On Thursday, the Supreme Court struck down affirmative action, ruling it unconstitutional for schools to consider race during the admissions process. In the short term, the move will likely impact companies’ entry-level talent pool, potentially narrowing the breadth of diversity available at the earliest stage of the employee pipeline.

Though the decision is one that most saw coming, it still stunned many. “I’m still shocked—that’s my initial reaction,” Joni Hersch, a professor of law and economics at Vanderbilt University, told Fortune on a call shortly after the news broke. “I’m still reeling. I’m still shaking.”

Hersch, who authored a research paper titled Affirmative Action and the Leadership Pipeline, says the decision will inherently shrink the talent pipeline for people from underrepresented backgrounds. As an economist, she and her fellow researchers in education have analyzed representation data following previous affirmative action court cases at the state level. 

“There is no getting around that if you don’t take race into consideration, the diverse composition of student bodies at elite universities will drop dramatically to about a third to one-half the number of Black students, and two-thirds or so of Latino Hispanic students,” she says, citing her research. “As long as firms are actively recruiting from the elite universities…you’ve just narrowed the pipeline.” 

In recent months, my colleagues have explored the impact the SCOTUS ruling would have on corporate diversity programs. Reporting from Trey Williams and Paige McGlauflin found that in states that had already eliminated affirmative action measures for women and racial minorities, “workplaces quickly became significantly less diverse—whiter, and more male.” 

It’s a finding recognized by HR leaders and executive recruiters alike. “In the short term, we will see companies who have been looking for a reason to stop, or reduce investment in, DEI efforts use this ruling as a signal/permission to end those programs,” says Neeta Mehta, a partner at executive search firm Bridge Partners, in a statement shared with Fortune. She says how organizations react to the decision will reveal their true level of commitment to diversity progress.

Moving forward, HR leaders will have to get creative in sourcing and developing diverse talent pools. Not only will recruiters need to cast a wider net of colleges and universities they recruit from, but they’ll need to be more intentional in providing training and opportunities for graduates from less connected schools where they might not have previously recruited. 

Hersch says companies should look to other institutions to create more effective tactics to recruit and retain diverse employees. She offers a practice used by Yale Law School as an example. The school notoriously doesn’t award grades in law students’ first semester, opting to offer a grace period of sorts because “a lot of your success in law school is dictated by your performance in your first year,” much like in the first months of a job. The time sans grades allows students to adjust and get up to speed in their new environment.  

Hersch says companies can replicate this for incoming candidates from schools that might not provide the same prep, access, or training as the elite colleges that top firms traditionally depend on to provide the diverse talent. A similar grace period could give employees a better chance to succeed. 

Whatever new initiatives employers decide to put into play, current and potential employees will surely be watching. 

“Just like companies who provided employees with resources like travel expenses following last year’s decision to strike down Roe v. Wade, there will also be companies who will reimagine their DEI programs and potentially increase investment,” says Mehta.

Amber Burton
amber.burton@fortune.com
@amberbburton

CHRO Daily will be back in your inbox on Wednesday, July 5, after the July Fourth holiday.

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Some legal experts say employers will likely need to review their hiring policies following the SCOTUS ruling on affirmative action.

"Although this case deals with education, it’s likely employers are going to have to reassess their policies just to make sure they're handling affirmative action issues properly. It’s reasonable that sooner or later the Court might be looking at like issues as they apply to designated government contractors that are being directed to adhere to federal affirmative action requirements, where applicable," Stephen Paskoff, CEO of ELI (Employment Learning Innovations) and a former EEOC and employment law attorney, told me in a statement on Thursday.

Around the Table

A round-up of the most important HR headlines, studies, podcasts, and long-reads.

- The Supreme Court expanded protections for religious accommodations in the workplace, ruling in favor of a postal worker who says they were discriminated against for refusing to work on the Sabbath. New York Times

- Women applying for jobs in Bill Gates’ family office were allegedly asked sexually explicit questions as part of an intensive vetting process. Wall Street Journal

- Facebook content moderators filing a class action lawsuit say their job was “torture” and that they received little mental health support. AP

- Southwest’s pilots' union asked to be excused from federal mediation, setting up a possible labor strike. CNBC

Watercooler

Everything you need to know from Fortune.

Hostile to women. Female oil field workers at the largest driller in the world are suing the company, alleging rampant sexual harassment, groping, and retaliation for reporting the incidents. —Bloomberg

Increasing diversity. The Supreme Court’s decision to ban affirmative action doesn’t change the fact that America is becoming more diverse, writes Pace University president Marvin Krislov in a commentary for Fortune. —Marvin Krislov 

Think of the employees. Anheuser-Busch CEO Brendan Whitworth urged those boycotting the brand because it included a transgender influencer in a marketing campaign to consider the livelihoods of its roughly 65,000 employees. —Christiaan Hetzner

Finance isn’t so bad. Gen Z is showing newfound interest in a career in finance now that the economy is uncertain, according to a survey from the organization that certifies financial analysts. —Prarthana Prakash and Chloe Berger