IESE Research Papers,
IESE Business School

Abstract: The principle of subsidiarity holds that a larger and greater body should not exercise functions which can be carried out efficiently by one smaller and lesser, but rather the former should support the latter and help to coordinate its activity with the activities of the whole community. According to some authors, businesses ought to be considered as human communities and, consequently, the principle of subsidiarity should be an ethical premise for designing business organizations. However, this principle has rarely been applied to business organizations as yet. This paper presents the bases and contents of the principle of subsidiarity, and the ethical requirements for the design of business organizations that flow from it. Subsidiarity is an ethical framework for employee autonomy, initiative, entrepreneurial spirit, and responsibility. It bears some similarities to the managerial concepts of "decentralization" and "empowerment," but differs from them both in its foundation and in its application. A case study of a medium-sized firm describes an organizational change which takes the principle of subsidiarity into account. Reflection on the subsidiarity principle and the use of appropriate managerial tools proved successful in improving various aspects of this organization. The paper concludes by presenting some suggestions for effective implementation of the subsidiarity principle in business organizations.

Keywords: subsidiarity; entrepreneurial spirit; empowerment; catholic social teaching; organizational design

20 pages, September 3, 2004

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