In order to generate a compensation matrix, you must have a "high"- and "low"-stained population defined for each parameter that will be compensated. Furthermore, you must drag these populations into the appropriate boxes in the compensation window.

Remember, you must also have different populations in the "high" and "low" boxes (i.e., these populations must have different median fluorescences in the channel of interest). Otherwise, the matrix cannot be properly computed because this computation is based on the difference in the fluorescences of the high and low populations.

You can click on each of the boxes in the compensation window to find out which population you dragged into that box (the title of the population is shown near the lower left corner of the window). You will find it helpful to name the positive and negative populations with unique names for each compensation stain so that you can use the title to identify them.

Also, remember if possible to use the "autoassign" box in the compensation window.  If your positive and negative populations were defined within the same parent population, and there are no other gates drawn on the parent population, then you can simply drag the parent population and drop it into the "autoassign" box and FlowJo automatically assigns the positive and negative populations into the correct places.

You can get more information about compensation in general, which has a tutorial showing you how to compensate in FlowJo, or more information specifically about the compensation window.