This article is for changing an existing group's hierarchy within your community. If you are creating a new group- check out this article.
If the group already exists and you want to make it a subgroup of another group, go to the Group Settings, stay in General, and click the Parent Group drop-down menu to choose which group should be its parent group:
Once you've chosen the parent group, click Save Changes at the bottom. You will see the changes take effect in the side navigation bar and on the Community Map.
It also means that data will flow according to your new structure. Sub-group database/registration form fields will automatically be added to the parent group form, and members of the sub-group will automatically be added to the parent group.