Three approaches to managing hot jobs

When the market heats up with a new hot job, pay ranges come under pressure.

Comp teams should first validate whether it’s actually true. Assuming it is, they can respond on a spectrum from doing nothing to an off-cycle pay range update.

I’ve seen three archetypal approaches on this spectrum:

1. Temporary premiums (less aggressive)
2. “Competitive” shadow ranges
3. Frequent range updates (more aggressive)

I think #1 is most common, even though #2 is likely the best approach for most comp teams. Let’s see if that’s true:

‍

#1 Use temporary premiums

‍
TL;DR — most common approach, but reactive and frustrates the business.

In this approach, comp teams flag certain jobs, skills, or geographic markets as hot, and provide temporary guidance to their aligned HRBPs and recruiters. This could look like making offers at higher compa-ratios, approving exceptions automatically, using a “key talent” designation for everyone currently in that job, etc.

Whatever specific tool used, this seems to be the most common management approach.

Pros

• The primary benefit here is you avoid institutionalizing higher cost in the form of updating your ranges too fast. Maybe the hot job is a passing trend that requires stoic, dispassionate resistance; show your stakeholders you’re business-friendly with some temporary relief, but protect your ranges from a bad one-way decision. After all, lowering your ranges later would be impossible…
• Not only do you avoid higher fixed cost, you also avoid gaming the range changes from people managers and employees with bad behavior. Hey, they raised Security Eng ranges; my team does DevOps which is pretty similar… I’ll just work with my HRBP to change their jobs, then demand a pay bump
• It keeps things quiet. No change to policy means you can operate behind closed doors to make subtle moves without catching too much attention

Cons

• The primary problem here is this approach is reactionary. By the time the noise reaches the comp team, the business is already disrupted and very annoyed. Offers have been declined, employees have resigned, goals have been missed — only then does comp come along and do something.
• It’s also hard to administer. How do you keep track of temporary guidance how to use ranges or approve exceptions? For which jobs and which markets? For how long? When you explain it, do people get it? If it’s temporary and discretionary, it may not be worth building an automated workflow to manage with consistency.

‍

#2 — “Competitive” shadow ranges

‍
‍TL;DR — relieves pressure and helps you be more proactive, but requires investment

In this approach, comp teams create a shadow range within a range. For example, if the range is $80k-$120k, they might develop a “competitive range” or “offer range” of $105k-$120k, or the top quartile, etc.

Where pay decisions for normal jobs anchor off the range midpoint, hot jobs rely on this narrower range.

Pros

• This strikes a nice balance of market-responsiveness without over-commitment. A separately defined competitive range within the range has permission to change more frequently, including up or down, relieving the formal pay range of the pressure to change off-cycle. And it serves as a clear tool to adapt to market changes proactively
• You can align shadow ranges to discrete pay decisions, e.g., an “offer range” for recruiters and a “key talent” range for merit cycles

Cons

• Adding more ranges gets confusing for everyone when you already have a lot of ranges for every job, level, geo-tier, pay element, etc.
• It takes added investment to scale and automate shadow ranges. For example, what if a recruiter wants to make an offer below the competitive range but it’s still within the pay range, so it doesn’t trigger a review?

‍

#3 — Frequent range updates

‍TL;DR — lots of work and change management, but the most scalable and business-aligned

What if you just updated your ranges when the market changed? Almost no one does this because they have a laundry list of reasons not to.

But the few comp teams I know that do update ranges all the time are some of the most progressive, innovative, and successful comp teams in the world… maybe they’re on to something.

Pros

• Your pay ranges stay synced to your philosophy. If you target the 75th percentile and a hot market rapidly increases pay, you may actually be paying below the 50th percentile the rest of the year
• You let your pay ranges work for you. Instead of doing the gymnastics of managing private exceptions or creating shadow ranges, you let your ranges do their job with all the scaling decisions downstream of them
• Narrower ranges are possible because you don’t need to buffer extra range spread to accommodate market changes throughout the year. Note this can have a favorable impact on pay equity, too
• You manage business risk more seamlessly, making it easier to compete for hot jobs and keep the business running

Cons

• But we update ranges annually, change is hard!
• Updating our ranges is already a huge effort, it’s hard to imagine doing it not once per year but 4, 5, 6, even 10 times per year? Our systems don’t support it
• This would mean that we reserve the right to move our ranges both up and down; we lack the organizational will to lower ranges
• There are many downstream stakeholders and processes of range changes, like comp planning, making offers, financial planning, people manager training, and more
• Pay transparency means people would notice the range changes — the other approaches feel safer with fewer prying eyes

‍

Why not just do nothing?

We’ll catch that hot job in our benchmarking process next year, we’re not doing anything off-cycle.
‍
— Your overworked comp team

Tempting as this may be, there are a few problems with doing nothing:

• The market doesn’t change annually for hot jobs, it changes monthly, sometimes even weekly
• Employees in those hot jobs leave for your competitors
• Offers for hot jobs are rejected
• Top company priorities are understaffed and underperform
• Business complaints compound and your credibility drops
• When the market cools, it reverses — your inaction results in overspend and millions wasted

And besides, your traditional survey data only updates annually.

How do you even know if the market is hot or cold? 😉