Manage automatic creation of direct reports group

I haven't seen this feature. It might not yet have been deployed. It might also be a feature designed for small tenants.

I do not think this is a good idea for large to enterprise tenants. In fact, it is a rotten idea. Enterprise tenants like to control their GAL and this sounds like a way to clutter that GAL up with a profusion of groups that will quickly become an uncontrollable mess. Unless, of course, Microsoft is going to update the newly-created groups on an ongoing basis to adjust membership based on changing reporting relationships. Creating groups is easy; maintaining them over time is bloody hard. That's why many enterprises have their own solutions (often integrated with HR processes) to do this kind of thing. It is a special challenge when organizations do not populate AAD with reporting relationships - or keep this data current, a problem that is more prevalent than you might think.

It's an example of a bright idea that looked good on a whiteboard but might be horrible in the field. 

Now I look forward to be proven wrong by the disclosure of a super-competenent system for tracking reporting relationships across large organizations and behind-the-scenes automatic adjustment of group memberships, removal of unwanted groups, and so on.