What's the difference between strategic and financial planning?

What is strategic planning?

The strategic plan is comprised of two very different parts. First is the mission statement. This is a brief statement of the organization's intended purpose -- why it exists, and what it does to achieve that purpose [source: QuickMBA]. For example, a mission statement for a local charity aimed at ending homelessness could be, "To greatly reduce the number of women and children living on the streets in our community each year." The mission statement is, by nature, broad. Although it does have to follow some reasonable criteria, which are often called SMART objectives [source: Heathfield]. SMART is an acronym for specific, measurable, achievable, relevant and time-bound. In other words, the mission statement may have a very lofty scope, but if the SMART system is employed, results are possible or even probable.

The mission statement example above is specific in that it targets the problem of homeless women and children. It is measurable because the number of homeless women and children can be quantified. It is achievable because it is a broad goal -- the aim is to "greatly reduce" the problem. It is relevant because homelessness is a major social issue. And it is time-bound because the goal is to make progress "each year."

The second part of strategic planning is crafting a vision statement [source: McNamara]. A vision statement speaks to an organization's long-term future, describing what it hopes to accomplish in five, 10 or even 20 years or more. So a vision statement for the local charity example mentioned above could be something like, "We're striving for a community free of homelessness, where everyone has affordable, safe housing." The vision statement is the collective dream of the organization, and as such must be agreed upon by its leaders, stakeholders and shareholders.

Combined, the two create an organization's "what" and "why," which is ultimately a theoretical and idealistic way to plot the future. Financial planning is where reality jumps in.