The latest episode of Writing Excuses features a great discussion of side-character arcs. This is a topic I find especially interesting, and I've written about it before. I pride myself on making secondary characters real by hinting at pasts and presents that unfold beyond the pages of the novel.
Do I create a detailed backstory and arc for every character who appears? No, although for the first novel I wrote, I had a detailed character database which included where all the main character's friends' parents went to college. Some of the parents of some of the friends only had a few lines of dialogue, so this was probably overkill. I'm no longer quite so unnecessarily thorough.
For example, one character in my current novel with no arc is a coworker who my narrator flirts with in a few scenes. I've given this woman a name and a little bit of a personality, but nothing about her changes over the course of the story, and I don't know anything else about her. I don't think my narrator knows anything else about her, either, and I imagine that the scenes she appears in are approximately all the interactions they've ever had -- these are two good indications that a character doesn't need an arc.
On the other hand, a character who has an ongoing, complex relationship with the protagonist should appear to possess an ongoing, complex life of their own. If the best friend doesn't seem to have anything going on besides serving as the ever-faithful best friend, readers will notice that one-dimensionality. This is true even if the main character is too wrapped up in their own problems to ever directly ask the friend what's up in their life.
My narrator and his wife have best friends, another couple in their neighborhood. This other couple appears (together and individually) in a large number of scenes, and it's established that my main characters interact with them even more frequently than that. These are characters who need arcs.
I've indicated a bit of their backstory (no, I don't know where they went to college), and some stuff happens to them that's independent of the main characters. The arc of their lives during the story involves making choices that contrast with the choices of the protagonist. Additionally, their arc impacts the arc of the main character's family, creating obstacles and complications that have to be dealt with. These are good ways to develop a side-character arc: find points of connection with the main plot, and highlight differences.
As they say in the podcast, everyone is the hero of their own story. Let your secondary characters have lives of their own.
Good Stuff Out There:
→ On the Amwriting Blog, Jason Black discusses the language of world building: "Easily the single biggest problem I see with world building in my clients' novels is characters who live in places that are different from modern-day America (sometimes radically so), but whose English is indistinguishable from that spoken here, today."