also reported that Thunderbird would see a $100-million operating surplus over the next decade.
The school will get $53-million from a sale-leaseback of its campus and $13-million to start up online and undergraduate programs, as well as open classrooms in Europe and Latin America, including M.B.A. programs in Paris, Madrid, Brazil, and Chile. And the deal will allow Thunderbird to use some of Laureate’s international instructional sites and provide resources for it to develop an undergraduate business program.
“In business education, you can’t just keep doing the same thing,” said Mr. Penley. “To develop new programs and improve quality of student services, you really need the additional capital to do that.”
Taming Opposition
Critics among Thunderbird’s alumni and board members say the institution’s agreement to join forces with the for-profit company is a rotten deal.
“This is the end of Thunderbird as we have known it,” Merle A. Hinrich, an alumnus, wrote in his letter of resignation from the board. “The Laureate transaction is a tragedy for Thunderbird and a total windfall for Laureate.”
A Change.org petition opposing the alliance cites reports by Congress criticizing the for-profit higher-education sector for misleading marketing practices and high dropout rates, and asserts that associating with a company in that sector “will cause permanent and irreparable harm to the Thunderbird brand, ranking, and academic reputation.”
The petition also takes issue with what it calls a lack of transparency by Thunderbird’s Board of Trustees, charging that the body did not consult enough alumni before deciding to go ahead with the partnership.
Meanwhile, Thunderbird has tried to tame the discontent and the wave of negative publicity. Other Thunderbird alumni, faculty members, and former presidents have announced on the school’s Web site that they back the move. Sam Garvin, an alumnus and owner of the Phoenix Suns basketball team, also announced his support. He pledged $60-million to the school a decade ago.
‘PR Strategy in Place’
Rebecca Hendriksen, vice president for enrollment and student-services management, wrote a letter to alumni asking them to help combat the “negative and sometimes inaccurate information” that critics are spreading. “Being No. 1 at anything tends to make you a target, but I want to assure you that our communications department has a comprehensive PR strategy in place,” she wrote.
Within five to seven years, Thunderbird expects to enroll 3,000 to 5,000 students—a major increase at a school that received just 417 applications to its two-year, full-time M.B.A. program this year. Mr. Penley, Thunderbird’s president, said that would probably mean hiring more adjuncts, though he added, “All business schools I know of have shifted to rely more heavily on graduate students and adjuncts.”
Mr. Becker also pointed to Laureate’s relationship with the University of Liverpool as evidence that Thunderbird would not see its academic quality diminish. Laureate helps Liverpool deliver online programs and develop degree-granting programs in China but doesn’t interfere with academic decisions, Mr. Becker said. Thunderbird is the only nonprofit among Laureate’s education partners based in the United States.
“To me, Liverpool is a perfect example of why the project can succeed,” he said.
A Financial Hail Mary
The partnership and surrounding controversy have caused some to wonder: What exactly went wrong for this former titan of business schools that made a name for itself as one of the first to push global education during the late 1980s?
A top official at another of Thunderbird’s accreditors said the trouble could have been avoided if the school had displayed more business acumen earlier. John J. Fernandes, president and chief executive officer of AACSB International: the Association to Advance Collegiate Schools of Business, said in an interview that Thunderbird’s decline stemmed from a failure to “look in the rearview mirror.”
As other business schools proliferated around the globe, Thunderbird failed to keep up and differentiate itself. Thunderbird should have started up an undergraduate program and cut costs many years ago, Mr. Fernandes said.
“Next thing you know, you’re in the soup,” he said. “It’s too late. That’s what happened at Thunderbird.”
‘They Chose Money’
The struggles and the latest move are surprising because business schools typically are considered cash cows, said Douglas Viehland, executive director of the Accreditation Council for Business Schools and Programs. Thunderbird, which Businessweek ranks 45th among full-time M.B.A. programs, also carried a big name in the business-school world because of its early recognition of the importance of international business education.
Mr. Fernandes said business-school mergers would happen more frequently as resource constraints like state budget cuts threatened more colleges, “but I don’t think it’ll be en masse because there’s not that many buyers,” he said.
Thunderbird had shopped for other partners, The Wall Street Journal reported, including Arizona State University and Middlebury College. But in the end, it went with the Laureate deal, leaving other potential suitors rankled.
Michael M. Crow, Arizona State’s president, said in an e-mail that the university had negotiated with Thunderbird for months, offering an academic alliance “that would have produced a positive financial outcome and maintained academic legacy and mission.”
“They chose money,” he said.
Mr. Penley said that Laureate was the only potential partner that would allow Thunderbird to sustain both its financial health and its brand. Thunderbird could also have become another global campus of Hult International Business School, another prospective partner, The Wall Street Journal reported.
Laureate, by contrast, would allow Thunderbird to keep its brand and would give it complete control over faculty appointments, curricula, and admissions standards, Mr. Becker said. That combination made the move much easier as higher-education competition intensifies, Mr. Penley and Mr. Becker said.
“It’s hard to imagine,” Mr. Becker said, “that the next 10 years would be any kinder to a free-standing small school of business than the last 10 years.”
