In today's highly competitive environment, organisations realise that they can achieve their goals only through the combined efforts of everybody involved in the organisation. Previously, organisations relied on hierarchiacal, functionally orientated, command-and-control systems. Today, the adoption of a team-based work arrangement creates a flat, focused, flexible, and adaptive organisation capable of rapid responses to change. Groups and teamwork allow for greater participation, increased performance, and ultimately influence the motivation and satisfaction of employees. However, changing to a team-based structure does not guarantee success. Some groups tend to be more successful than others, and for this reason it is essential to investigate the factors that contribute to effective group functioning. The introduction of virtual teams into the workplace also offers new challenges for the way in which people are managed. In this chapter, we explore the nature of groups, how they develope, and the factors that contribute to effective group functioning. We examine the difference between groups and teams, and give special attention to the utilisation of teams in the workplace.