Big Red Synergies?

Debates over corporate scope–synergies v. focus–have become staples of the business pages. Activist investors keep turning up, demanding greater business focus and less sprawl across industries and activities. Management teams either acquiesce (Xerox, HP, DuPont-Dow) or resist, following their passion for synergy-seeking (Agrium, Siemens, Yahoo). Now we have an interesting meta-case of a university seeking greater synergy in business education, as Cornell’s top management group–president, provost, and board of trustees–forces a merger of the School of Hotel Administration, the Dyson School of Applied Economics and Management, and the Johnson School of Business into a new and improved College of Business.

There are only two problems with this merger: Process and substance. The action was admittedly taken without consultation with alumni or faculty and announced as a fait accompli. Some of the alumni of the Hotel school (among whom are a few large donors) and of the Dyson school are hopping mad about having their degrees and identity dissolved into a pool with the far less successful Johnson School. Faculty are reported to be equally disturbed at this change.

Substantively, the merger has only the weakest of rationales: Each school is to be kept as a separate unit with its own dean, its own control over curriculum and admissions, and a mandate to keep its own “identity and mission.” So why bother to “merge” them? How’s this for an explanation:

“For a top-tier university like Cornell, an outstanding and integrated business program … is necessary for success,” they wrote. “Students and faculty need to engage with the economy and business, as well as collaborate with other disciplines.”

If they just want to run some interdisciplinary programs, adding a new bureaucratic layer at the College level with its own dean, staff, etc. seems wasteful. If they plan to save substantial money by using shared staff while maintaining separate curriculum, admissions, PR, and development processes, one can only inquire as to the color of the sky on their planet. The dark suspicion of many Hotel and Dyson constituencies is that this is an attempt to help Johnson by yoking it to its more-successful brethren while dragging them down via brand dilution.

Ah, synergy! Base impersonation and flights of fancy oft becloud thine honest virtue!

4 Comments on “Big Red Synergies?”

  1. Dead-on, Steve. Cornell has needlessly affirmed the long tradition of circular firing squads in academe. The phrase ‘synergy in business education’ reminds me of “If you like your doctor, you can keep your doctor. Period.” And synergy should be spelled sinergy. In more than 35 years as a business professional, I’ve seen the real thing–synergy–exactly one (1) time. In M&A, synergy is a substitute for “we decided to overpay and waste the shareholders’ money.”

  2. aijaleiponen says:

    Here is an actual Dyson perspective. Faculty in the business disciplines at each school are trying to replicate the “mini-B-school” form but each group is too small alone to attract top faculty. Students are having trouble getting into classes in the other schools due to irrational rulemaking. Competing service courses are offered in the schools to grab tuition dollars, all the while faculty still need to teach multiple preps within their schools rather than offer sections in the other schools. Faculty groups don’t play ball across units and fail to cooperate even when all would benefit in the long run. None of the schools is really a major player in business (ag and hospitality yes). What would you do to fix this? Coordination doesn’t exactly seem to emerge on its own in a turf war.

    • stevepostrel says:

      Thanks for the perspective.

      If the issue is a lack of scale economies at the discipline level along with needless teaching-prep duplication, then the merger sounds like weak tea unless the promises of sustained autonomy for each constituent part are lies. That would mean curriculum would be centrally decided, e.g. one accounting course, one econometrics and stats class, etc.–a “common core” if you will.

      As you suggest, the traditional setup has Cornell as a major payer in hospitality and ag but struggling to make an impression in general business education. That is pretty much what my thesis in this post was–the reorg is potentially sacrificing advantage/reputation in hospitality and ag in order to try to catch up in the B-school wars. The two key questions are: Can the pure-B part be improved this way without sacrificing prominence long-term in Cornell’s current areas of strength? And is it a good idea to make a bigger bet on general business education at a time when the trend in the U.S. is for specialized programs’ growth rather than traditional MBAs? I don’t know the answers but those are probably the questions being asked by opponents of this move.

      • aijaleiponen says:

        I think this indeed comes down to a fundamental strategy/organization question of whether it’s possible to benefit from partial integration while “not killing the goose”. I believe Oliver Williamson had a word or two about such “selective intervention”, so we’ll see.

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