Compensation Analysis: An Important Tool in Your Talent Strategy Toolbox

Jill Monte - Content Specialist ·

In the dynamic landscape of talent acquisition and retention, understanding the intricacies of compensation becomes paramount. To delve into the significance of compensation analysis, we've tapped into an insightful conversation with EDSI Managing Partner Jim Bitterle, an expert in the field.

So, let's get started unraveling the nuances of compensation analysis and why it's a crucial component in any organization's talent strategy toolbox, especially when it comes to attracting and retaining top talent.

Unpacking Compensation Analysis

Q: What is compensation analysis, and why should companies be concerned with it?

A: Compensation analysis is the process of evaluating and determining how much employees should be paid, encompassing not only salaries but also benefits and bonuses. While historically, turnover data showed that compensation wasn't a top reason for leaving jobs, the landscape has shifted. Between 2021-2022, national turnover rates were 57.3%1 and compensation became one of the top two reasons for job changes, especially notable among Generation Z employees entering the workforce.

Q: How has the perception of compensation changed over the years, particularly for different generations?

A: Interestingly, compensation has become more crucial for millennials and Generation Z employees. Previously, factors like a manager, work content, or location took precedence over compensation when considering job changes. However, with recent surges in turnover across industries, compensation has become a significant factor, particularly for the younger workforce.

Navigating the Compensation Landscape

Q: How can organizations assess their competitiveness in terms of compensation?

A: When organizations realize the need to reassess their competitiveness, they often embark on a compensation analysis project. This involves developing a compensation strategy that defines where they want to position themselves in the market (e.g., 50th percentile, 75th percentile), and identifying who their true competition for talent is. An essential aspect is avoiding the pitfall of comparing to the wrong benchmarks; a CEO learned this when losing tellers to a national bank despite comparing against regional banks.

Q: Can you delve into the process of developing a compensation strategy?

A: Certainly. The first step is defining a compensation strategy, deciding how competitive you want to be in the market. Next is identifying the organizations or industries you want to compare yourself against (comparators). As mentioned in the bank scenario above, another anecdote would be a CEO losing talent to a national bank, underscoring the importance of comparing to the right competitors. Then, you must consider the broader talent ecosystem, including culture, benefits, and work environment, as these elements are crucial to creating a holistic strategy.

Tools and Techniques in Compensation Analysis

Q: What tools and technologies do you use for compensation analysis?

A: We primarily use Payscale, now part of Payfactors, which is the largest compensation database globally. It provides efficient and effective data for benchmarking. Although we also conduct conventional benchmarking studies for clients, we find Payscale to be a streamlined and cost-effective solution. Using such tools in providing industry-specific data enables organizations to make informed decisions without going through the traditional, costly benchmarking processes. Additionally, we often conduct informational interviews to gather compensatory data, especially if job descriptions are outdated, insufficient or unavailable.

Q: You mentioned traditional benchmarking studies. How do these differ from more efficient tools like Payscale?

A: Traditional benchmarking studies are less automated and timely, and typically involve organizations collaborating to share compensation and/or benefits data. This method, although valuable, is time-consuming and may not always ensure apples-to-apples comparisons.

Tailoring Compensation Solutions to Organizations

Q: Are there specific industries or types of organizations that benefit most from compensation analysis?

A: Virtually all industries benefit from compensation analysis in today's talent market. The war for talent is pervasive, with about 95% of industries struggling to attract and retain2 necessary talent. While there are a few exceptions, such as niche industries, the vast majority of sectors, including public and private, find value in compensation analysis. Since labor is often a business's single biggest expense, it is crucial to understand how your company approaches pay.

Q: How does the financial aspect come into play when adjusting compensation levels?

A: It can be a challenge to find the balance between raising compensation and financial constraints as not all companies are going to have extra budget to simply increase wages. Taking a realistic approach is important, and it often involves gradual changes over an extended period. Part of our process includes financial modeling to assess the impact of proposed changes and the potential cost of leaving positions vacant.

Real-world Application: A Case Study

Q: Can you share a case study highlighting the impact of compensation analysis on an organization?

A: Certainly, let's take a 400-person nonprofit as an example. As a health and human services organization, they were facing a turnover of over 60%. Through our compensation analysis, we identified that they lacked a coherent and competitive strategy. They also had a number of high turnover positions that were significantly below market pay levels. We benchmarked every position, adjusted their minimum pay to the 50th percentile, and implemented a 50th to 90th percentile pay range. Today, their turnover has declined to 26%, showcasing the transformative power of compensation analysis. The outcome was a substantial reduction in turnover, showcasing the practical impact of a well-executed compensation strategy and supportive analysis.

Outcomes and Deliverables

Q: What outcomes and deliverables can organizations expect from a compensation analysis?

A: The outcomes of a compensation analysis are geared towards helping organizations be successful in attracting and retaining talent. Deliverables typically include a well-defined compensation strategy, position-specific compensation benchmarking reports, and a comprehensive understanding of the organization's talent ecosystem. Additional outcomes include ensuring job descriptions are up-to-date, improving organizational structure, and designing a roadmap to creating a high-performance culture. This holistic approach ensures organizations not only address compensation but also create an environment that appeals to top talent.

Market Trends and Considerations – How to Navigate Your Compensation Journey

Q: What market trends are influencing compensation analysis?

A: Current workforce trends, especially with the dominance of Gen Zs and Millennials, indicate a shift in how compensation is perceived. Beyond this, the Bureau of Labor Statistics predicts a significant workforce gap in the coming years. This ever-growing talent shortage reinforces the need to focus on workplace culture, as well as competitive compensation and benefits levels.

Q: What advice do you have for organizations considering compensation analysis?

A: If you haven’t completed a compensation analysis in the last three years, you are overdue. The compensation landscape has changed dramatically in the last few years. If you’re experiencing higher turnover rates, as well as greater vacancy rates, compensation competitiveness is likely an issue in your organization.

Assessing pain points in attracting, retaining, or engaging employees is crucial. We recommend conducting employee surveys and exit interviews as they can provide valuable insights.

For those unsure about the value of compensation analysis, we offer a sample project, analyzing a few positions to showcase the benefits before committing to a larger-scale project.

EDSI Offers a Unique Approach

Q: How does EDSI stand out in compensation analysis work?

A: Our differentiation lies in a holistic approach. While some firms focus solely on compensation details, EDSI offers a broader perspective. We provide insights into career paths, job descriptions, compensation systems, employee development programs, and organizational culture. This comprehensive view sets us apart, backed by numerous awards and world-class customer service scores.


It's evident that compensation analysis is not just about numbers on a payroll. It's a strategic tool, intricately woven into an organization's culture, benefits, and overall talent ecosystem. The key takeaway is the need for organizations to align their compensation strategy with a broader narrative, fostering a workplace that not only pays competitively but also offers a compelling and engaging employee experience.

In the ever-evolving quest for top talent, compensation analysis emerges as a lighthouse, guiding organizations toward competitive and sustainable workforce strategies.

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1 Zippia. 27 US Employee Turnover Statistics [2023]: Average Employee Turnover Rate, Industry Comparisons, And Trends" Feb. 7, 2023,

2 Gallup. Employee Retention & Attraction.