Building Culture in a Hypergrowth Startup

Many of the most recognizable companies in the modern business landscape began as smaller-scale startups – companies that are in the first stages of operations – before becoming household names. Starting and growing a business can be exciting and rewarding, particularly when your company’s innovations and efforts begin to achieve results. 

In some cases, startup companies can experience a period of rapid growth that outpaces the growth rates of other competitors in the industry, which is called hypergrowth. Hypergrowth is the result of sustained and coordinated efforts by cross-functional teams and successful strategic planning. A high-growth startup must be adaptable to remain competitive and navigate any challenges that may arise. 

Rapidly growing companies can also face significant challenges throughout their expansion process. The increased workload and demand for growth can overshadow other important aspects of successfully scaling your business. This is why scaling and building company culture is vital to maintaining a healthy and productive work environment. However, this can be difficult when leading a global team. 

This article will tell you all about hypergrowth companies, the challenges associated with scaling, and how to establish and foster a diverse, equitable, and inclusive (DEI) company culture with optimal employee satisfaction. 

Hypergrowth Startup Overview

The term hypergrowth startup, first used in a Harvard Business Review, usually refers to a newer company or market that experiences a period of quick exponential growth. Generally, companies that maintain an average compound annual growth rate of 40% or higher for more than one consecutive year are considered to be in the hypergrowth phase. 

High-growth startups that meet the compound annual growth rate (CAGR) requirements experience significant increases in revenue, customer base, workforce demand, and market presence. Other notable characteristics of hypergrowth companies include:

• Market disruption
• Global expansion
• Investment and funding
• Agility for adapting to emerging market pressures

Hypergrowth startups that rapidly build a major presence in the industry can become market leaders. Several notable companies, such as Amazon, Uber, Slack, and more have successfully navigated the hypergrowth phase and experienced sustained success. 

Hypergrowth Phases

Achieving hypergrowth can help companies boost revenue and access a wider consumer base. In most cases, innovative companies experiencing rapid growth go through three phases, and each stage typically requires business leaders to adjust the strategic or operational focus of the company. It’s also important to understand that additional factors such as the industry and its ability to scale can impact how a growing company moves through each step. 

Phase One: The Edison Stage

The Edison Stage is the first step that hypergrowth companies will encounter during expansion. Before a company can garner significant market demand from consumers, it must successfully develop a product or offer a service that resonates with the audience. Once developing the product or service, the company must efficiently manage projects. 

Organizations in this stage should be focused primarily on bringing innovative ideas into reality and finding early adopters for your company’s product or service. Businesses in this stage generally have typically not yet entered the mass market. Fostering a workplace culture that values creativity and innovation can help your organization develop a niche. 

This is referred to as the Edison Stage because companies are primarily focused on discovery and invention, similar to Thomas Edison when inventing the lightbulb. 

Phase Two: Model T Stage

After a company has successfully developed a product or other offering, it can enter the market and scale business operations to meet customer demands, which is the next stage of the hypergrowth curve. Companies in this stage should be primarily focused on how to supply a larger consumer base, garner interest from consumers outside the early adopters, and assess the product or service’s market fit. 

During this stage, competition for attention is generally relatively low, meaning companies can easily stand out within an industry or niche market. However, companies must be flexible and make strategic adjustments to advance to the next stages of hypergrowth. 

This stage is referred to as the Model T Stage because companies are taking a product or service that already exists and trying to introduce it to a wider consumer base. This is what Henry Ford initially did to popularize the automobile. 

Phase Three: The P&G Stage

While it can be easy to stand out in a relatively non-competitive market or niche, companies must also plan for how to stand out in a significantly more competitive space. Businesses operating in this stage should primarily be focused on bringing the product or service to a global audience, scaling the product, and developing other useful products or services to support your company’s rapid growth. 

An organization with a global audience has typically differentiated itself from other fast-growing companies and successfully created a brand identity among consumers. 

This is called the P&G Stage, or the Proctor and Gamble Stage, because companies should primarily be focused on investing in the brand and building up name recognition to increase the organization’s market share. A strategy that P&G is famous for.

Why is Company Culture Important?

Company culture is a significant part of any organization and plays a major role in the success of every business. Company culture refers to the shared values, attitudes, practices, and standards that a company implements into its daily activities and expectations. 

Implementing an inclusive and diverse culture that respects all employees can lead to higher levels of employee engagement, improved retention rates for existing talent, increased productivity, and overall performance along with shaping employee behavior. 

Maintaining a cohesive company culture in hypergrowth startups is especially important when building a global team of remote workers, as companies can experience several challenges when communicating with employees. By offering employees the opportunities to learn through blended learning programs, you can purposefully integrate and align the online and in-person components of your rapidly growing company.  

Having a great company culture can help growing companies remain competitive when hiring talent, as roughly 46% of job seekers consider organizational culture when applying to companies. 

Company Culture in Hypergrowth Startups

While all organizations should aim to foster a positive and healthy culture, organizations that are rapidly growing should particularly focus on preserving core values when scaling operations. Hypergrowth can allow companies to build a significant market presence and brand recognition, but the process does not guarantee long-term success, and a range of factors can cause high-growth startups to ultimately fail. 

Companies experiencing hypergrowth tend to prioritize growth and results, which can lead to strategic decisions that negatively impact the organizational culture or fail to address changing market conditions. 

Companies with a defined and healthy culture experience 38% higher revenue growth year-over-year and are 15% more efficient. Understanding some of the risks associated with rapid market growth and scaling operations can help your company improve company culture at each hypergrowth stage. 

Challenges When Scaling Cultural Values

By focusing on expanding the business, companies can face challenges such as cash flow problems and difficulty filling roles with qualified candidates. As a company grows and builds a presence in new markets, it must ensure that core company values remain intact to keep employees satisfied and retain talent while embracing all necessary adjustments. Many global companies may find it difficult to establish a strong company culture filled with inclusive and equitable policies, especially when a company’s need for workers grows exponentially. 

However, a global Employer of Record (EOR) can help you remain compliant and manage the complexities of onboarding and paying your international team, giving you more time and resources to focus on building a positive company culture. 

Cultural Consistency

As a team grows and adds skilled workers from various countries and cultures, business leaders and HR professionals may find it increasingly difficult to maintain a cohesive and consistent set of standard operational practices. 

It can be difficult to ensure that all employees in hypergrowth companies understand how each role contributes to broader strategic or cultural objectives, or what the organization’s expectations are. 

A hypergrowth startup may need to significantly increase its international workforce at a rapid rate to meet its business goals. However, this can dilute some unique aspects of a company’s culture. For example, some companies may have to change core company values to accommodate employees with different cultural norms or practices, which can potentially lead to a loss of the organization’s core identity. Rapidly adding employees to your company can also lead to the risk of cultural drift, referring to the tendency for norms and values to develop over time, and changes in your workforce demographics can influence these changes and contribute to dilution. 

An organization’s leadership must clearly define the company culture and remain committed to fostering a collaborative and consistent environment. Issues with leadership, such as a failure to pivot, lack of focus on core operations or implementing best cultural practices, and recruiting employees who aren’t aligned with company goals, are among the 20 most common reasons startup companies fail. 

Difficulties Managing Global Staff

In addition to challenges in maintaining a consistent culture with a rapidly expanding workforce, companies may find it difficult to manage and coordinate with international workers. This can be particularly challenging for global workers who operate in different time zones or geographic locations, making it difficult to integrate global talent. 

While hiring international workers can give companies a chance to access a wide pool of cost-effective talent, it can also be difficult to communicate important aspects of culture in hypergrowth startups due to cultural differences or language barriers. Certain aspects may also need to be adjusted to accommodate a more diverse workforce and facilitate a more equitable company culture. 

Increased Workloads

Ultimately, the intense workload and lack of emphasis on maintaining employee satisfaction can lead to a higher chance of burnout among your workforce. Burnout is a type of workplace stress due to overworking employees and is generally characterized by mental, physical, and emotional exhaustion. This can lead to employees feeling substantially less satisfied, engaged, and feeling increased negativity or cynicism about the organization. 

Burnout is a particularly salient issue for high-growth companies because retaining talent at this stage can be difficult. Feelings of burnout are one of the most commonly cited reasons for resigning from a job. Roughly 70% of employees would leave their current position due to work-related stress. Decreased employee retention due to intense workloads can also lead to skills gaps in important positions, which can impact productivity and growth opportunities. 

Successfully Scaling Culture in Hypergrowth Companies

Despite the many challenges companies in this stage may experience, developing comprehensive strategies and remaining committed to the organization’s goals can help business leaders successfully scale company culture and improve employee engagement. Implementing certain methods can help your business maintain a company culture that values collaboration, innovation, diversity, and inclusivity. 

Here are some useful methods that can help you maintain your company’s unique culture. 

Integrate Company Values Into Core Operations

To scale company culture effectively, organizations should ensure that all important cultural values are integrated into the day-to-day activities of the company. This allows the company to measure its cultural impact and employee engagement by monitoring specific and observable behaviors. Additionally, defining key performance metrics for diversity, equity, and inclusion strategies can help organizations identify areas for growth. 

Companies can implement important practices or standards in various ways to maintain an open and positive work environment. For example, integrating the most important aspects of company culture throughout the training and onboarding process or emphasizing the importance of values in meetings or interviews can help maintain a more inclusive workplace.  

Find the Right Individuals

Hiring qualified individuals who are aligned with your company’s goals can help you scale operations successfully. Overall, finding the right people for each position is crucial for your organization's sustained success, as it can lead to higher levels of engagement, clearer expectations for employees, and improved retention levels among your workforce. 

Companies should also ensure that leadership roles are filled by professionals who are committed to upholding the company culture. 

Hiring the right leaders who value other team members and communicate organizational expectations can foster a positive and collaborative work environment.

Maintain an open line of communication to facilitate better collaboration among team members and foster a healthy culture. Implementing practices such as encouraging feedback from employees, recognizing individual contributions, or rewarding workers for quality work can also lead to workers feeling valued. Companies should set clear leadership goals to drive professional growth and ensure continued improvement.

Be Adaptable

High-growth companies must be flexible and prepared to pivot in response to rapid changes in the job market or organizational demographics. Creating a company culture that’s adaptable and resilient when challenges arise can help your company navigate any setbacks without negatively impacting employee morale or efficiency. This can also help create an environment where learning and creativity are encouraged at each level. 

Keeping up-to-date with global hiring trends or other industry-related shifts and being able to pivot can help your company remain competitive. Embracing inclusive practices, such as offering remote work opportunities or flexible time off throughout the year, can help keep your global team happy and energized. 

Fostering an adaptable culture in a hypergrowth startup can also help leaders implement feedback quickly, thus reducing the possibility of cultural issues spreading throughout the company through early intervention. 

Invest in Employees

Providing opportunities for your global team to further develop professional skills helps build a healthy company culture in hypergrowth companies. Rewarding hard-working employees with growth opportunities can foster higher levels of engagement and loyalty among your team. 

Additional training or continued education programs can also demonstrate a commitment to an organization’s employees, regardless of the employee’s background or location. This can lead to employees developing a sense of loyalty and feeling more connected with the long-term success of the company. This will improve employee retention and provide the company with a competitive advantage to recruit and retain talent. 

How Can Borderless AI Help?

Borderless AI is the global HR platform for teams with operations worldwide. We help companies onboard, manage, and pay their international team members on one platform.

Unlike other Employer of Record providers, Borderless AI requires zero upfront costs and offers dedicated in-house support, unrivaled customer experience, and AI-powered global employment law resources.

‍Speak with one of our experts today.

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