We posit a model of endogenous team formation to study the incentives of heterogeneous workers inside organizations that decentralize information production and characterize the inefficiencies that arise in equilibrium. Our analysis leads us to define, and prove the existence of, a new solution concept for one-sided matching environments with imperfectly transferable utility, Coalitional Subgame Perfect Equilibrium. Inefficient equilibrium sorting arises from two sources. First, moral hazard within teams may cause workers to join less productive teams in which they exert less effort. Second, while some workers may have incentives to form productive teams, such teams may generate significant negative externalities on the productivity of other teams.