Spout the oft-touted maxim "the customer is always right" and Josiah Humphrey and Mark McDonald may shake their heads. The co-CEOs and founders of the app development company Appster run their company with an entirely different philosophy: Employees first, customers second. The 150-person, three-year-old Australian company now has operations in San Francisco, Melbourne and India and is growing like crazy with 50 new hires in the works by the end of 2014 with another hundred planned for early next year. Its biggest bottleneck: Finding the rare kind of talent willing to put in long hours for the opportunity to do challenging work with startups that may end up being the next Facebook.

As evidence their strategy is solid, Humphrey cites a popular article at Harvard Business Review that shows the linkages between employee satisfaction and customer satisfaction and ultimately, profitability. In essence, research has shown happy employees do better work that results in loyal customers and revenue growth. "We really try to do everything we can to keep our customers happy but we think that's done by first making sure that the staff absolutely love what they do," he says.

Here's more of the duo's rationale for putting employees before customers.

Your internal culture is the same thing as your brand.

While you can try to control how your brand is perceived through positioning, customers will always believe what insiders say about a company's culture. "You wouldn't believe how many projects we've won purely because people have gone on Glassdoor and seen what actual employees say about the business," McDonald says. "Companies can fake testimonials, they can get Facebook likes but the one thing they can't fake is how happy their employees are with the business and that's a huge thing."

You can't control everything your employees do.

Fifty years ago company management could make a bunch of rules and put in place processes to develop a system wherein failure wasn't an option. Today, technology has made the dynamics of work more complex. A disgruntled Appster developer, for example, could write bugs into a client's software. "So our attitude from day one has been delight employees and they'll delight customers," McDonald says. "They'll find ways around the systems you have internally, they'll figure out how to keep customers happy and they'll do the right thing by your business."

Your company might bump into a former employee later down the road.

McDonald says the degrees of separation within a particular industry are getting smaller and someone who once worked for your company could end up being a decision maker who gives the green or red light to another company buying your products or services. "You don't want to burn that relationship or bridge," he says. "In many cases we've actually helped people that have decided to leave the business get other jobs and dedicated part of our HR function to going out and building relationships and giving referrals."

Employee referrals are huge.

Finding good talent is a major hurdle for any tech startup, but you need to remember that your incredible salesperson or developer probably knows at least a handful of other incredible salespeople or developers. "Referring someone into a job is much more than recommending a movie or recommending a favorite restaurant," McDonald says. "You're really helping someone make a life decision. So in order to scale as quickly as we are, we are really dependent on employee referrals."

Customers are not always right.

In fact, Appster wants its employees to challenge customers because blind implementation doesn't lead to stellar innovation.

Happy employees will proactively solve problems.

With rapid growth comes an amount of chaos. "No matter how experienced your executives, no matter how great your team is, there are going to be issues. Things happen," McDonald says. "If you have a strong employee-centric community as well as culture, you notice employees actually take the initiative to go and fix problems before they get escalated."

Published on: Nov 18, 2014