Diversity in the workplace is a central issue for contemporary organizational management. Concomitantly, managing increased diversity deserves greater concern in public, private, and nonprofit organizations. The authors address the effects of diversity and diversity management on employee perceptions of organizational performance in U.S. federal agencies by developing measures of three variables: diversity, diversity management, and perceived organizational performance. Drawing from the Central Personnel Data File and the 2004 Federal Human Capital Survey, their findings suggest that racial diversity relates negatively to organizational performance. When moderated by diversity management policies and practices and team processes, however, racial diversity correlates positively with organizational performance. Gender and age diversity and their interactions with contextual variables produce mixed results, suggesting that gender and age diversity reflect more complicated relationships. This article provides evidence for several benefits derived from effectively managing diversity.