Instructors of college level business courses utilize group assignments to stress the importance of collaborative work in professional organizations for students. How instructors determine team formation, whether assigning students to groups or allowing students to form their own groups, could impact the effectiveness of the group regarding their cohesiveness, conflict, or social loafing. Best practices suggest that instructors strategically assign students to teams to maximize the diversity of the members. However, could the diversity of group members contribute to conflict amongst members? Could the formation method contribute to the members' functioning as a team or group? The research questions in the study are: To what degree does team formation method impact (1) members' conflict; (2) members' cohesiveness; (3) members' social loafing; and (4) members' functioning as a team or group? Over 2 years, simultaneous sections of the same management course utilized different team formation procedures. Each year in one section, the instructor designed teams to maximize diversity of members. In the other course section, students freely formed their own teams. The findings suggest that instructor-designed diverse teams did not increase member conflict. Also, student-selected teams did not improve team cohesiveness. However, instructor-designed diverse teams did impact social loafing and the members' functioning as a team.