Post 4 of 4 in a series looking at Revolutionizing VPOs.
So far in this series we’ve discussed the toolset for turning VPO’s from a source of frustration to one of enduring value, but revolutionizing VPO management isn’t just about tools—it’s about transforming your homebuilding company’s culture. For many, this means moving from a reactive, blame-heavy approach to one that’s intolerant of recurring errors. To make that shift, we move beyond the bare minimum and go above and beyond.
So what’s the bare minimum? Well, a shortage occurs on site, and a VPO is issued to fix that specific job. For example, a framer gets 30 studs instead of the necessary 300? Easy, cut a VPO for 270 more. Done.
VPO Management isn’t just about tools... it’s about culture.
- Above and Beyond VPO Process
- Fix Current Job: Just like the bare minimum approach, we always start with the issue at hand. Keep labor and the field moving, then go deeper.
- Similar Jobs Coming Up Soon: Are there other homes in production with the same flaw? Fix them now with proactive VPOs (proactive in this case simply meaning we issued the VPO prior to the field or the trade asking for it).
- Future, Unreleased Jobs: Update material lists or processes so this never hits the field again.
Remember, this process is not about blame. This isn’t about punishing the Purchasing team for a typo. It’s about empowering the “team best positioned to prevent reoccurrence” to step up and shine. Imagine how the field team feels when they see that note from the purchasing agent that after being informed of a VPO need in the field actions were taken to ensure that no one on the field or supplier team will have to deal with that same nuisance VPO request again in the future, ever.
To drive this home, use a Thematic Goal (hat tip to Patrick Lencioni)—a rallying cry for your team. Think: “Cut variances by 50% this year.” It’s collective, not individual. And remember from our previous post, we don’t tie bonuses to a specific team or individual when it comes to VPO reductions – this creates conflict, not value. When you set your thematic goal, make sure you are measuring for the result that you want to achieve.
- You Get What You Measure: Picking the Right Metric
- VPO Dollars Divided by Sales Price: Nope. Rising sales prices can skew it, hiding operational issues.
- VPO Dollars Divided by Cost of Goods Sold: Closer, but still nope. Early-stage jobs have fewer variances, gaming the system.
- VPO Dollars Divided by Approved AP: This is the winner. Use variance dollars over approved accounts payable (committed + actual costs). It’s consistent, fair, and actionable. Aim for under 2%, top performing builders will hit 0.4-1% using this metric.
You get what you measure, so pick the right metric!
Once you have the right metric, it’s time to measure and improve. Dig into your data—job, development, model, team, trade, time, reason, cost code, and schedule activity. Spot trends (e.g., one framer’s variances spike quarterly) and take action. Technology like Mark Systems’ MySQL access can make this a breeze with daily reports.
When you measure smart and resolve relentlessly, variances shrink, budgets align, and margins hold steady. Field Managers and trades stick around because frustration fades. That’s the payoff.
We started this series by naming the VPO problem: uncontrolled costs, delays, and no sustainable fixes. Then we walked through a revolutionary approach a step at a time:
- First – Reason Codes brought clarity to who owns what.
- Second – Daily Reviews built a rhythm of accountability.
- Finally – A mindset intolerant of repeat errors drives the biggest wins.
That’s what revolutionizing VPOs looks like—turning a pain point into a profit protector. Ready to lead the charge? Let’s chat—we live for this.