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A common misconception around succession planning is that it signifies the end of a CEO's tenure. Just as you don't wait until death is knocking at the door to buy life insurance, you also shouldn't wait to start planning for your inevitable exit.

Companies are no different than individuals in that they should always be prepared for the unexpected, such as the loss of a key individual – especially the CEO or a member of the executive team.

Most larger firms plan for seamless succession of the CEO by grooming key personnel at the executive level many years in advance. Smaller to mid-size companies, on the other hand, often neglect to establish a legacy framework.

At the risk of sounding paranoid, a judicious CEO should start creating a well-defined succession plan from the moment he or she takes over. Making it a consistent and continuing part of the firm's overall business planning process is critical to ensuring a smooth transition in the eventuality of an "unexpected" event. This is part of your job as CEO – managing risk for your organization.

Focus on your current team, not your successor

If you're not planning to leave any time soon, it may not be about seeking out potential successors. Being keenly aware of the strengths and weaknesses of your current team – yourself included – is an important part of a CEO's role.

If any senior executives were to leave tomorrow, what gaps would need to be filled? What are the intangible skills of key individuals that would be most difficult to replace? If a key position needs to be filled quickly, having this information documented and easily accessible could be crucial.

It also forces the discussion with your executives – not about yourself, but about them. It is a way to engage the team to understand where they stand, what their goals are, and what they need to do to get there, giving you a joint road map.

Succession planning is a priority at Credential. It is a standing item of the annual review process with my board of directors and executive team. By establishing a framework for discussions around what some may consider a sensitive topic, the criteria for selecting a successor will be clear to all stakeholders when the time comes.

Though these initial discussions may be uncomfortable, it is better having them without the added pressure of urgency to find a replacement. Furthermore, it is the board that will ultimately make the decision regarding a new CEO, and at times, other key executives, to ensure the right fit for the organization. By setting up a consistent, well-documented process, you are setting them up for success.

When there is a clear understanding of the skills required to keep moving the company forward in case of a sudden departure, the focus becomes more about finding the right cultural fit for the organization. Many potential candidates at the executive level will have similar attributes, but not all will have the qualities needed to resonate with the values and corporate culture of your organization.

Getting it right, and getting it wrong

The curious case of Microsoft is an example of succession planning gone wrong. The assumption was that Steve Ballmer, generally viewed as the natural successor to Bill Gates because of their long association, was the right individual for the job. Yet, when Bill Gates finally stepped down, it wasn't the smooth transition Microsoft had anticipated. While Mr. Ballmer appeared qualified, Microsoft and its board did not take into account their different leadership styles and how this would affect the entire organization.

By contrast, Apple has what is considered one of the best succession planning programs around. By the time Steve Jobs was compelled to stand down, the company already had a united vision of the future and what was required in terms of a strong cultural fit for the incoming leader. The result has been that Apple has continued to progress seamlessly, even when losing such an iconic and vital leader.

When I became CEO of Credential, one of my first tasks was to put a succession-planning process in place. That was six years ago, and I'm still here. In my opinion, it's simply one element of good business practice. Aside from the obvious preventative aspect, it also helps keep the board and my executive team aligned with our overall strategy and common goals, while bringing us peace of mind.

Doce Tomic is president and CEO of Credential Financial, a national wealth management firm owned by Provincial Credit Union Centrals and The CUMIS Group. He is also a member of the Institute of Corporate Directors and TEC Canada, a peer advisory group for chief executive officers.

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