Directory and Goals for Direct Reports

Summary

Directory shows the correct heirarchy but Goals does not show the same list of workers

Content

In both R11 (Production) and R12 (Test) we are seeing a weird behavior where the directory shows the correct heirarchy of a manager but when you look at My Team or that direct reports team goals  (loogged in as that manager) the do not see all of the direct reports that they see in directory.  Has anyone else encountered this situation?  Is it a security duty missing?   Any help would be appreciated.  Document attached with screen shots of the issue.