A VP of Global Products at Tiffany's is in the process of developing financial and strategic objectives. Tiffany's is a luxury jewelry and accessories company. The VP realizes she needs to add short-term and longer-term performance targets. Is it important for her to spell out both short-term and long-term performance targets? Which time frame is more important? Are there tradeoffs involved? Explain.

Question

What will be an ideal response?

Answer 1

A company's set of financial and strategic objectives should include both near-term and longer-term performance targets. Short-term (quarterly or annual) objectives focus attention on delivering performance improvements in the current period and satisfy shareholder expectations for near-term progress. Longer-term targets (three to five years off) force managers to consider what to do now to put the company in position to perform better later. Long-term objectives are critical for achieving optimal long-term performance and stand as a barrier to a nearsighted management philosophy and an undue focus on short-term results. When trade-offs have to be made between achieving long-term objectives and achieving short-term objectives, long-term objectives should take precedence (unless the achievement of one or more short-term performance targets has unique importance).