Insights on Effective Org Structures for Growing Dealerships

As a dealership expands its footprint, the typical top-down management approach with everything running through the owner can start to become impractical. To maintain effective communication and operational efficiency, a growing dealership must typically evolve its organizational structure.

Keith Kreps has been leading teams in an ag equipment dealership environment for 25-plus years. He says there are 3 common organizational structures that are used.

“Each structure has its own strengths and weaknesses,” says Kreps, chief operating officer at 21st Century Equipment, which operates 26 locations across Colorado, Nebraska and Wyoming. “All organizations are different, so no one structure is always the best.”

Here’s a review of the 3 most common structures used by farm equipment dealerships.

Location. This is the most common structure where all employees report either directly or indirectly to a store manager. It’s also common for parts and service managers to work directly under the store manager. One positive is accountability, since the store manager is the go-to on everything. On the other hand, other employees can become hesitant to make decisions. Also, stores and managers can start viewing each other as competitors, placing themselves and their locations above the overall good of the company.

Matrix. This approach adds another leader outside of the location that certain employees report to, such as a companywide or regional sales manager. One advantage of this structure is that the store manager can focus on growing the aftermarket business because the sales manager is overseeing sales. However, confusion can fester over accountability and who’s really in charge.

Functional. Instead of having store managers, this structure installs managers in different functional areas of the business. A common approach is to have separate aftermarket and sales territory managers. While this approach can create departmental silos, it also establishes clear accountability in key areas of the business, while also allowing for gains in efficiency.

Kreps, along with two other successful dealers who’ve also gone through an evolution of organizational structure, shared their experiences at the Farm Equipment Dealership Minds Summit 2024. Following are their personal stories.

21st Century Equipment adopts functional structure as footprint explodes

When Kreps joined 21st Century Equipment in 2020, the dealership had 16 locations organized into 4 districts. The store-manager model was utilized and proved effective up to a point.

“21st Century Equipment is a progressive organization that has grown through acquisitions and mergers,” Kreps explains. “We had some strong store managers, and some not so strong. We had store managers who came up through the aftermarket and spent a lot of their focus in those areas. But we also had some who came up through sales and spent most of their time and energy there.”

By 2022, company leadership began exploring the idea of changing the org structure to something that would better address the company’s challenges.

“One problem we were having was our customers were increasingly doing business in more than one of our stores as their farms grew,” Kreps says. “We needed to make sure they had a consistent experience at all of our locations.”

Another problem was a technician shortage. Customers in one location were waiting weeks to get their machines repaired. In another location just 35 miles away, technicians were having a hard time keeping busy. “Since store and department managers were compensated primarily based on their location, very little work was being shared across our stores,” Kreps points out.

A looming merger that would add 10 locations on top of the existing 16 made a structure change particularly urgent. “We knew that as we got larger, our customers would fear that our local decision-making would go away,” Kreps says. “We wanted the exact opposite.”

It was important that 21st Century Equipment’s frontline managers could continue making decisions on behalf of both the company and customer. At the same time, department managers needed to be gaining experience and developing leadership skills so they could step into bigger roles at some point. “This could only be done if we eliminated the role of the one go-to person, the store manager, who had thrived on calling all the shots,” Kreps says.

The dealership decided to establish territories governed by the functional leadership model. This enabled 21st Century Equipment to create incentive plans that rewarded management for the performance of their functional area. For instance, a territory aftermarket manager, along with all parts and services managers within that territory, would be rewarded for their territory’s results — as opposed to individual store performance.

Initially, 2 regions were established. Each region consisted of several territories of 2-3 stores. Half of those store managers had a background in sales, so they transitioned into territory sales managers. The other half had an aftermarket background, so they transitioned into territory aftermarket managers. “With their more narrow focus, they could each spend their time in their areas of strength and passion,” Kreps says.

21st Century Equipment adopted a functional organizational structure when it reorganized its 26 locations into 9 territories within 3 broader regions. Territory sales managers and aftermarket managers replaced individual store managers, aside from two locations that are still best served by the store manager model due to their heavy emphasis on small ag and turf equipment.

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21st Century Equipment also created the developmental role of store lead. This person held another position in the company as either a current department manager or someone identified as a potential future manager. “This person takes the lead in the community for events and donations, and is responsible for maintaining our safety focus, store communication and overall facility appearance,” Kreps says.

When the merger with 4Rivers Equipment’s ag division finally happened in June 2023, 21st Century Equipment had some new organizational wrinkles to iron out. A large portion of 4Rivers’ business consisted of consumers buying small ag and turf products. So they decided to leave the store-manager model in place at those locations for at least a year to see how it would work. “We kept those 10 stores together as our new West Region,” Kreps says.

Throughout that initial 1-year trial period, Kreps says the company recognized that many of the benefits of the territory model would benefit the 10 new stores. “We also decided that we needed to break up the old dividing lines,” Kreps says. “We decided to move some of our new stores into our original regions and some of our original stores into our new West Region.”

That change took place this past summer. The dealership’s 26 stores are now organized into 3 regions and 9 territories of 2-3 stores each. Only 2 locations are still utilizing the store-manager organizational model. “They are both small, B2C small ag and turf locations,” Kreps says.

Now 2 years into using the functional territory-based model, Kreps says both customers and employees have been pleased with the change. Service teams are working together and not treating each another as competitors. Work is being shifted from store to store to balance technician workloads and provide more timely service.

“Our department managers are also stepping up to make the decisions they are best suited to make,” Kreps says. “With this added responsibility, our bench strength has definitely improved and is positioning us for future growth.”

Kreps concedes that evolving from a location model to a functional model can be a little nerve-racking. It is fair to say that employees and customers both appreciate having a store manager they can direct their questions or concerns to.

“Our situation was no different,” Kreps relates. “But once we explained the ‘why’ to them, and they started to see the many benefits this structure has for them, their opinion changed. They began to see, for example, that by combining 1 service department into 2 or 3, the number of technicians available to them could double or triple.”

The new functional department managers have also settled into their new roles. “Our employees and customers have begun to hold them accountable to make decisions,” Kreps says. “When you explain that the company philosophy is that frontline managers are empowered to solve their problems, corporate can no longer be blamed or used as a delaying tactic.”

KanEquip Sticks to Store-Driven Model Due to Dealership Diversity

KanEquip has 13 locations in Kansas, a 14th in Nebraska, over 300 team members, and 50 field support office staff. Despite being a vast organization spread out over a large area, the dealership has found a store-driven organizational structure to be the best match for its needs.

“We are a Case IH and New Holland dealer,” says Bryndon Meinhardt, a regional manager for KanEquip who has 7 store managers reporting to him. Some locations carry both brands, while other stores carry one or the other. “There is a difference between Case IH and New Holland. Plus, we carry a lot of shortlines. We tried the function-driven model for about 3 years, but just weren’t able to handle it with the diversity of dealerships we have.”

KanEquip has found that a well-rounded field support office can help alleviate a lot of functionality off the shoulders of its store managers, allowing those individuals to focus on personnel and sales volume at each of their individual locations. Shown here is the dealership’s Field Support Office structure.

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KanEquip switched to a store-driven model roughly 10 years ago, meaning that store managers are responsible for the performance and people at their specific locations. That said, the company recognized that individual stores still need support with all of their functions.

The company created the OGM, Office of the General Manager. “The OGM is our main ownership group,” Meinhardt points out. “It consists of our general manager, Craig Groff, and myself, along with Grant Meinhardt, whose primary role is JCB manager and government sales.”

The general manager is in charge of KanEquip’s field support office, which employs roughly 50 people in the key areas you might expect, including HR, accounting, IT and marketing. But KanEquip has found it advantageous to alleviate its stores from other key functions.

“Our precision ag business is managed at the field support level,” Meinhardt says. “Each store has at least one person they can call for precision.”

KanEquip also likes to support aftermarket operations from its field support office. “We have a service program manager, as well as a parts program manager,” Meinhardt says. “We also recently developed a service technical liaison role beneath the service program manager. If an individual store seems to be struggling, this person will go there to help ensure that the process is being completed in the right way.”

KanEquip has also created the role of public sector sales manager in its field support office. “This person just sells to the public sector,” Meinhardt says. “They’re at the field support level because they support all 14 of our stores. They also sell the JCB side of our business.”

Because the field support office is taking care of a long list of functions for all of KanEquip’s stores, Meinhardt says store managers are largely tasked with managing people and sales volume. This has been key to allowing the store-driven organizational model to work for a dealership as large and complex as KanEquip.

With respect to its actual store locations, KanEquip divides its territory into 3 regions. Regions 1 and 3 each have 3 stores, while Region 2 has 7 stores. The Region 3 manager takes on some additional responsibility by functioning as sales program manager for the entire KanEquip sales team.

Each of KanEquip’s 14 stores fall into one of two general classifications. Plateau 1 stores are smaller and might only have a couple people working in parts. Plateau 2 and 3 stores are larger and, thus, staffed accordingly. Pictured is an example of KanEquip’s org structures for Plateau 2 and 3 stores.

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Meinhardt says KanEquip has two types of stores. Plateau 1 Stores are smaller. They have 2 people in parts and often do not have a truck driver. Plateau 2 and 3 Stores are larger so they have more resources, including a driver and parts manager. The parts manager, along with the service manager, report directly to the store manager. The store manager typically functions as the sales manager.

By being strategic in how it’s applied, the store-driven organization model has worked well for KanEquip. Resources are optimized across the organization, and accountability is established in all the right places.

Hiring an Outsider as CEO Gives Hoober Inc. the Inside Track to Better Management

From 2012-16, Hoober Implement transitioned to its third generation and operated with 3 co-CEOs at the top of the org chart. That approach worked well for a while, but it soon became apparent that things needed to change.

“My brother-in-law, Rod Lefever, stepped in as CEO for a couple of years,” says Chuck Hoober, co-owner of Hoober Inc., which operates 12 locations across Pennsylvania, Maryland, Virginia, Delaware and New Jersey. “Then, in 2018, we were blessed to bring in Don Mikes as our president and CEO. It was a big thing for Hoober’s to bring somebody in from outside the family to manage the business. It’s been 6 years and it’s been one of the best decisions we’ve ever made.”

In looking back on those transition years, Hoober says bringing in “outside help” was an important step.

“We first brought in a couple of outside board members,” Hoober says. “One was the president of a bank. The other was familiar with family dynamics in business. They told us we had great employees and great leadership, but needed to have somebody come in and run the business. We interviewed 3 people before picking Don (Mikes). We also created a fiduciary board and named one of our outside directors as chairman of that board.”

With the challenges around leadership and oversight now settled, Hoober’s started to look at how the overall organization was organized. When Mikes stepped in as president and CEO, the dealership was function-driven. The desire was to shift to a store-driven model.

Mikes established key performance indicators (KPIs) and began stressing accountability. He also took steps to enhance the company mission and core values. Employee surveys helped capture the pulse of the company, and regular reporting to the board helped keep things moving in the right direction. Annual employee performance reviews became mandatory.

Hoober says it didn’t take long for employees to develop an appreciation for having a leader from outside of the family.

“It lessened the family dynamics you can get into with a family business,” Hoober says. More importantly, the person at the top of the org chart needs to be a good planner, effective decision-maker and great communicator. The person at the top must also project a professional image. Mikes checked all of those boxes.

One of the keys to making the store-driven model work at Hoober Inc. is keeping a good pulse of the workforce through employee surveys and performance reviews. Photo courtesy of Hoober Inc.

As for the current ownership group, Hoober is joined by his sister, Lauri, and brother, Scott Hoober. They are joined by a fourth owner and cousin, Brad Hershey. Lauri’s husband, Rod Lefever, who served as interim CEO from 2016-2018, now serves as the company’s director of finance.

So what do the 4 owners of Hoober Inc. focus their time and efforts on?

“I personally spend a lot of time in the field with commercial sprayers,” Hoober says. “My brother, Scott, spends a lot of time with planters and product issues. Lauri sits on the board of directors. Brad (Hershey) is a store manager. We’re all spending a lot of time with the next generation. Our CEO and board are committed to making sure we get the next generation up to speed on leadership.”

That’s a good idea. Regardless of which organization structure a dealership ultimately uses, it needs strong leaders who can step into their roles and drive the company forward – whatever those roles might be.