Benchmarking has become increasingly important as organizations strive for better performance. For many, this means observing, adapting and reapplying best practice from others within the same sector, which can lead to a convergence of competitive positioning as they strive to do the same things better. To increase competitiveness, improvement activities should be innovative and release the full potential of all employees. This paper results from a review of the literature relating to operational effectiveness, benchmarking and the role of strategic human resource management (SHRM). It examines the relationship between HR strategy and the practices and performance of service sector organizations. The analysis draws on empirical data from research, which benchmarked the practices and performance of over 800 manufacturing and service sector organizations. Underpinning the analysis is the argument that for some, HRM has completed the transformation from reactive 'doer' to proactive strategic facilitator (Tamkin et al., 1998), and in successful organizations HR strategies are about making business strategies work (Cook & Armstrong, 1990). This paper examines the association between HR strategy and world-class status, and investigates the proposition that leading organizations improve their operational effectiveness through innovation not imitation.