I have the same problem other people complain lately regarding managing contract groups in Hotmail.  I don't see "Groups" menu on top nor do I see "Groups" under "Manage" in People!! I used to add contacts to the specific "Groups" that I wanted to, but not any more.  "Groups" menu just disappeared  suddenly.  Very Very frustrating!!! 

I don't understand how MS let this happen.  Upgrade should make things easier and better, not the other way around.  I like old Hotmail better than this frustrating and disappointing Outlook.   Please help!