If You Don’t Know Where You Pay, You Don’t Have a Talent Strategy

Ask a founder about compensation and you’ll usually get a budget answer. Can we afford this hire? What did the last person in that seat cost? What’s left in the plan for the year? All reasonable questions. And I get it: at growth stage, every dollar is being fought over by three other priorities, so of course compensation shows up as a line item first.

Underneath those questions, though, sits one that almost never makes it onto the agenda: where do we actually sit in the market for the people we need? That’s your pay position, and it deserves more attention than it gets, because it speaks for you. Before a candidate ever weighs a number, they read the position: where this company sits in the market for people like them. Pay at the market’s midpoint and you’re saying one thing. Pay at the seventy-fifth percentile and you’re saying something else entirely. And pay somewhere you’ve never measured, and you’re still saying something. You just don’t know what.

The uncomfortable truth everyone has to grapple with is that there is no neutral setting. A company that has never benchmarked is still making a statement about how it values talent, whether it acknowledges that statement or not. And more often than not, it reads as incoherent. In an age where controlling your own narrative matters more every year, an unacknowledged pay position isn’t something you can afford to let fall by the wayside.

Most companies genuinely don’t know where they pay

This isn’t just a small-company challenge. It’s a documented feature of the labor market. When economists studied firms that gained access to a salary benchmarking tool, something telling happened: the spread in what different companies paid for the same role narrowed by a quarter.[1] Sit with what that means. A meaningful share of the gap between what one company pays and what another pays for identical work was never strategy, and wasn’t even disagreement about what the role is worth.

The cost shows up at the requisition

And you can tell exactly when a company doesn’t know. It shows up long before any offer, at the moment the requisition gets approved. I see the same pattern often enough to describe it from memory: someone decides the hire needs to happen, a number gets attached based on what feels right or what they’ve historically paid, and the search goes to market. The quiet part that never gets said out loud is the hope: that this number will attract candidates who can have a meaningful impact on the company’s growth.

Intentionally or not, the interviews become the benchmarking exercise. And often, the candidates who can genuinely deliver the outcomes the role was created for turn out to need more than was budgeted to move. Now the real cost starts, and it isn’t the salary. The budget gets stretched, or pulled from somewhere else in the plan. The offer waits while things get moved around and re-approved. And the whole time, the seat the company needed filled sits empty. The impact the hire was supposed to deliver sits unrealized. The runway that was supposed to fund the next growth milestone erodes.

Benchmarking before the requisition wouldn’t necessarily have made the salary costs cheaper, but it would have made the decision real: fund the role at what it actually costs, rescope it, or don’t open it yet. Any of those decisions is a strategy. Discovering the market from inside your own interview process is not.

So the question worth asking comes earlier than the offer. At the moment you approve the role: do you actually know where you pay, or are you about to find out from candidates?

Your audience hears position, not number

Here’s the part founders consistently underestimate: it isn’t the number itself that people respond to. It’s where that number sits against everyone else’s.

The canonical study on this comes from the University of California, where researchers told a random set of employees about a website listing every colleague’s salary. Employees who discovered they were paid below the median for their unit didn’t just feel worse about their pay. They reported lower job satisfaction across the board and a significant jump in their intent to look for a new job. Employees above the median felt no better at all. And the differences that drove the effect weren’t differences in pay levels. They were differences in pay rank.[2]

Now look at that from the employer’s side. The dollar amount you agonized over in the comp discussion isn’t the thing your people respond to. The position is. And position is precisely the thing an unbenchmarked company has never examined.

For a long time, one thing protected companies from this: nobody actually knew where they stood. Research on worker beliefs bears this out. Workers anchor their sense of what they could earn elsewhere on what they currently earn, and the anchoring is severe. A worker who would see a ten percent pay change by moving to their next-best option typically expects a change of about one percent.[3] But the same research found the protection is temporary. Show workers what similar people earn, and they update their beliefs and change their behavior: how they search, and how they negotiate.[3]

The fog is lifting

And that information is now arriving at scale, and not just in the United States. Fifteen US states and Washington, DC require salary ranges in job postings, and on one major job board the share of postings that include pay information has roughly tripled in five years to around sixty percent.[4][5] Three Canadian provinces have followed: Prince Edward Island since 2022, British Columbia since 2023, and Ontario since January of this year, which now requires compensation in postings and even caps how wide a posted range can be, so employers can’t comply with a range so broad it says nothing.[6]

The European Union has gone furthest of all. Its Pay Transparency Directive gives candidates in all twenty-seven member states the right to pay range information before interview, bans employers from asking about salary history, and mandates gender pay gap reporting, with national implementation now rolling out across the bloc.[7]

Where transparency laws took effect, wages rose measurably as competition did its work.[4] The research has even reached the fine print: the width of the range you post shapes who applies, with wide, noncommittal ranges disproportionately deterring women.[5] The fog that used to hide an unexamined pay position is gone, and it’s gone on both sides of the Atlantic. The statement is being made in public now, in the posting, before you ever meet the candidate.

The external statement: who your offer is written for

Once you know where you actually sit, something useful happens: you can stop running someone else’s talent strategy.

Without knowing where you sit, you can’t build an effective talent strategy. Every choice downstream depends on it: where you source, what you lead with, what the offer has to carry, and what the rest of the package contains. The question a growth-stage company actually faces is not how to outbid the deepest pockets in the market. It’s how to find the people who can meaningfully move the needle within the budget you have. That’s a solvable problem, but only if you know where that budget puts you.

A known position is the foundation of that strategy. It tells you which candidates you’ll genuinely win: the ones for whom your environment, your growth curve, and your actual pay position create a competitive offer. It tells you what else has to be true in the package, in the role scope, and in the career story to compete where the cash doesn’t. And it aims your sourcing efforts toward people who will succeed in your environment rather than people recruited into a version of the company that doesn’t exist. Get this wrong and you find out when it hurts the most: at the offer stage, or even worse, when they leave within six months for another opportunity.

The internal statement: the offer you make every day

The external statement gets the attention because it has a date on it: the offer call, the signature deadline. The internal one matters more, because you make it every single day to people who already work for you.

Your pay structure, and the career architecture built on top of it, is the standing answer to a question every employee eventually asks: where can I go from here? Benchmarking is what makes that answer real. It defines the levels, what each one is worth in the market, and what the distance between them looks like. Without it, the question has no answer. And no answer is an answer.

The capped workforce

I’ve watched this play out with numerous companies. They’ve grown quickly but didn’t have the time to build a comprehensive approach to employee development: no benchmarked levels, no career architecture, no defined path from one tier to the next. When we run the benchmarking work and map their people against it, the finding usually isn’t about pay at all. A very large portion of the workforce is sitting effectively capped. Not underperforming. Not stuck by choice. The structure above them simply doesn’t exist yet. For those people to advance, the company itself has to adapt: better defined levels, clearer scope, and a career architecture people can actually see.

Here’s what matters about that finding: the exercise doesn’t create the cap. It reveals it. Every one of those employees has already been living inside it, asking where they can go. That’s the internal version of the unacknowledged statement, and the research above tells you exactly how it ends. People respond to position. Their ignorance of the market is temporary. The employees most likely to discover they’re capped and underplaced are precisely the ones you can ill afford to lose.

Writing the statement on purpose

None of this requires paying more. That’s the reframe worth keeping: benchmarking is not a decision to raise salaries. It’s a decision to know what you’re saying. The work looks like this:

The statement is going out either way. It went out in your last offer, and it’s sitting in your current org structure, and under the new transparency rules it may be published in your next job posting. The only decision actually available to you is authorship. Companies that know where they pay get to say what they mean. The ones that don’t are saying something anyway, and in my experience they’re the last to find out what it was.