How Compensation Affects Decisions

Whether or not you understood it was happening, every single person has made a decision which has had some sort of compensation attached to it. It could be something small, like giving some eggs to a neighbor in exchange for some fresh fruit, or something big like accepting a job offer to a remote location in exchange for a much higher salary. Many situations involve some form of compensation and knowing how this can affect an individual’s decision making is very important.

In business practices, compensation is a very common occurrence in exchange for work or a product. According to a national survey, “54% of employees rated direct financial compensation as “very important” or “extremely important” to motivation” (Lumen Learning).

I have experienced some form of this as well, as in my sophomore year of school, I had the choice of deciding between two different companies for a summer internship. Both options were good, as I would be getting good experience and decent pay, however, one was slightly higher, and I was receiving a pretty generous housing stipend as well. Knowing this, I reached out to the company with no stipend to see if I would be able to receive one, however, it took a long period of time to get back to me. I ended up accepting the first offer, because the pay was higher and the housing stipend was also secured, which really swayed me as opposed to a slightly smaller pay with the uncertainty of receiving a better housing stipend. In the end, it was the amount of compensation provided by one of the companies that swayed my decision.

Sources:

Compensation and Motivation | Human Resources Management