This study explores the relationship between HRM (human resource management) systems and performance using data from 192 manufacturing companies operating in Pakistan. This study examines this relationship in two ways: direct impact of HRM systems on performance and indirect impact or effect of HRM systems on performance through HR outcomes. The HRM systems include the practices of participative leadership, job security and training and development. The results of regression analysis suggest that the individual HRM practices impact the performance significantly in isolation but these direct effects are insignificant when HR outcomes mediate the relation between HRM systems and performance. The configuration of HRM practices showed a significant impact on performance. These impacts are more profound when management uses HRM practices to elicit the employee's attitudes/behaviors in terms of job satisfaction and work motivation. The results of structural equation modeling also suggest the prediction that the HRM systems impact performance more significantly through HR outcomes. Hence the study emphasizes the systematic and integrated use of behavior oriented HRM practices in order to achieve competitive advantage.