Informal diversity management practices and their effectiveness: In the context of ethnically diverse employees in hotels

Abstract Managing ethnically diverse employees is a key challenge for managers, and research shows that managers often use informal diversity management practices. Yet we do not know enough about the relationship between informal diversity management practices and organizational outcomes. To address this challenge, the present study examined the relationship between informal diversity management practices and two organizational outcomes – innovation and financial effectiveness. The study also examined the moderating role of ethnic diversity in the above relationships. Data were collected from Australian hotels at organizational level, and hierarchal regression was used to analyze the data. Results indicated a significant positive direct relationship between informal diversity management practices and organizational outcomes. However, ethnic diversity moderates only the relationship between informal diversity management practices and innovation. The study advances the hotel diversity management literature and offers practical implications for how to sustain the benefits of informal diversity management in the long term.