The following study, in examining theoretical constructs and their practical implications, as they relate to organization management, innovation, and ethnicity, notes the inter-relationship of all aspects of administration. It also recognizes that organizations are social entities which have a nonrational component. These non-rational elements can lead to prejudice, discrimination, and hostility, particularly across organizations and across ethnic boundaries. In the field of education it is contended that innovation or change is only acceptable where effective communication across all involved groups occurs; and in ethnic settings educators must heed the feelings of the ethnic community accepting that the community has knowledge about its culture that they do not possess. Educators are often unprepared, or unwilling, to do this, hence the move towards change stagnates, and hostility between the groups festers. To overcome the stalemate appropriate cultural forms of communication between the participating groups must be established. To demonstrate the application of the various theories under review, an inter-organizational conflict situation between the University of Tasmania and the Tasmanian Aboriginal Education Consultative Committee was examined. The reasons leading to the conflict are cited, along with their relevance to theory, and proposals to overcome the obstructions facing each group are delineated. In putting forward these notions there is a realization that closer bonds must be forged between the University and the TAECC if the conflict is to be resolved. To do this it is advocated that the change strategy, Organization Development, be utilized, using outside change agents who are acceptable to both organizations.