Managing the Pressures of Rapid Scaling

The characteristics that make founders successful when starting a venture can become liabilities as a business begins to rapidly scale. Visionary thinking and continuing to carry out work yourself can hinder your startup’s capacity for long-term growth. The co-founders of Careem, a mobile-based ride-hailing service that became one of the first unicorns in the Middle East, learned this the hard way. During its first two years, Careem grew at an unprecedented rate of 30% per month. The company now operates in hundreds of cities and, in 2019, was acquired by Uber. But navigating the pressures of scaling quickly wasn’t straightforward or easy. In an interview with Shikhar Ghosh, Careem’s co-founders Mudassir Sheikha, Magnus Olsson, and Abdulla Elyas reflect on their meteoric growth from 2012-2014. Reflecting on the mistakes they made, they identify the consequences of rapid scaling. They offer practical advice for managing the pressures of rapid scaling to other founders. Anticipating and responding to each consequence can help you mitigate pitfalls that you’ll encounter as you scale.

4 Actions to Help Founders Manage the Pressures of Rapid Scaling

  1. Resist the Pressure to Do Everything Yourself
  2. Recognize that Short Term Solutions Create Long Term Process Problems
  3. Consider Adding a Co-Founder
  4. Plan for Reduced Efficiency during Hypergrowth

Resist the Pressure  to Do Everything

As Careem added staff at record rates and expanded geographically, Mudassir Sheikha and Magnus Olsson felt pressured to make decisions quickly and thus maintained the roles they held in the company’s early stages. For instance, they continued to do work—like answering service calls in the middle of the night and paying bills—and make all major decisions. While they intended to delegate some tasks and decision-making, when moving at such a fast pace, it seemed quicker and more efficient for them to continue doing the work themselves. Olsson shared.

“You can tell people what you want, but it is harder to specify how it should be done.”

Magnus Olsson

Sometimes, they worked through the night to fix the operational problems related to billing and dispatch. They were so focused on doing the work, operational processes lagged behind. And that began to yield mistakes and negative consequences. In functions that had some processes in place—like finance and HR—breakages occurred that the founders had to fix as they scaled. It was a never-ending process, like patching a dam, Sheikha explained.

“As a fire erupted we solved it. We would only patch things and buy six months. Then things would break again and we would buy another six months. Things would break again.”

 Mudassir Sheikha

By 2014, Careem had grown too big for the founders to direct every decision, but it hadn’t matured enough to operate without their intimate involvement in day-to-day operations. Lack of processes caused operational mistakes to occur more frequently. At one point, an employee noticed that an error resulted in a failure to bill any of Careem’s rides. Another time, no one remembered to pay Careem’s telecom bill, which resulted in the shut-down of their servers.

Recognize That Short Term Solutions   Create Long Term Process Problems

Doing the work themselves and fixing processes only when things broke offered a faster and less costly solution in the short term. But that resulted in creating “a lot of skeletons” that, Sheikha recalls, “we had to go back and fix.” The cycle affected their personal lives as well. Both co-founders continued to remain on-call 24/7, literally responding to customer support calls at 2:00 or 3:00 AM.

Working 20 hours a day, seven days a week, might be more efficient temporarily. But during a hyper-growth phase, adopting an “I can do it all faster” attitude and repeatedly putting off establishing processes ultimately stunts your growth.

If you lack processes, routine tasks, like paying bills, can fall through the cracks and create potentially serious problems that multiply as you scale. Eventually, you won’t be able to keep up because you are not scalable.

When Careem operated in a smaller urban market and had fewer drivers, Sheikha understood how offering incentives to drivers and customer discounts would impact the business financially. If he underestimated the total cost that an incentive or discount could have, the impact of that mistake remained relatively low.

As Careem’s driver and customer bases grew, locally-initiated incentives mushroomed. Since newly hired managers lacked the co-founders’ comprehensive company knowledge, mistakes grew proportionally. They began to impact Careem’s overall financial health.

Reacting to the cost of mistakes, Sheikha and Olsson—like most founders—initially remained heavily involved in making most decisions. But by 2014, as they expanded throughout MENA, they could not effectively make all decisions. As a result, they had to hire management layers to run operations in different countries.

Consider Adding a Co-Founder

Careem needed a strong position in the Saudi market in order to continue expanding, raising capital, and competing with Uber. Since neither Olsson nor Sheikha spoke Arabic or had a connection to local authorities, they recruited Abdulla Elyas, an entrepreneur in Saudi Arabia who had complementary tech skills and deep knowledge of local Saudi markets.

Instead of hiring him as a part of the executive management team, they designated him as a co-founder. The decision communicated—internally and externally—that Careem respected the local cultural differences that existed in the MENA. Likewise, by creating a structure that allowed for some local autonomy, it validated the company’s values.

Plan for Reduced Efficiency during Hypergrowth

Mistakes have a greater impact as you scale. How can you minimize the consequences? Plan for mistakes and reduced efficiency during hypergrowth. Growth will impact your financial, operational, and hiring plans. Many founders assume that scaling occurs on a steady linear path. In reality, most businesses experience a phase of inefficiency as new people join and processes are created. Planning for a temporary decline in productivity as you scale shifts your role as founder. It enables you to support your company through periods of growth rather than attempting to tackle all issues yourself.

Empower Others to Make Decisions

Resist the temptation of doing it all yourself and proactively establish processes for things you’ve done intuitively. As a founder, you have the most comprehensive knowledge of your business. In the short term, it costs less time, money and resources, for you to continue to make decisions and execute tasks. But you are not scalable. What worked before cannot continue to work in perpetuity. You must establish ways to share your integrated knowledge of business with employees or you will impair your growth.

Because mistakes can have a catastrophic financial impact, most founders react by continuing to make all major decisions. In the short term, that approach works—it’s logical and expedient for the person with the most knowledge to make decisions. But that approach can’t be sustained, especially if you intend to grow beyond your current market.

No founder, regardless of how visionary, can retain all knowledge and continue to make all decisions in a rapidly scaling venture. No one is scalable.

It feels counterintuitive but, as you scale, you need to share your expertise and allow front-line managers to make decisions. That means as a founder, you must establish communication processes and frameworks or generalizable rules.

Shikhar Ghosh

Posted by Shikhar Ghosh

Shikhar Ghosh is a serial entrepreneur, angel investor, and Professor of Management Practice at HBS. Named one of the "Best Entrepreneurs in the US," by Businessweek, Ghosh has led some most innovative tech-based companies in the US and advised hundreds of entrepreneurs.