With 15 years under her belt in a series of senior positions at Bank Hapoalim, Lilach Asher-Topilsky seemed to have a reasonable shot at eventually landing the job as the bank's CEO.
But last Thursday Israel Discount Bank's board of directors named her as successor to CEO Reuven Spiegel, who asked to step down before completing three years at the helm. Asher-Topilsky's new employer will supply her with challenges several degrees greater than those at the relatively stable and profitable bank she came from.
At 43, Asher-Topilsky will become the youngest CEO in Israel's banking system. She will also become the third woman heading a major bank, along with Rakefet Russak-Aminoach at Bank Leumi and Smadar Berber-Tzadik at First International Bank of Israel.
Asher-Topilsky entered the banking world at the age of 28 as personal assistant to Shlomo Nechama, Bank Hapoalim's chairman at the time. She found her way to the job through her father-in-law, Marcel Topilsky, a pulmonologist who was treating Nechama's mother and who set up a job interview in the hope of convincing his son and daughter-in-law to return to Israel. During the 1990s Asher-Topilsky and her husband, architect Marc Topilsky, lived in Chicago, where he was completing a graduate degree in architecture while she served as a consultant for Boston Consulting Group.
"She has all the qualifications necessary for the job," says Nechama. "She's professional, thorough, displays composure, and attained remarkable achievement at Bank Hapoalim." But he also points out: "The job of Discount CEO is without a doubt challenging, and the challenge before her is different than what she has known."
Rise through retail
In 2002 Asher-Topilsky was appointed manager of Hapoalim's electronic banking services with the task of developing the bank's Internet operations through other direct channels such as its call center and automatic teller machines. Three years later she was appointed head of the retail division for the central region, a job that put her squarely in the thick of things and granted her considerable responsibility and power. Later she served as manager of the retail division's marketing and strategic planning department.
Her greatest leap forward occurred six years ago when she was appointed deputy CEO and head of strategy. Since 2009 she has served as head of retail operations division, the bank's largest division and the largest in the banking industry, with 7,000 employees and 280 branches.
Leaving Hapoalim after 15 years, and as a natural candidate to take over as CEO, couldn't have been an easy decision. She is leaving what is now considered the leading bank in terms of management quality and working procedures for Discount, which is behind Hapoalim by almost every measure and suffering from severe problems on several fronts simultaneously.
Moreover, word has gotten out in the capital market that having to work on a daily basis with Discount chairman Yossi Bachar isn't easy, to put it mildly. In the past year alone three top managers at Discount group have resigned: Spiegel, who hasn't finished reaching the objectives he set for himself during his short term at the bank; Israel David, CEO of the Cal credit card company, who stepped down due to friction with Bachar; and Yaakov Tannenbaum, former CEO at Mercantile Discount Bank.
Some of the managerial turnover can be linked to the level of complications and tensions that have characterized the banking system over the past two years: plunging interest rates that have made profits harder to generate, along with new capital adequacy requirements set out by the banks supervisor in March 2012, which are putting a damper on the return on capital. Asher-Topilsky is heading into a job that has brought down others with more experience.
She has taken on a huge risk. If she doesn't bring about a turnaround at the bank within just a few years, she could find her term ending abruptly, as has happened with many Discount group executives before her.
One of the toughest problems facing Discount is its organizational culture, which resembles government companies like Ashdod Port or Israel Electric Corporation, where unions are powerful enough to force management to do their bidding. In the last employees' meeting convened by the workers' committee, in which most bank employees participated, committee chairman Ricky Bachar launched a stinging diatribe against management.
"It's time the controlling shareholders went away and gave us control of the bank," he said. Commenting on management, he said: "They come and go, and even I don't know their names. I say to management: 'Kiss my ass.'" In response, his audience of 5,000 employees, who enjoy the highest levels of pay in the banking industry, got up on their feet and cheered him on.
This incident demonstrates the decline in status of DIscount's management, which allowed the workers' committee to shut down an entire bank with no advance notice, and to hold a rally where the union leaders incited the rank and file. When management refused to pay workers for the hours they missed at work that morning, the committee said the bank's branches wouldn't open at all that day - without any prior notice given to customers.
One of the first tasks awaiting Asher-Topilsky on stepping into the role of CEO will be the signing of a new collective labor agreement, the last one having expired in March. Meanwhile, talks have reached an impasse.
Fortunately for Asher-Topilsky, Bachar is set to step down as workers' committee chairman next March, close to the time she is slated to assume her post. She might hope for a more reasonable successor, but after years of becoming accustomed to indulgent compensation unlinked to job performance, Discount's unionized staff is unlikely to yield to any organizational shake-up without a fight.
Like the other banks, Discount enjoys strong revenues. Its problem is mainly on the expense side, particularly a glut of highly paid employees thanks to contracts that contain no wage caps.
Also, while ideally every manager should be responsible for six or seven employees, in some departments, particularly information technology, there are often cases where managers and workers are matched one-to-one and much work is outsourced. This doesn't only lead to superfluous payroll costs on managers, it also generates bureaucracy that slows the pace of work.
Part of the problem will resolve itself without intervention as older employees reach retirement age and are replaced by younger ones at lower pay levels. Outgoing CEO Spiegel has carried out some cost-saving measures, but Asher-Topilsky will need to initiate more of these.
It should be noted that most of the group's difficulties lie with Discount Bank itself. The group's other components are in much better shape. Mercantile, Cal and Discount Bank of New York are all profitable, and it is thanks to them that the group shows a profit each year. Discount Bank itself has only managed to be marginally profitable.
The bank also suffers a shortage of capital. To help solve this problem and bolster its capital adequacy ratio, Discount is expected shortly to sell off 30% of its Discount Bank of New York unit. This will also help the bank increase lending after it cut back by some NIS 4 billion in the past year to NIS 115 billion, losing its traditional third place among the country's banks to Mizrahi-Tefahot Bank. Asher-Topilsky's job will be to put the bank back on track towards growth.
"The central challenges facing her aren’t necessarily in fields where she has experience," says Micha Goldberg, the head of research at Excellence Nessuah who has known Asher-Topilsky for many years. "In many challenges she needs to prove that she knows how to meet them: She hasn't yet accumulated experience in business lending, she's inexperienced at managing capital, she hasn't managed international banking and it isn't certain she has enough experience in negotiations. But perhaps with her approach she'll succeed where Reuven Spiegel and Giora Ofer failed."