Purpose: The study aims to examine the human resource management challenges in Southern EU and their effect on organizational performance. Design/methodology/approach: First, key challenges were identified in the existing literature. Then, these challenges were matched with those reported most often in the CRANET questionnaire. These challenges were operationalized into current organizational practices, also reported in the questionnaire. Last, t-tests were used to explore the relationships between organizational effectiveness and the selected human resource management practices representing the challenges. Findings: Key challenges involved training and development, efficiency and flexibility, and employee relations in all nations explored. Furthermore, practices of the training and development challenge, the employee relations challenge and the efficiency and flexibility challenge are significantly related to organizational productivity in most of Southern EU. Research limitations/implications: The study used single-respondent, self-administered questionnaires. Nevertheless, this study offers fertile ground for further, more in-depth investigation of challenges and their relation to organizational effectiveness not only in Southern EU but also in other parts of Europe or the world. Practical implications: Southern EU organizations should employ requisite training, development, flexibility and employee relations practices to achieve excellent organizational performance. Furthermore, governments may create policies to promote the above practices, since, in the long term, achieving organizational excellence will reflect positively on national economies. All these may be facilitated through proactive organizational, national and cross-national HRD initiatives. Originality/value: The significance of the present study stems from the fact that none of the existing literature explores the impact of human resource challenges on organizational performance. (Contains 7 tables and 1 figure.)