What issues are addressed by a compensation arrangement? Explain what is meant by the “motivational implications” of a compensation arrangement.
Compensation agreements are agreements between two people to be paid for a service or money. The agreements have the degree and timing of the cost responsibility by the supplier so that they know when they will have the money. Also, it has the amount of profit or fee that the supplier will get. Lastly, it has any motivational implications which can arrage for fixed profit percentages for faster work. Motivational implications are big because they can reward the supplier for good work which will benefit both sides. These can also change overtime if goals are continuously hit, or never hit but they would make a new compensation agreement.