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Hierarchies are an important part of all business intelligence solutions, used to describe dimensions that naturally contain different levels of granularity. Some are simple and intuitive whereas others are complex and demand a lot of thinking to be modeled correctly.
These questions and others are answered in this Technical Brief. Attached you will also find a sample unbalanced, n-level hierarchy along with the script to load it.
See also the following blog posts:
Unbalanced, n-level hierarchies
Authorization using a Hierarchy
2013-11-26: Added section on authorization.