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This research examines the relationship between the Legitimate and the Shadow Systems in organisations: an interaction that can result in bringing an organisation into a state of bounded instability, and therefore increased creativity and innovation. The Legitimate System consists of the formal hierarchy, bureaucracy, rules, controls and communication patterns in an organisation. A properly functioning Legitimate System is vital for the conduct of business in an organisation in order to ensure its survival and efficiency. The Shadow System is a term coined by Stacey (1997) to describe the informal network of relations within the organisations that are evident in casual hallway conversations, along the grapevine, through the rumour mill and in the informal procedures for getting things done. It harbours such diversity of thought and approach that it is often the place where much of the creativity resides within an organisation. Hence, it can be a great source of innovation if leaders could learn to listen to and tap into it. Stacey proposes that when the Legitimate and Shadow Systems are at a level of optimum interaction, an organisation can sit at the Edge of Chaos or be in a state of bounded instability. In this state the organisation hovers between equilibrium and chaos and is the ideal setting in order to promote change and maximise innovation and creativity (Brown and Eisenhardt, 1997).
Halpin, C., Hanlon, P.: Interaction of the Legitimate System and the Shadow System in Organisations. Presented at 11th Annual Conference of the Irish Academy of Management, Dublin City University, September 2008.