Microsoft: Contact Group is Grayed Out in Outlook for Mac 2011

In Outlook Preferences, you have to make sure the 'hide items on my computer' box is unticked. Then, the option to add a group is available. To untick the option, follow the steps below:

1. Click on the Outlook Menu and choose Preferences
2. Click on the General button
3. Uncheck Hide folders on my computer

Reference:
Add Contact Group is grayed out in Outlook 2011
http://oit2.utk.edu/helpdesk/kb/entry/1830/