Three years ago, the firm began adopting Six Sigma techniques. Within J.P. Morgan's foreign exchange banking department, a team asked its customers what they valued and what made them choose one investment bank over another when conducting foreign exchange deals. Once these issues were understood, the team was able to define and measure the activities that most impact customers' needs. The analysis aided the bank in understanding why performance varied among different branches. These lessons helped yield higher margins for the foreign exchange group, as well as best practices for individual traders.
Sigma is a Greek term for variation.
Six Sigma is defined as 3.4 defects per million products. The program's objective, at least in the beginning, was to minimize variations or defects during the production of products. Motorola Inc. created the concept in the 1980s. Engineers had concluded that new products, which often failed to meet customer expectations, could be produced error-free from the start. According to Tom McCarty, director of Six Sigma business improvements at Motorola University in Schaumburg, Ill., Six Sigma differs substantially from quality initiatives that were prominent in the '70s and '80s, such as continuous improvement and total quality management.