This paper attempts to examine the influence of six principal Human Resource (HR) practices—training and development, teamwork, incentives, HR planning, employment security, and performance appraisal—on the relationship between business strategy and firm performance by using data obtained from private banks in the Iranian city, Tabriz. Porter’s generic strategies are used to measure business strategy and balanced scorecard is applied for measuring organizational performance. The results show that there is a close relationship between business strategies and HR practices; HR practices have a positive effect on firm performance; business strategy has a positive effect on organizational performance, and also there is a positive relationship between integrated HR practices and business strategy and firm performance. Therefore, it could be concluded that applying suitable HR practices corresponding to firms’ strategies will result in improving organizational performance.

In today’s unstable and dynamic environment, firm managers should search for performance measures that could illustrate the competitive strategies and progress in quality (Kim and Lim, 1988; Kaplan and Norton, 1996a and 2001; and McNamara et al., 2003). Performance measurement is crucial to align the organization with its objectives in order to meet them (Kaplan and Norton, 1992; Armstrong, 2000; and Atkinson and Epstein, 2000).

For more than a decade scholars have been paying a lot of attention to the relationship between Human Resource Management (HRM) and organizational performance (Guest, 1997; Wood, 1999; Paauwe and Boselie, 2003; Bowen and Ostroff, 2004; and Boselie et al., 2005). Several researchers have recognized the aspects of HR practices and organizational performance within various industries (Huselid, 1995; Delery and Doty, 1996; Youndt et al., 1996; Jayaram et al., 1999; Fields et al., 2000; and Guest et al., 2004). The important role of HR to improve organizational performance is more recognized since the competitors cannot copy them easily and effective human resources can demonstrate a rapid and effective reaction to market demands (Prahalad and Hamel, 1990; Stalk et al., 1992; and Huselid and Becker, 1996).

Management Research Journal, Hypotheses Development, Structure Equation Model (SEM), Influence of HR Practices, Business Strategy, Firm Performance, Banking Industry, Human Resource Management (HRM).