Shabby way of working not right to challenge (4-5)
I believe the answer is:
moth-eaten
'shabby' is the definition.
(I know that shabby can be written as moth-eaten)
'way of working not right to challenge' is the wordplay.
'way of working' becomes 'mo' (modus operandi).
'not' indicates named letters should be taken away.
'right' becomes 'r' (common abbreviation).
'to challenge' becomes 'threaten' (threaten can mean to challenge or put at risk).
'threaten' with 'r' removed is 'theaten'.
'mo'+'theaten'='MOTH-EATEN'
(Other definitions for moth-eaten that I've seen before include "Falling to bits" , "Shabby" , "Threadbare" , "Damaged by insects" , "Old, in bad condition" .)