What is the difference between short-term and long-term planning

It’s easy to get caught up in your day-to-day tasks without considering what you want the future to bring. Many people work hard every day but feel as though they are drifting through life. The best way to combat feeling adrift in the world is to learn how to set achievable and meaningful goals for yourself or your business.

Whether you are trying to pay off personal debt, grow your team or build a business empire from scratch, knowing how to set both long-term and short-term goals, and then acting on them, is the key to your success. These tips will help you create both long- and short-term goals so you can bring your vision to life.

[Read: 5 Simple Steps to Finding a Mentor]

The difference between short-term and long-term goals

While there are many different types of goals, the two overarching categories are short-term and long-term goals. In general, short-term goals can be finished within a six-month to three-year time frame while long-term goals may take anywhere from three to five years (or even longer).

In many cases, a long-term goal requires and consists of many smaller, short-term goals. These smaller goals break the “big picture” vision down to bite-sized tasks. For example, you may have to clear a few short-term goals, such as researching a niche market, creating a landing page and auditing your brand strategy, before the long-term goal: launching a new marketing campaign.

Short-term goals can help you work towards that long-term goal or they can be goals you’ve set for isolated milestones in your life.

Tips to create short-term goals

Here are three steps to take when planning your short-term goals:

Identify long-term goals

Knowing your long-term goals will help you break them down into smaller, bite-sized goals to work through before you reach your end game. Evaluate and identify a goal that would take a considerable amount of time and effort for you to reach, such as opening a brick-and-mortar store.

Set SMART goals

The SMART formula is a system designed to help you achieve your goals faster by getting as specific as possible on what it is you’re wanting out of your goals. The SMART formula has you go through your goals to ensure they are:

• Specific.
• Measurable.
• Achievable/Attainable.
• Relevant/Realistic.
• Time-based.

For example, a good SMART goal is, “I will create a new landing page tailored to this specific niche audience in 15 days.”

[Read: 6 Tips for Setting Employee Goals]

Create short-term goals for the intermittent steps towards your long-term goal’s bottom line.

Keep track of your progress

There are many ways you can track your progress on your short-term goals and see how they’re leading you to your long-term goals. Examples include:

• Writing in a journal on what you have completed for your goal each day.
• Keeping a running tally of days in a row you have worked on your goal.
• Share your progress with a mentor or trusted friend to help keep you accountable.
• Visualize yourself already completing this goal or working towards your goal either before you go to bed or as soon as you wake up.

Tips to create long-term goals

In addition to your short-term goal list, here are some methods to help you envision your goals across the long term:

Think of where you want to be in 10 years

You can break your goals down into different categories from financial to personal. It's also helpful if you align your goals to your values and what means the most to you. This makes them more personal, giving you greater drive to completing them in the long run.

Work backwards from that goal

It may seem counterintuitive to work backwards. However, starting at the finish line — as though you’ve already completed your goal — allows you to create tangible steps without becoming overwhelmed and losing sight of the long-term vision. Working backwards allows you to already feel the accomplishment and give you a boost of insight in how to reach it.

Break long-term goals into small, attainable steps

Create short-term goals for the intermittent steps towards your long-term goal’s bottom line. An example would be writing 100 words a day (short-term goal) towards writing a novel (long-term goal).

Create monthly, short-term goals

Sit down with yourself monthly to go over your plan to reach your long-term goal. Create short-term goals based on what’s going on that particular month.

Adjust goals as priorities change

As time goes on, your goals may change. Check in with yourself as often as you can and don’t be afraid to adjust, tweak or even scrap your plans to start anew in your long-term goal’s journey. Use your monthly check-ins to make sure your goal is on the same page as it was when you began.

[Read: 10 Well-Known Businesses That Were Started With Less Than $10,000]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published August 06, 2020

Learning Outcomes

• Differentiate between the uses of long-term plans, short-term plans, and operational plans.
• Differentiate between standing plans and single-use plans.
• Explain how policies, procedures, and regulations impact operational plans.
• Explain the role of budgets in the planning process.
• Differentiate between forecasting, scenario planning, and contingency planning.
• Explain the use of “management by objectives” (MBO), SMART goals, and benchmarking in planning.

You can view the transcript for “Long term and short term planning animated” here (opens in new window).

Watch the short animated video for a brief overview of the importance of long-term and short-term planning.

Long-term and Short-term Plans

When you decided to attend college, you had a long-term plan in mind. You would spend the next four or five years preparing to become a teacher, a businessperson, or perhaps an ecologist. Or, you may have committed two or three years to become a nurse, a medical technician, or an electrician. Your long-term goal was necessary to make sure that your daily activities would help you achieve your desired outcome. You could have just enrolled in a school and taken classes that looked interesting, but then where would you be in four years? You most likely would not have taken the courses required to qualify you for the job you want. An organization, especially a business, is not so different. It also needs a long-term plan to make sure that the daily activities of its employees are contributing to the mission and value statements of the organization.

A long-term plan is crucial to the ultimate success of the organization. A long-term plan for many businesses, such as construction, hospitality, or manufacturing, generally extends four to five years into the future. For other faster-changing industries, especially technology companies, a long-term plan may only look two or three years into the future. After that, it becomes too difficult to predict the future with any degree of certainty.

Top management is responsible for the development of the long-term plan. It is up to the CEO to make sure that changing conditions (both external and internal) are reflected in the organization’s long-term plan. The larger and more complex the organization, the larger and more complex the long-term plan will be to include all of the individual departments and functions.

Short-term plans generally allocate resources for a year or less. They may also be referred to as operational plans because they are concerned with daily activities and standard business operations. Like long-term plans, short-term plans must be monitored and updated, and this is the role of middle- and first-level management. Different managerial levels have responsibility for implementing different types of short-term plans. For example, a department manager may be comfortable implementing an operational plan for the entire year for her department. A marketing manager may direct a three- to four-month plan that involves the introduction of a new product line. A team leader may only be comfortable planning and implementing very specific activities over the period of a month.

Figure 1. Organizational Plan Hierarchy: The figure above summarizes the relationship between these types of management planning

Operational Plans: Standing Plans and Single-Use Plans

An operational plan describes the specific goals and objectives and milestones set by an organization during a specific period. (Objectives are specific tasks undertaken to meet broader goals. A goal may be to increase product sales by 3 percent; an objective may be to hire two additional sales agents.) It will allocate the tangible resources (labor, equipment, space) and authorize the financing necessary to meet the objectives of the plan. There are two types of operational plans: standing plans and single-use plans.

• Standing plans are plans designed to be used again and again. Examples include policies, procedures, and regulations. The advantage of standing plans is that they foster unity and fairness within an organization and help to support stated organizational values. Managers don’t have to make unique decisions already addressed by various organizational policies. Standing plans also save time because managers know in advance how to address common situations. Finally, standing plans aid in the delegation of work, because employees are already familiar with the procedures and regulations followed by the organization.
• Single-use plans refer to plans that address a one-time project or event. The length of the plans varies, but the most common types are budgets and project schedules. The obvious advantage of a single-use plan is that it can be very specific in how it addresses the needs of a particular situation.

Policies, Procedures, and Regulations

As stated above, the most common examples of standing use plans are policies, procedures, and regulations. These plans are usually published and handed out to new hires or posted on the organization’s employee website for easy reference.

• Policies provide broad guidelines for the smooth operation of the organization. They cover things like hiring and firing, performance appraisals, promotions, and discipline. For example, a company may have a policy to encourage recycling in the workplace or a policy that prohibits personal cell phone use in manufacturing areas.
• Procedures are steps to be followed in established and repeated operations. Procedures should reflect the policies of the company and support the organization’s long-term goals. Procedures may also detail steps that should be followed to ensure employees are disciplined in a fair and unbiased manner. For example, if employees feel that other employees interacted with them in an inappropriate manner, then they should follow the procedure for bringing this to management’s attention. Or, the organization may establish procedures for what to do in cases of emergencies, such as a fire or toxic spill.
• Regulations refer to what is allowable and what is strictly prohibited in an organization. In other words, a regulation is a kind of rule that addresses general situations. In many hospitals and laboratories, for example, there are safety regulations against wearing open-toed shoes or shoes with slippery soles. State and federal governments frequently issue regulations for industries that impact public safety.

The Role of Budgets in the Planning Process

Refer back to Figure 1 and locate the box labeled “Budgets.” Notice that budgets are examples of single-use, short-term plans. An organization’s budget is a document that details the financial and physical resources allocated to a project or department. They are single-use plans because they are specific to a particular period or event. For example, departments may have a hiring budget that allocates a certain number of positions and a total salary value for a calendar year. Next year, that budget may be the same or it may change, depending upon conditions in the organization. But it cannot be assumed that the budget will stay the same. Zero-based budgets look at each budget as if it were brand new and require managers to justify each of the budgeted items. This process ensures that budgets are closely tied to the latest organizational goals.

Managers deal with a variety of budget types:

• Financial budgets include balance sheets, income/expense statements, and statements of cash flow.
• Operating budgets project revenue against expenditures.
• Nonmonetary budgets allocate resources such as labor, workspace, and equipment use.
• Fixed budgets are budgets that do not change with increased or decreased activities, such as sales revenue. They are also called static budgets.
• Flexible budgets will vary with the level of activity (grow or be reduced according to changing conditions).

Budgets are a very important planning tool, and organizations take their budgeting process very seriously. Some managers spend most of their time making sure that the expenses and projects they control do not exceed authorized spending limits. To routinely “go over budget” is a sign of a poor planning—and planning is one of the basic management functions. In some cases, to routinely come in under budget is also viewed negatively, because with more accurate budgeting those committed resources could have been allocated to other projects. Often, projects compete for limited resources so the best budget is the one that most closely projects actual expenses and revenue.

Forecasting, Scenario Planning, and Contingency Planning

Forecasting is simply making a prediction about the future. Anyone can make a forecast—the trick is to be right or close enough so that important planning decisions can be based on the forecast. Some “botched” forecasts by business leaders follow:

“This telephone has too many shortcomings to be seriously considered as a means of communication.” – President of Western Union, 1876

“There is a world market for maybe five computers.” – Chairman of IBM, 1943

“Television won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.” – Darryl Zanuck, president of 20th Century Fox, 1946

“There is no chance that the iPhone is going to get any significant market share.” – Microsoft CEO Steve Ballmer, 2012

There are actually much better ways to predict the future than resorting to fortunetellers.

Scientific forecasting is using mathematical models, historical data, and statistical analysis to make predictions about what will happen in the future. Businesses use short-term forecasting all the time when creating budgets and anticipating expenses. Mostly, these forecasts are based on what they sold and what they paid providers in the recent past. Long-range forecasting requires both quantitative numerical data and qualitative data based on expert opinions and insights. Often, organizations will create a number of long-range forecasts based on “best-case” and “worst-case” scenarios. They will then make plans on how they would respond to each situation and, as time goes on, they will update and adapt the long-term plan.

One other important type of planning is the contingency plan. A contingency plan describes what will happen in a possible—but not expected—situation. Usually, contingency plans are designed to handle emergency situations. For example, airports have contingency plans for plane crashes on takeoffs or landings, and popular tourist attractions have begun developing contingency plans in case of terrorist threats.

An example of the critical importance of contingency planning involves the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. Eleven people lost their lives and seventeen were badly injured when an explosion on an oil rig released almost five million barrels of oil into the Gulf of Mexico. It was the worst marine oil spill in history, and its effects were even more devastating because BP Oil did not have contingency plans in place for that kind of disaster. The spill went on for months while BP and its partners tried to figure out how to shut off the oil’s source. Even though BP spent $62 billion on the response and cleanup activities, there was extensive damage to marine and wildlife habitats and fishing and tourism industries. Getting employees involved in planning may help prevent tragedies similar to this one.

Management By Objectives (MBO) and SMART Goals

Management by objectives, or MBO for short, is a tool that can be used to improve the performance of an organization by creating clearly defined objectives agreed upon by management and by the employees. Peter Drucker, a prolific author and a leader in management theory, coined the phrase “management by objectives” in 1954. The intent of MBO is to improve employee motivation and organizational communication by focusing on aligning individual goals to corporate objectives. In MBO, a manager and an employee do the following:

• jointly set goals and objectives for a period.
• together plan tasks that the employee performs with the support of management.
• agree on the standards for evaluating performance of the task.
• regularly meet to review progress.

MBO must be a top-down management tool, because organizational goals are cascaded down to create the various operational levels. Drucker showed that as long as employee goals support short-term and long-term organizational objectives, MBO will help move the company forward. Critics, however, charge that managers using the approach focus more on creating goals than on helping the employee achieve them.

SMART goals are a technique often paired with MBO. SMART stands for specific, measurable, achievable, realistic, and time-bound. The SMART goal paired well with MBO theory by

1. Providing incentives to employees by rewarding them when they meet key goals.
2. Empowering employees by allowing them to set their own objectives for achieving their individual goal.
3. Communicating honestly about what went well and what did not, and focusing on developing the missing skills.

The chart that follows summarizes the most important characteristics of each part of a SMART goal.

For example, let’s say you set a goal to become a recognized department expert in a subject relevant to advancement within the organization. How could you turn this into a SMART goal?

• Specific: I will learn about the liabilities of six major nonprofit organizations.
• Measurable: I will make presentations to the advertising, grant writing, and donor/client committees.
• Achievable: I will interview one nonprofit organization every week for six weeks.
• Relevant: This expertise will fill a current knowledge gap in the new client department.
• Time-bound: I will fulfill this goal before my next scheduled annual performance evaluation.

Benchmarking

The last planning tool we’ll discuss in this section is benchmarking. You may think that your organization has an excellent long-term plan and effective short-term plans, but how do you really know? Even if your company is showing growth, is it growing as fast as your competitor? A benchmark is a standard used for comparison purposes. Benchmarking is looking at performance levels outside of your organization, or sometimes across departments or divisions inside your organization, to evaluate your own performance. You can benchmark using several different criteria:

• Industry: Let’s say you produce technology widgets. Benchmarking can answer questions about how your company is doing in comparison to other tech widget makers. This approach is a type of competitive benchmarking.
• Geography: Your state is showing a lot of economic growth. You can use benchmarking to determine if your company is sharing in that wealth or underperforming compared to the regional economy.
• Organization: You are a small business owner. Benchmarking can help answer questions about whether the economic climate is friendlier to big business than it is to small business, or whether nonprofits are failing whereas for-profits are succeeding.
• Processes: You can use benchmarking to determine what processes other firms are using that are helping or hurting them. Are there lessons to be learned from them? This is also called strategic benchmarking or process benchmarking.
• Innovation: Benchmarking can help you discover what partners or techniques your competitors are using that are missing in your organization. Are there functions in your products or programs that should be eliminated and others that could be added? Functional benchmarking is key in technology-related organizations.

Internal benchmarking means comparing a department’s performance with another department in your company or branch within the same larger organization. The important thing about benchmarking is that it gives you a standard against which to compare your progress.

Key Points

Planning tools are designed to help you determine goals, guide behaviors within the organization, and help you evaluate your performance against external benchmarks. Plans are essential, but good managers know to be flexible when conditions demand.

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