3 Consequences of Hypergrowth & How to Prepare
Looking to grow the next unicorn? Tips on how to scale effectively abound. But few prepare founders for the practical ways in which hypergrowth changes their role. Careem’s CEO, Mudassir Sheikha, is uniquely poised to give advice on what to expect as your company rapidly scales. Within two years of launching Careem, a mobile-based ride-hailing service in the Middle East, the company was expanding at by 30% each month. In a conversation with Shikhar Ghosh, Sheikha reflects on Careem’s meteoric growth from 2012-2014. As he led the startup through phases of hypergrowth, he identified three common consequences to scaling and developed ways to handle each.
3 Common Consequences of Hypergrowth
- Costs of Mistakes Increase Exponentially
- Culture Begins to Dilute & Decay
- Staff Loses Motivation & Everyone Experiences Burnout
He candidly shares the mistakes he made as the company scaled. Anticipating and responding to each consequence can help you mitigate pitfalls that accompany hypergrowth.
Consequence: Costs of Mistakes Increase Exponentially as You Scale
Why It Matters
During scaling, mistakes become more numerous and costly. This can:
- Unexpectedly reduce your projected cash runway.
- Push founders to tighten control instead of empowering the front line to make decisions.
Impact on Your Cash Runway
In a startup’s early stages, as a founder, you have integrated knowledge of the entire business that allows you to quickly make key decisions. Your comprehensive understanding allows you to instinctively know how a seemingly minor decision made in one function could potentially impact the rest of the business.
Leading a small team, you can recover from mistakes more quickly. Plus, you can embrace mistakes as learning experiences. Rapid growth raises the stakes. Decisions have a significantly higher financial impact—both positive and negative. A poor decision that resulted in a $10,000 loss during your early stages could cost millions when you’re rapidly scaling.
No One Is Scalable
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. You can’t continue to make all decisions in a rapidly scaling venture. No one is scalable.Shikhar Ghosh
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.
What Happened at Careem?
Careem began as a taxi and limousine booking service in the GCC then expanded throughout the culturally diverse Middle East and North Africa (MENA). Initial co-founders Olsson and Sheikha didn’t want to build just a transportation infrastructure in a region that didn’t have good public transport options. They wanted to build an institution that could truly impact the entire region.
Enabling Mobility & Empowering People
They named the company Careem after the Arabic kareem, which means generous.
We wanted to be kareem to our customers, enabling mobility and empowering people.
They also changed the perception of its essential workforce—the drivers who took customers to destinations. Typically, people considered driving as a low-level, unskilled labor. Wanting to elevate the status of drivers to professionals and improve their quality of life, Sheikha and Olsson reclassified drivers as “captains.”
During Careem’s first year, they hired 1,000 captains who serviced 6,000 customers in 4 cities. The quality service delivered by Careem’s captains drove customer demand and led to meteoric growth. During their second year, they expanded service to 8 cities and tripled the number of captains they employed. The number of customers serviced increased 12x. By their third year, Careem’s captains grew from 3,000 to 9,000. Their customer base increased 6x and the number of trips skyrocketed from 250,000 to 2,100,00, as the table below demonstrates.
Doing Everything Yourself Seems Efficient—at First
As Careem added staff at record rates and expanded geographically, Sheikha and 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.” 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. 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, and we’d buy another six months.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.
Doing Everything Yourself Is Unsustainable
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 or 3 a.m.
Working 20 hours a day, 7 days a week, might be more efficient temporarily. But during a hyper-growth phases, adopting an “I can do it all faster” attitude and repeatedly putting off establishing processes ultimately stunts your growth.Shikhar Ghosh
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.
Empowering Others to Make Decisions
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.
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 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.
In short, the mistakes have a greater impact as you scale. What can you do to lessen the consequence?
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 this allows you to focus on supporting your company through this growth rather than attempting to tackle all issues yourself.
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.
Consequence: Culture Gets Diluted and Decays Exponentially
Why it Matters
If you don’t proactively establish your company’s culture in a strategic way that aligns across functions, it can:
- Derail your mission.
- Weaken customer experience.
A well-established culture teaches staff “how we behave, how we work, how we treat each other, and how we talk,” Elyas describes. But transmission of culture doesn’t happen automatically. During hypergrowth it needs to be cultivated and reinforced.
Establishing a strong culture directs staff how to respond to new contexts. It doesn’t provide a set of scripted, procedural instructions, but it informs staff of your underlying mission. This enables them to interpret and respond to different situations. A strong company culture can infuse your team with motivation and focus, helping minimize the ambiguity and chaos that infuses a scaling startup.
Cultural Learning Curve
What makes culture dilute during scaling? Several forces occur simultaneously.
Each new hire has a cultural learning curve. The duration of the curve depends on the environment they came from, their natural alignment with your culture, and the strength of your culture. If you haven’t established some formal mechanism to embed your culture into your organization, inconsistencies will arise. Why?
New employees absorb culture from others. When you start with a small team, employees interact with the founding team regularly. They have the opportunity to observe the founders directly for cues on how to act.
As Staff Increases, So Do Inconsistencies
As staff grows, the founding team becomes less accessible and less involved in all hiring decisions. If your hiring managers, HR, and function leads aren’t fully aligned with your culture, they will model behavior and standards that reflect their past experience. When that happens across departments and teams it can quickly erode your company culture internally. This leads to an inconsistent experience for you customer which can weaken your reputation.
What Happened at Careem?
Careem’s unique culture enabled them to expand into new territory, claim additional markets, and challenge Uber. After 2014, as growth skyrocketed and new employees flowed into Careem, cultivating a company-wide culture presented enormous challenges they didn’t anticipate. Sheikha shared, “We just thought, ‘Get the right people in place, and they will figure out what to do.’” But that didn’t happen.
Newly hired staff came from vastly different backgrounds and different places. While the co-founders aligned on values and agreed on the culture they envisioned for Careem, they lacked a formal process to disseminate a company-wide culture. In retrospect, Sheikha realized, “We didn’t do enough up-front to define the culture that we wanted.”
“We created some values, and we just left it there. We didn’t really define what these values meant or what kind of behaviors we expected.”Mudassir Sheikha
Even though they began adding management layers to respond to growth, new managers often operated units in ways that made sense to them, based on prior experience. As a result, Careem’s culture didn’t reach new employees. Instead, it became increasingly watered down. Careem’s co-founder Abdulla Elyas recalls, “We had five different ways of running Careem, because different leaders were not working in a consistent, coherent way.”
Culture dilution is a common consequence of scaling. Once this begins to happen, how can you get everyone to start following the same script?
Embedding a Culture Code into the Business
At Careem, the co-founders recognized that they needed to create a process to drive consistent behavior. They determined to embed culture in every aspect of the company, so it could spread top-down, bottom-up, and horizontally. That meant they had to significantly shift how they spent their time. As CEO, Sheikha became the company’s beacon for culture which meant that he became actively involved in shaping processes for hiring, onboarding, and employee evaluation. He began by clearly defining Careem’s values—“these are the values that we stand for, this is the culture that we want to build.”
Prioritizing culture will slow you down at the beginning, because it requires some and implementation. But it would have saved us a lot of fires. It would have saved us from a lot more bad hiring decisions.Mudassir Sheikha
Olsson, Sheikha, and Elyas embodied Careem’s values, but the task of implementing a universal culture across the company was daunting. As CEO, Sheikha reluctantly accepted this responsibility, but it required a complete shift in thinking. He explained, “I enjoy driving commercial strategy, getting shit done.” He wanted to let someone else “figure out the H.R. side of it.”
You Can’t Outsource Culture
But that did not happen at the quality and the rigor that should have happened. Establishing culture proved complicated and time-consuming. You can’t outsource culture and expect it to stick.
Ultimately it’s the CEO’s responsibility. Ask yourself, “how do I want my customers to feel? What type of experience do I want them to have?” It’s your job as CEO to figure out how that translates to what staff does in their daily work. And make that real.
You have to start the process and stay involved in the process throughout. Only in that way can you embed culture into every aspect of the organization.Mudassir Sheikha
Creating Universal Values
Sheikha identified universal values that employees could apply in their daily work, regardless of function or geographic location. Each value is part of Careem’s 3 pillars—ambition, service, and ownership—that relate to daily work. All employees receive training on the values and, now, performance evaluations measure the values in tangible ways. For instance, Sheikha adjusted company KPIs from measuring output to input by assessing things like, “How have staff served customers and captains? What initiatives have they taken? What projects have they collaborated on?”
Sheikha recommends viewing employees as internal customers. Essentially, as CEO, you serve people on different teams and different locations.
You need to wow your staff. Because if you wow them, then they will wow your customers.Mudassir Sheikha
In other words, if your employees’ daily experience in your organization doesn’t reflects your company culture, you can’t expect them to deliver an outstanding experience to customers. All of this takes time, he notes. But it’s a worthwhile investment.
Culture dilutes as you scale. What can you do to lessen the consequence?
Shift your focus away from execution
- Define the culture you want to create and describe the attitude and type of behavior that embody that culture.
Incorporate the behaviors that reinforce culture into your company’s processes
- Make sure that recruiting, onboarding and performance management process communicate and reinforce your company’s values. Your staff need to understand how their role aligns with the company’s greater mission.
Empower your managers to make decisions
- Distill your instincts and disseminate your experiential knowledge to management in a systematic way.
Consequence: Staff Loses Motivation and Everyone (including You) Experiences Burnout.
Why it Matters
Rapid growth can disrupt workflows, job responsibilities, and the daily work you and your staff do. This can:
- Generate ongoing ambiguity that provokes stress and causes productivity to drop temporarily.
- Lead to a sense of disconnect and underperformance.
- Cause founder burnout and adversely affect your personal life.
- Prompt a high turnover of staff and perpetuate a negative cycle.
The Pressure to Hire Rapidly
During hypergrowth, you may feel intense pressure to hire quickly. Many founders don’t anticipate that adding new staff in large numbers can create an atmosphere of uneasiness that lasts for several weeks. If your culture isn’t well-established and employees don’t feel connected to the greater vision, they can become dissatisfied and their motivation will drop.
Growth Often Outpaces People
As you scale, it’s especially important to adapt who you hire and to reevaluate the roles of current staff. Scaling changes job needs quickly. Staff who performed brilliantly may begin to fall behind as their role outgrows their skill set. Hiring the wrong people or keeping people in a role that no longer fits carries a high price tag.
Most startup employees expect to work long hours. But if you expect too much for too long, exhaustion sets in. If staff aren’t aligned with your culture, they may begin to feel unmoored. Eventually, morale declines, productivity dips, and your best people may leave. Then, culture gets further diluted.
What Happened at Careem?
In the summer of 2016 the GM in Dubai quit—burned out and completely disillusioned. This forced Sheikha to redouble his focus on people in 3 ways: hiring for culture, shifting values-aligned staff into new roles, and firing staff who didn’t align with the company culture and weren’t invested in Careem’s mission.
Teaching Others to Recruit for Culture
As CEO, he traveled to new territories to educate managers on how to recruit people and evaluate a candidate’s alignment to Careem’s culture. Growing at 30% per month, managers felt real pressure to fill positions. Sheikha acknowledged that often, “we find someone that is amazing, and it’s very tempting to get that person onboard” but experience taught him that hiring for skills is a short term solution. To counteract the pressure managers felt to hire qualified candidates due to pressing staffing needs, Sheikha began to embed cultural alignment into the hiring process.
The Challenges of Dispersing a Universal Culture
The trickiest aspect was translating universal values to myriad locations in the Middle East and North Africa, most of which had profoundly different cultures. Ambition could mean one thing in Careem’s headquarters in Dubai, but it manifest differently in the context of a rural location. Sheikha empowers local managers to interview but is designating people who are “super-aligned with the values” to work with hiring managers throughout the process, asking questions that test for values fit. Having a team of cultural ambassadors ensures consistency in the hiring process. His message:
The next time you interview someone who seems amazing and has outstanding skills, but is not a culture fit, you’re more confident making the call that this person is not the right fit.Mudassir Sheikha
Sustained Rapid Growth Will Outpace You and Your Team
Careem’s co-founders maintained an aggressive growth rate of nearly 30% per month in order to remain competitive in their market.
Product market fit constantly evolving thing. Because you have to be continuously better than someone else with deeper pockets, who can give the same thing that you have at a cheaper price.Mudassir Sheikha
When an organization grows rapidly, individuals may struggle to scale up and “really good people may find that their skills are overtaken by the challenges they face.” When those employees have a good cultural fit, Careem works to retool their skills and retains them.
Balancing Ambition with Other Obligations
The stress bled into their personal lives. At the start of 2012, the co-founders provided customer service 24/7. “We kept phones with us when we were sleeping. So if someone called at 3:00 AM, the phone woke up my wife.” While they did hire a customer service team to answer calls 24/7, the quantity of time they spent on the business did not diminish as they scaled. Sheikha described a scenario that many founders may relate to:
You’re not at home much. You leave at 6:00 AM and come home at midnight. So you’re basically not there when our family is awake. Even when you’re there, you’re not present. You’re not listening to them because you’re constantly thinking of what’s happening in the business.Mudassir Sheikha
In 2014, their spouses reacted and demanded some change. Having learned at Careem the necessity of writing down and disseminating values, Sheikha and Olsson sat down with their wives and created a family contract. “We basically wrote down what we call the boundary conditions, the things that we commit to our wives that we will do on a weekly, monthly basis.”
After signing the documents, the co-founders pledged to hold each other accountable. Sheikha explained, “Our families could raise the flag as well, saying, ‘you guys are not abiding to the contract that you signed with us.’” Unfortunately, the contract didn’t last for more than a few weeks. Careem’s growth rate out scaled its founders and created immense pressure to scramble.
Reinventing yourself and reinventing the way that you do things every few weeks and every few months. That creates a lot of stress.Mudassir Sheikha
Sheikha confessed that he still spends up to 20 hours a day engulfed in work, with no end in sight, because ambition sparks similar cycles of growth. In this case, their wives adjusted their expectations.
On the surface, it may seem like Sheikha’s endeavors to find balance failed. However, the ways in which he spends his time have evolved. He built a capable and driven leadership team that aligns with Careem’s mission. And he shifted his focus away from putting out fires towards cultivating people. In doing so, he established processes and embedded culture into the organization.
Recap: Practical Advice for Founders of Rapidly Scaling Startups
Growing Careem from a small startup to a unicorn in under 6 years, Sheikha learned that focusing on people, especially getting the right people into the right roles, actually drives the business through growth. He underscores
If you just get this right, then this thing will start running like a machine. This thing will start attracting the right people and start putting the right people behind the right rules. This thing will start driving and incentivizing people the right way.Mudassir Sheikha
No founder can possibly mitigate all of the negative consequences of rapid scaling. What are the best ways to adapt to the pressures of hypergrowth as the founder of a scaling startup? For some, resisting the temptation to accelerate growth and make a conscious decision to temporarily slow growth can help.
For Careem and others, slowing growth isn’t an option. As an underdog competing against Uber, opting to slow growth could have caused them to lose their competitive edge.
Greatest Lesson in Growing a Unicorn
If Sheikha had to summarize his greatest lesson in growing a unicorn, it would be:
Stop focusing on your problems. Turn your attention to people.Mudassir Sheikha