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People & Organizational Performance

Scaling up: How

founder CEOs and
teams can go beyond
aspiration to ascent
November 9, 2022 | Article

By Claudy Jules , Alok Kshirsagar , and Kate Lloyd George

For many start-ups, the challenge is no longer

about securing capital—it’s about learning how
to restructure themselves as fast as their
products or organizations can evolve.

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T
he mystique surrounding public companies like
Alphabet and Amazon and their evolution from innovative
start-ups to brand icons has many executives believing that
there is only one “right” path to growth. But behind these and
other companies’ scale-up success stories is a distinctive set
of organizational capabilities that other founder CEOs may be
able to develop as they move their start-ups from aspiration to
ascent to peak performance.

Through our extensive research and years of experience

working with founder CEOs, we’ve learned a lot about what
the hyperscaling journey entails and how it di!ers from
gradual growth. Here’s what we know about hyperscalers:
they outperform industry peers, remain resilient during
downturns, and maintain strong cash positions. They set the
bar high for corporate performance, and they aren’t afraid to
make bold moves .

But how do they do these things? We’ve pinpointed six

factors that are crucial to the success of companies’ fast-
growth expeditions. Speci"cally, companies need a structure
built especially for product or portfolio growth, e!ective ways
of working, a strong talent development engine, a distinctive
growth culture, leadership capabilities at scale, and an aligned
founder CEO and top team who set clear directions and make
decisions that stick—no second-guessing.

Of course, it’s one thing to target hyperscaling for a product or

organization; it’s another thing entirely to achieve exponential
growth without introducing exponential complexity. In this
article, we’ll explore why hyperscaling is so hard, how the six
essential success factors can expedite the journey, and how
executives might begin their quest. It’s worth remembering
that the primary challenge here for founder CEOs is no longer
just about securing resources—it’s about moving as fast as
their products or organizations can evolve.

Exponential growth without

exponential complexity
Achieving exponential growth without introducing exponential
complexity is often easier said than done. A start-up is usually
a small organization, often founder-led, and reliant on rounds
of funding. The main strategic priority is capturing value
quickly. In expeditionary terms, this is base camp. As start-up
organizations mature, however, what they do (and who does
what) inevitably changes. The product portfolio grows—and
with it, annual recurring revenue. The ascent from base camp
has begun. But the reality is, many start-ups fail to scale up
products successfully. According to our analysis, of those
start-ups that manage to launch and develop a product
successfully, about 80 percent fail to see it through to full
scale-up[ 1 ] (Exhibit 1).

Exhibit 1

The scaling challenge comes not just from the nature of the
company or the products themselves: behind every failed
attempt to turn around an outdated business model, capture
the bene"ts of an important acquisition, or scale a tantalizing
start-up, there is probably some mismanagement of some
aspect of talent, organizational culture, or operating model.[ 2 ]
This is evident from a quick look at the numbers:

Investors have attributed 65 percent of portfolio company

failures to people and organizational issues.

Companies that have operating models that enable

multidirectional growth (outside the core business, for
instance, or in di!erent geographies) are 97 percent more
likely to outperform those that don’t.

Organizations that reallocate talent frequently are more

likely to outperform their peers.[ 3 ]

Putting one foot in front of the

other
The business terrain is tough, with high in#ation, high interest
rates, a tight talent market, and fragile supply chains—and
investors are increasingly demanding pro!table growth. As
founder CEOs set out on their hyperscaling journeys, they will
need to constantly track economic conditions and consider
the company’s strategy, its sources of value creation, and its
tolerance for risk amid changing winds.

“Hyperscalers need an operating model

with fluid elements that allow leaders to
mobilize quickly as new opportunities
emerge, and stable elements that provide
the guardrails for getting things done.”

To hedge against these shifts, scaling organizations should

aim to create a deliberate balance between stability and
dynamism within their operating models (Exhibit 2). That is,
hyperscalers need an operating model with !uid elements
that allow leaders to mobilize quickly as new opportunities
emerge, and stable elements that provide the guardrails and
norms for making decisions and getting things done.

Exhibit 2

Our research and experience show that six factors in

particular are important for achieving this balance and scaling
a product or business up successfully: a structure especially
built for growth, e"ective ways of working, a strong talent
development engine, a distinctive culture, leadership
capabilities at scale, and an aligned founder CEO and top
team that set clear direction (Exhibit 3). We take a closer look
at each below.

Exhibit 3
A structure built specifically for
growth
“We just !led for an IPO, and we are growing very fast: How
should we restructure as we scale?”

Mention org charts and people’s eyes glaze over. But having
an organization that’s speci#cally con#gured to encourage
innovation, creativity, and risk-taking is perhaps the most
critical aspect of successful scale-ups. Founder CEOs and
teams need to change their mindsets from “growth for
funding” to “growth for sustained scale”—and they need to
pivot fast. They will need to reorganize people and processes
around value creation objectives that are changing as quickly
as the markets are.

To that end, founder CEOs may need to rede#ne workforce

size, composition, and shape. They may also need to clarify
roles and responsibilities to support streamlined and
empowered decision making. Leaders at one global #nancial-
services company, for instance, launched a three-stage
program to assess their existing operating model and whether
it would allow for future growth.

Their assessment revealed a revenue expansion opportunity

of more than 350 percent over three years, so the team
developed a #t-for-purpose operating model designed to
capture this value. By embracing both a stable organization
axis that made sense within its industry and the dynamism
required to innovate, the #nancial-services company was able
to forge its trail to hypergrowth.

Effective ways of working

“If we want to accelerate our current 30 percent per annum
growth by 50 percent, how should we think about people,
processes, and culture?”

Business decisions, performance management processes,

and overall governance can seem more manageable for start-
ups, given the typical size and mission of these organizations.
But a scale-up journey can introduce (and sometimes mask)
challenges in all those areas. The company’s strategic
priorities may change. Reporting lines may be altered.
Decisions may take longer. And while start-up teams may
eschew a shift toward more processes, believing it will slow
things down, they may actually #nd it useful to embrace more
good processes longer term. When it comes to governance
and growth, for instance, four core business processes (go-
to-market, product development, operations, and support)
can look very di"erent as companies mature. Early on, start-
ups acquire customers and revenue however they can. As they
mature, however, they must embrace and manage the
complexity of multiple channels, platforms, and partnerships.
Communication among business units and functional leads
can become exponentially more di$cult.
That’s why hyperscaling companies adopt cross-functional
approaches to governance and are clear about the KPIs and
OKRs (objectives and key results) that teams are expected to
achieve. A Chinese #nancial-technology company realized
signi#cant pro#t and loan-under-management growth over a
24-month period after it shifted to cross-functional work
practices—for instance, managing its development process
through scrum teams. In another example, a large consumer-
packaged-goods company mandated weekly leadership-level
planning meetings between sales and operations. Previously,
the sales team had been continually committing to deliver a
product that operations was unable to manufacture, while
ignoring the vast stockpiles of an alternative product. Through
this cross-functional sharing, the company was able to boost
knowledge sharing, identify interdependencies and pain
points, and quickly improve performance.

When it comes to decision making, leaders in hyperscaling

companies are generally clear on several important rules: be
inclusive and gather perspectives from relevant stakeholders
when a decision is on the table, but be clear about who has
the #nal say; there should be no ambiguity on that point.
Likewise, don’t con!ate consensus with inclusion; distinguish
the advisers from the deciders.

A talent development engine

“How do I recruit for jobs that don’t exist yet?”
The talent challenges for hypergrowth companies are the
same as those for everyone else: how to quickly move
candidates through the hiring process (from application to
o"er to onboarding) and how to compete with other
companies in an always tight, ever-changing talent market.
But founder CEOs of start-ups have additional challenges. At
the start-up stage, for instance, it’s natural for the CEO to
want to interview every prospect; at scale-up, this can
become untenable. Similarly, start-ups seeking to scale up
products or business units may #nd that the job candidates
they appeal to now are di"erent from the kinds of candidates
they attracted when they were “the next new thing.” The
company’s culture may change with every new mile covered
on the journey to scale, and candidates’ perceptions of the
start-up’s mission and values may shift as well.

On both dimensions, it’s critical for founder CEOs to clarify the

company’s talent management strategy and its employee
value proposition (EVP). Longer term, they will also need to
create and communicate clear employee development paths.

In reviewing their EVPs, founder CEOs should consider

everything—from roles and titles to team composition to
compensation and bene#ts. One e-commerce start-up with
multiple growth-platform businesses used advanced analytics
to identify which skills it would need to maintain these
platforms and achieve a signi#cant increase in revenue over
the following three years. It used individual employee and
business unit performance data to model di"erent growth
scenarios, and based on the most feasible scenarios, revised
its hiring and training programs and rede#ned key roles and
responsibilities across the organization.

A note about rede#ning roles and responsibilities: as

companies embark on a hyperscaling journey, they should
remember that the formal titles they use at start-up may not
work as well over time. One consumer-packaged-goods start-
up, as an incentive, provided its leaders with executive but
arbitrary titles, like chief creative o$cer and chief brand
o$cer. As the organization grew, however, the question of
who was senior and who was accountable for which functions
and tasks confused executives who were jostling for
promotions. The top performers grew frustrated by the lack of
a clear career path, and the company struggled to retain
talent. One start-up leader we spoke with suggested a simple
skills-oriented approach for successful scale-up: consider the
biggest talent gaps in the organization and solve for those
#rst; the rest will sort itself out.

Another note—this time about team composition: don’t

underestimate the value of diversity. Research shows that
start-ups gain value when not everyone in the company looks
exactly like the founder CEO and top team members.
Ultimately, greater diversity produces better business
outcomes. It’s important for hyperscaling companies to
manage diversity, equity, and inclusion (DEI) with the same
rigor as other elements of strategy—including setting
measurable but bold goals for representation across the
organization. The company’s DEI strategy should be re!ected
in its recruiting, performance management, and compensation
programs as well.

A distinctive culture
In start-ups, culture permeates everything. It’s baked into
every interaction, every design decision, every process step—
intentionally or not. So as companies scale up, so must the
culture. Founder CEOs must acknowledge that the culture
that enabled a start-up’s early success may not cut it during
the next phases of growth. They can use surveys and
benchmarks (industry and internal) or focus groups to get the
information they need to determine which elements of culture
to keep and which to sunset. Above all, founder CEOs should
take care to explain why the company is pursuing
hyperscaling—all the better to engage employees on the
journey and maintain a cohesive culture. They can
communicate the growth mission via town halls with
leadership, in forums on culture and values, and even early on
in employees’ tenures as part of the onboarding process. And
they can reward those employees who live out cultural values
in a number of ways—through #nancial perks, extra days o",
or even a personal thank-you from the CEO.

Scale leadership capabilities

There is a di"erence in the type of leadership required at
start-up versus scale-up phases. In the early days of a
business, there is probably little distance between senior
leadership and the rest of the organization—in fact, the top
team likely comprises much of the company. But as the
company grows, so do the layers of management—thus
requiring an intentional approach to developing leadership
capabilities across the organization.

“As the company grows, so do the layers

of management—thus requiring an
intentional approach to developing
leadership capabilities across the
organization.”

Team sprints can help leaders and teams co-create an

operating model that balances the needs of “growth leaders”
and “operational leaders.” This is especially important as the
number of midlevel managers grows and they begin to take on
di"erent kinds of responsibilities. An online food-delivery
platform in India, for instance, created a leadership
development program targeted at the top 140 members of the
organization. A team built customized leadership journeys for
each person, including 360-degree feedback and one-on-
one coaching to sharpen individuals’ business acumen and
their long-term strategic thinking. Through this program, the
company was able to get agreement among managers at
various levels on priorities for growth, and participants
reported signi#cant personal growth.
An aligned founder CEO and
top team
The founder CEO shouldn’t presume that the entire start-up
team is ready for a hyperscaling journey. The CEO must
engage in clear-eyed, honest conversations with members of
the C-suite and functional leaders and gauge their interest
and capabilities for the expedition. Some may be better o"
remaining at base camp, within their current scope. Likewise,
founder CEOs should be clear about their own role, picking
the decisions to own (for instance, the most mission-critical
choices, or the decisions only they can make) and delegating
everything else.

During the hyperscaling journey, disagreements may emerge

between founder CEOs and their supporters and any
newcomers. For instance, when one consumer conglomerate
acquired a specialty brand, part of the agreement was that the
conglomerate would retain the specialty brand’s independent
board. The board was responsible for protecting the brand’s
environmental, social, and governance e"orts and core values.
The deal was initially successful; sales doubled, and operating
margins tripled. Then several values-related issues came to
the forefront, and the specialty brand sued its new parent
company for violating the brand’s core values.

The founder’s vision should be a catalyst for the start-up’s

scale-up journey—but not its only guiding force. That’s why
it’s important to clarify the ongoing role of the incumbent
CEO; founders often see the company as “their calling” and
have a personal stake in the scale-up process. But that
doesn’t mean their skills still match the evolving business
strategy. Some companies have addressed this dilemma by
establishing a chairman role to which the CEO is typically
appointed, ensuring that the company continues to bene#t
from the founder’s vision. It’s an e"ective option, so long as
the founder CEOs are willing to evolve their role and relinquish
control.

Hyperscaling companies dare to be unreasonable. They set a

course with a clear and audacious vision of why they need to
grow. They have equal parts stability and dynamism in their
operating models, which allow them to #nd, retain, and
develop the right teams, cultures, and processes for scale-up.
They are ready to plant a !ag in the short term—and are able
to navigate whatever challenging terrain lies over the horizon.

1. PitchBook data, April 2021. Based on sample of 3,164 companies with Series A
funding in 2011 to 2013, assuming six to eight years to scale/exit.
2. Claudy Jules, Building Better Organizations: How to Fuel Growth and Lead in a
Digital Era, Oakland, CA: Berrett-Koehler Publishers, 2022.
3. Noam Wasserman, The Founder’s Dilemmas: Anticipating and Avoiding the
Pitfalls That Can Sink a Startup, Princeton, NJ: Princeton University Press,
2013; Arzu Tekir, “Culture matters: How great startups will thrive in 2020,”
Forbes, February 11, 2022; Elizabeth Foote, Bryan Hancock, Barbara Je"ery,
and Rob Malan, “The key role of dynamic talent allocation in shaping the future
of work,” McKinsey, September 1, 2021; Mike Barriere, Miriam Owens, and
Sarah Pobereskin, “Linking talent to value,” McKinsey Quarterly, April 12, 2018.