Long Term Goals and Short Term Goals

In our opinion, it is crucial to understand the difference in approach when we are talking about long and short-term goals. Where does it lead when your company is forgetting about long-term goals? Why are short terms more prevalent in our everyday life? This and even more onwards.

How goals are made.

Let’s start with an example situation.

The company fights for its financial sustainability - this goal is formalised on the business vision level. Company sets the goal that it wants to achieve within the following year.

This goal should sound like this:
“Achieve a specific EBITDA figure from sales of a range of products in specific sales channels, by a specific period.”

The only way of achieving it is by moving in two directions simultaneously:
Raising the revenue and managing costs more efficiently. Usually, these indicators persist separately in two different responsible structures. It doesn’t add transparency and consistency by itself.
According to studies, when the goal is moved from your team to another, the trust ratio drops by almost 90%.

The goals of the first level in the hierarchy can be as follows:

We need to manage sales channels effectively, i.e. have distribution goals. And if we start talking about the effectiveness, we need to add the target to cost management.

To achieve our cost reduction goals, we need to add operational and inbound goals of the supply chain and cost price. The number of control points is increasing.

In identifying the factors influencing the result, we decompose the goals to levels lower while increasing the complexity of the entire plan. A complex project is challenging to control, ask the military.

The organisation appears not adapted to each other's purposes, and functional business areas start to interfere due to dissonant goals.

Ultimately, all attention is focused on short-term goals, some of which may not be related to long-term goals. Some even contradict them, such as conducting a marketing campaign and reducing the cost of POS material.

This is a typical process that occurs in many companies and reflects the natural behaviour of the company as the number and complexity of its goals increases.

For more information about Goals, check our article: Goal Measurement and Goal Management.

 

Friends or foes? The attractiveness of short-term goals.

It's no secret that long-term goals for most companies are an abstraction, loosely connected with reality, and devoid of any power.

• Firstly, the meaning and essence of long-term goals are often understood only by top management. The goals are developed and discussed at the top levels of the company hierarchy, and for the performers, they do not have any specific content. Accordingly, long-term goals have little effect on the daily routine of most of the company.
  
  

• Secondly, long-term goals are often represented only by financial indicators and sometimes by marketing ones. "Field" workers usually do not have information about the company’s financial performance and how exactly they can influence these indicators.
  
  

• Thirdly, a common situation in business: the team is formally focused on long-term goals but receives a material reward for the implementation of short-term goals.
  
  

• And lastly, it is easier for the human psyche to focus on short-term goals, which almost always require immediate and understandable action instead of long-term ones. After all, when a person thinks about long-term goals, he does not focus on actions; he usually considers how much time he still has in stock until it is necessary to start acting.
  
  

Short-term goals are essentially what the company does. The problem is that short-term goals tend to spontaneously multiply, conflict, and drift away from the original path. They cannot be left unattended; otherwise, they will simply “devour” all the business’s resources, and the company may remain stagnant.  

Long term goals and their destiny.

Long-term goals define the meaning of everything that happens in business. Should determine. They outline the company as a chessboard on which pieces (resources) are placed and battles (all day-to-day activities).

Ideally, all short-term goals should be linked to long-term goals. But in reality, the number of short-term goals can change daily. It all depends on the circumstances. This is one of the differences between short-term goals and long-term goals. Long-term goals tend to remain constant for the team and the company.

Problems start when you set long-term goals. Objectives are usually selected based on previous experience. But the very idea of using past expertise as a basis for forecasting the future has ceased to be a working model. The knowledge that we have received even 3-5 years cannot be simply interpolated for the future. Why? For example, a year ago, a massive number of businesses began to wag a new factor - COVID19.

The desire to achieve long-term goals has turned into an absolute lottery due to the increase in the number and strength of negative factors described by the abbreviation VUCA (volatility, uncertainty, complexity, ambiguity - instability, uncertainty, complexity and ambiguity)

Everything changes very quickly, but unlike long-term goals, short-term goals allow you to follow the speed of the changes.

When formulating long-term goals, there is no particular need to use the SMART format. In this case, the probability that the goals will be changed is close to 100%.

Does this mean that we should abandon long-term planning? Not!

The practical benefits of using long-term goals are quite specific, and we can describe them as follows:

1. Increase in productivity.
   The synergy between various company functions allows you always to get more results and achieve greater efficiency.
   
   
2. The ability to implement large projects.
   The very preparation of the necessary resources for big goals is a separate project. Sometimes it can take years to train the right people to find the right technology. Such tasks cannot even be comprehended at the short-term goals - the business needs a strategy and long-term goals.
   
   
3. A criterion for evaluating its effectiveness over long periods.
   Goals allow you to gain knowledge about the limits of the capabilities of a business, a team, and specific people. In this sense, long-term goals are an invaluable source of information for improving your business, finding growth points, etc.

SMART - Negative.

When formulating long term goals, there is no real purpose using SMART method.
In this case probability of goal changing is nearly 100%.

SMART describes the result using five categories(specific, measurable, achievable, result-oriented and time-bound). 

This approach created a single language for describing results while uniting teams and companies around their goals.

The issue is that SMART is usually over-simplifying goals. This goals hierarchy leads to perverted reality, making them poor reflection of the actual situation.

In other words, by itself, this method allows you to fix the goal, nothing more. Further, the focus of attention is turned on, which is expressed in the fact that we cease to notice a lot of other important events by placing our focus of attention on a specific thing.

Remember that any goal map is a very simplified snapshot of reality. In practice, this means that business and managers must constantly “look around” from sides, test goals for their relevance. Remember what Peter Drucker said: ‘There is nothing so useless as doing efficiently that should not be done at all’.

Conclusion: 

"Every organisation needs to succeed in three main areas: it needs immediate results, the development and reaffirmation of values, and the preparation of people for the future."

Peter Drucker

What is the work to achieve the goal? No matter what the long-term goal is, its fate depends entirely on the team’s current actions. Remember that you can only act in the present, the future has not yet arrived, and the past cannot be changed.

Moving towards a long-term goal is like a road junction with several loops:

Loop One, Short Term Effectiveness: 

1. Working on short-term goals.
   
   
2. Monitoring and correction of goals and works depending on the circumstances.
   
   
3. Evaluation.

The second loop, Coordinated Movement Towards Long Term Goals: 

1. Monitoring the progress of long-term goals.
   
   
2. Management of short-term goals.
   
   
3. Management of changes in both long-term goals and short-term, in the event of significant circumstances.
   
   

Loop Three, Managing Business Development Potential and Sustainability: 

1. Ongoing monitoring of the preparation of resources following the long-term strategy (goals)
   
   
2. Managing changes to resource preparation plans in the long term

From the set of these actions, it is clear that the team must analyse and manage short-term goals, mainly if unplanned changes have occurred, focusing on their long-term expectations.

At the same time, special attention should be paid to increasing the business’s potential, its resource capabilities. To do this effectively, you need to understand the long-term strategy and goals expressed in the business vision itself.

We hope you found something new and valuable for your business. Stay tuned and achieve your goals with KeepSolid Goals!