If you are in the early decision stages of a Performance Management system, you may be exposed to some new jargon: ‘multi-dimensional’, also known as ‘OLAP (On-line analytical processing)’.
In simplest terms, ‘Multi-dimensional’ gives you the ability to ‘slice and dice’ the data along many different measurements and perspectives without a significant amount of labor on your part. There are many standard dimensions among all vendors.
‘Version/category’*, facilitates comparisons between actual numbers (history), and budgeted numbers (future), as well as comparisons between different budget passes. If you are using spreadsheet budgeting, you would need to export your actuals from a GL package into a spreadsheet, and perform some amount of manual adjustments to the spreadsheet to have an accurate comparison between what was expected to happen and what actually happened, and frequently this comparison may not be made at all. This is sometimes referred to as ‘the Strategy Gap’. In a typical OLAP CPM package, you will have at least one pre-built view that will compare budgeted expectations with actual results for any given time period, allowing for an easy feedback loop of the decision-making process.
The ‘Unit’ dimension provides comparisons between different organizational components. This dimension frequently mirrors your organization chart, and answers questions about where the best ROI (in percent) and ROI (in dollars) are coming from. This dimension will usually have at least one ‘alternate hierarchy’, since you will usually wish to compare geographic regions, and also compare along management lines when they do not align with geography.
The ‘Time’ dimension allows comparisons between months, quarters, years, as well as year-over-year comparison for the same period, such as Q1-06 vs Q1-07. Generally, CPM systems will keep time down to months and occasionally weeks, and it is rare to see a CPM system that tracks down to a daily basis. Daily comparisons are usually done in OLTP (On-line transaction processing) systems, which are considered to be distinct from BPM/CPM systems, but often provide data feeds into the BPM/CPM system.
The ‘Schedule/Accounts’ dimension is normally the heart of the OLAP system. This is where you keep your chart of accounts, key performance indicators, and other measurements. You will frequently put this dimension on the view, and slice and dice it along units, versions, time and other dimensions.
A less-used standard dimension is ‘currency’, which allows for automated currency triangulation. Generally, the numbers will be imported in the local currency, and translated into the reporting currency of choice for upper management. This dimension is unnecessary for domestic businesses, but does not require processing power when it is not being used.
If you are using your Performance Management system for Financial Consolidation, including Journal Entries, there is also typically a dimension defining whether data is original (prior to adjustments), or adjusted. You will have at least one report making the comparison of original and adjusted data.
In addition to these standard dimensions, most BPM/CPM systems can have custom dimension, which accommodate specialized areas of your business. You may want to compare your production facilities, your sales teams, your distribution chains, etc. Any comparison you might wish to make that is not a clear match with the standard dimension can usually be accommodated as its own dimension.
Did the term ‘multi-dimensional’ at first sound like science fiction, or advanced mathematics to you? If so, just think of it as ‘slice and dice-ability’!
* Some multi-dimensional vocabulary is not fully standardized between vendors