Alternate hierarchies can be created in the system

Description

The ability to create alternate hierarchies in Corporate Performance Management (CPM) software gives businesses greater flexibility and comprehensiveness in their data analysis, reporting, consolidation and planning processes. By creating distinct groups or categories (management roll-up, product roll-up), businesses can better understand impacts of activities on different areas of the organization.

Example Use Case

Scenario: A large retail chain employs CPM software to analyze their sales performance. The original hierarchy is based on product SKUs. However, to get more varied insights, they want to view the data from the perspective of sales management teams.

Solution: The CPM software can accommodate the creation of alternate hierarchies. In addition to the geographical hierarchy, a new hierarchy is created based on different Sales VP orgs. This change allows the CRO to filter their sales data not only by product but also by team, providing a more multi-faceted analysis of their sales performance.

Considerations

Alternate hierarchies are useful for more than simply rolling up organizational components in different ways. It can be used to model a new business structure (re-org), acquisitions, divestitures, and so on.

The power of this functionality is like an insurance policy for the user. Over the next 5 years, the user's business can change in unexpected ways which will likely necessitate changes to the hierarchy. Having this functionality can prevent a re-implementation or save you from buying a new system altogether.

It can be helpful in certain situations that the alternate hierarchy inherits its information from a core hierarchy. This helps the user have confidence in data integrity for their new hierarchy - ensuring that it is not missing information that comes over from source systems such as the general ledger.

Questions to Ask a Vendor

• Hierarchy Creation: How simple is it to create alternate hierarchies in your CPM software? Does it need specialist knowledge, or can anyone acquainted with the software do it or can I just drag and drop core hierarchy elements into the alternate hierarchy?
• Hierarchy Updates: How easily can these hierarchies be managed and updated in response to changes in business structures or requirements?
• Historical Data: What happens to historical data when I make changes to the alternate hierarchy?
• Hierarchy Aliasing: Can we alias the hierarchy in a different way from the core hierarchy?
• Accounts: Can we create an alternative hierarchy for our chart of accounts in the event we want to roll it up differently for reporting or ease of use?