The literature on policies, procedures, and practices of diversity management in organizations is currently fragmented and often contradictory in highlighting what is effective diversity management, and which organizational and societal factors facilitate or hinder its implementation. In order to provide a comprehensive and cohesive view of diversity management in organizations, we develop a multilevel model informed by the social identity approach that explains, on the basis of a work motivation logic, the processes by, and the conditions under which employee dissimilarity within diverse work groups is related to innovation, effectiveness, and well-being. Building on this new model, we then identify those work group factors (e.g., climate for inclusion and supervisory leadership), organizational factors (e.g., diversity management policies and procedures, and top management's diversity beliefs), and societal factors (e.g., legislation, socioeconomic situation, and culture) that are likely to contribute to the effective management of diversity in organizations. In our discussion of the theoretical implications of the proposed model, we offer a set of propositions to serve as a guide for future research. We conclude with a discussion of possible limitations of the model and practical implications for managing diversity in organizations.