The Effect of Business Strategies and HRM Policies on Organizational Performance: The Greek Experience ANASTASIA A. KATOU AND PAWAN S. BUDHWAR This article investigates the relationship between si- multaneity in decisions regarding business strategies and human resource management (HRM) policies and their impact on organizational performance. The research is based on a sample of 178 organi- zations operating in the Greek manufacturing sec- tor. The results of this study support the hypothe- sis that when business strategies and HRM policies are developed simultaneously, they positively affect organizational performance. This is more valid for decisions taken simultaneously with respect to qual- ity and employee development, innovation and em- ployee rewards and relations, and cost and employee resourcing. © 2008 Wiley Periodicals, Inc. In explaining the significance of human resources to organizational performance, the majority of work in strategic human resource management (HRM) has adopted the “resource-based” view of the firm, which sees an organization as gaining a compet- itive advantage from the resources it possesses. The organization gains a competitive advantage from the human resources that it attracts and re- tains. Within this view, HRM policies are usually grouped into two HRM systems of internally con- sistent HRM policies: the system of HRM policies aiming at attracting human resources and the sys- tem of HRM policies aiming at retaining human resources. Furthermore, because the ability to gain and retain competitive advantage is crucial to an organization’s growth and prosperity, business strategies are usu- ally grouped into three internally consistent systems: the system of cost leadership, aiming at producing a product or service at less expense than its competi- tors, the system of innovation, aiming at making the organization the unique producer, and the system of quality, aiming at delivering high-quality goods and services to customers. The existing literature highlights the developments of many models investigating the relationship be- tween HRM policies and business strategies, and organizational performance. Three types of models are usually cited in the literature: universalistic, contingency, and configurational. The universalistic model advocates independence, supporting the idea that business strategies and HRM policies are mutually independent in determining business performance. The contingency model advocates sequence, supporting the idea that business strate- gies are followed by HRM policies in determining business performance. The configurational model advocates interrelation, supporting the idea that business strategies are interrelated with HRM poli- cies in determining business performance. However, some authors argue that it is not the inde- pendence, sequence, or interrelation of HRM poli- cies and business strategies that matters; rather, an ideal model should develop business strategies and HRM policies in a holistic manner and not sepa- rately. In this view, instead of referring to business strategies and HRM policies separately, we should refer to organizational strategies that fully integrate both business and HRM strategies. In other words, when an organizational strategy is developed, the HRM policy dimensions are also simultaneously developed. 40 c  2008 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com) Global Business and Organizational Excellence • DOI: 10.1002/joe.20235 • September/October 2008