What you have to do is to create a view that lists users and which takes a user id as an argument. When no user id is given it should list all users. When a user id is given the view should list all users who are referenced to the user whose id is given as the parameter.
In the views output against each user there should be a link that links to the same view with the user id of the user in the row passed as a parameter. Now clicking on that link the view will be loaded and show the child users under that user.
or
Use the Organic Group module for user hierarchy.