Just like its name, By Manager – Direct Reports and By Manager – All Reports focuses on the manager-employee relationships that are defined by your organization's hierarchy.
For the By Manager - All Reports attribute, it will collect all users below a manager in the hierarchy. With By Manager - Direct Reports, it will only select the direct reports for that Manager.
These two system attributes are read-only. They will automatically collect the manager information from User Management, and update the values accordingly.
For example, Bob Ryan has 2 direct reports, and each of them has 3 direct reports. When selecting Bob Ryan and then using By Manager – Direct Reports, it will return 2 users (his direct reports). If By Manager – All Reports is selected for Bob Ryan, it will return 8 users (Bob's 2 direct reports, and each of their 3 direct reports).
Where are they located?
In addition to Departments, Office Location, and other attributes, with the By Manager attributes, you have more options when slicing survey results, or creating Saved Groups. You can select them in the Attribute dropdown in response visualize or saved group creation.