The market for talent is a dynamic one. As the world continues to change, in ways both expected and completely unanticipated, the dips and jumps are coming at us faster and with greater frequency. Market compensation levels for different jobs have never moved along in complete lockstep - at least not in my recollection - but the swings tend to be more significant now than in the past. Salary levels for some positions remain relatively flat, while others are positively surging.
All of this makes managing our pay programs, particularly those that are built primarily on market as their underlying "value system", ever more challenging.
Well, for one thing, the days of letting your compensation program, and particularly your base salary structure, run on autopilot are gone. Keeping your finger on the pulse of the market - both informally through your sourcing, recruiting and even networking efforts and formally by regularly accessing at least a few reliable compensation surveys that cover key elements of your labor market - will be a critical part of proactively program management.
And when signs indicate that market pay levels for a particular field or job family are leaping ahead, put a plan in place. That plan might, initially, simply involve watching the situation closely and determining your criteria and potential timing for action. And then acting, in accordance with your plan. Waiting until the circumstances become unbearable will only make the inevitable corrections and adjustments that much more difficult.
If the economy does slow down, it won't necessarily mean that market pay growth will uniformly taper off. There will continue to be professions, job families and skill sets where demand outstrips supply, and where proactive and aggressive pay management is necessary for successful recruitment and retention.
Is this a reason to move to a base pay approach less closely tied to market (e.g., point factor, or other internally-focused method), as some of my clients have asked? Not to my mind (unless there, of course, are other overriding reasons). While a market-based salary program may require you to adjust in line with market changes, the good news is the it also allows you to adjust in line with market changes. In times of an increasingly dynamic market, I'd rather be hooked to an approach that allows the flexibility to react to those market zigs and zags.