An organization’s HR practices refer to those activities that relate to recruitment, development and management of its employees (Wall & Wood, 2005). Over the past decade a link has been established between a specific set of HR practices and organizational performance. HR may be linked to organizational performance because effective practices may develop employee commitment to their jobs and elicit increased employee effort. Different terms are used to describe the effective set of practices including ‘high commitment management’ (Walton, 1985), ‘high involvement management’ (Lawler, 1986) and ‘high performance work systems’ (Appelbaum et al., 2000). High performance work systems (Appelbaum et al. 2000), for example, accord a central position to employee involvement and greater job control (Batt & Appelbaum, 1995; Berg, 1999) providing workers with the opportunity for involvement, greater job satisfaction, and the development of mutual trust between employees and managers. These positive experiences of high performance work systems produce discretionary effort from employees which improves firm performance due to employee satisfaction, perceived fairness, trust and belief that managers are delivering on their promises (Guest 1999, 2003, Sturges et al., 2005). Notwithstanding evidence of links between HR and performance, the ways in which HR practices can improve organizational performance are not well understood. Wall & Wood (2005) suggest three broad improvements that can be made in the HR performance research: (1) more reliable/valid measures of HR practices and using multiple informants; (2) larger samples with better response rates; and (3) using longitudinal research designs. Our study takes these suggestions into account. In addition, we aim to develop theory to explain the link between HR practices and organizational and individual performance. Viewing climate as an intervening variable, we seek to develop, conceptually and empirically, the notion of HR climate as a missing link in the study of human resource management and its affect on performance. That is, our position is that HR practices and policies lead to organizational and employee outcomes through the creation and development of an appropriate HR climate in organization.