In our experience, people with the same manager may not be based in the same location so we use departments to group employees for reporting purposes.
An approver will see all employees for whom they are the approver but you can also give an approver "additional departments" which they will see in the reporting screen. Where departments work closely together, this can give increased visibility of time off.
The department drop down consists of all departments associated to your organisation. To add a new department, type it in the New Department box and update the employee record.