Run rules on folder contents

I understand that this action is supposed to be carried out throughout the folder hierarchy, i.e., the rule will be activated on any sub folder of the folder monitored. It seems not to be working for me. For example, I am trying to set up a tagging/de-tagging operation. If I monitor the folder within which the files to be worked upon exist, that's fine. However, if I choose a folder higher up in the hierarchy and apply "Run rules on folder contents", it doesn't work.
Any help would be appreciated.
Any help would be appreciated.