You may not like your boss, or even loathe the thought of them, but that doesn't mean they're nuts. We all have varying opinions, so you may just have polarized feelings about most things. Your boss may also have to adhere to strict company policies s/he has no control over, or has no management experience but was promoted and is just trying to make do. None of these things are good, but they don't make up a crazy boss.
What we're talking about here is a person filled with rage who's prone to mood swings and has inconsistent reactions to common situations. This is a person who will share his or her feelings openly and expect you to have pity while they have little to no sympathy for you or others. A crazy boss will put their interests first, which may not always coincide with the interests of the company. This type of person needs to have an enemy or target at all times, which often means creating one if one doesn't exist.
These are just some of the many personality traits that can surface in a crazy boss, but you can generally always tell if s/he is creating trouble where it is unnecessary. They may not always be terribly aggressive people who are just outright mean, but when you're dealing with behavior inappropriate for even a poorly-raised child you're probably dealing with crazy.
Generally communication works better when you speak with people directly, but when you're dealing with irrationality that's rarely the case. Let the messages flow through multiple people. If you've got a crazy boss, generally everyone is well aware of it. If the boss sends a scathing message to you, if it gets filtered through at least one of your fellow employees first it's not going to sound quite as horrible. If it does, at least you'll have someone who will listen to you complain about the situation and empathize. Having a communication chain and the support of your coworkers is vital when you're dealing with an unstoppable force.
Every time your boss does something insane, write it down with a date and time stamp. Write it somewhere they'll never be able to find it, of course, but the important thing is that you keep a record. If things ever get to a point where you need to go to human resources to file a complaint, that record is going to be enormously important. On a more personal level, it's a good place to let go of everything they do. You can't get mad, and you can't act like them (unless you're looking to be fired), so you write down the crazy thing your boss did and you let go of it for the rest of the work day. You can always take the record home, share it with friends, laugh (and maybe cry) about how horrible your boss can be, and try to make the best out of a bad situation. Additionally, once that record gets long enough, it may serve as the motivation to leave your job and never look back.
When you do business with people you don't know, you generally get a contract. While you hope they don't have a screw loose, you do this because you can't be sure. A contract ensures that you are at least somewhat protected in the event of an issue. While you can't make your boss sign an anti-crazy contract—not that one would probably do much good anyway—you can protect yourself by having a written record of requests and most anything else you can get. For example, if your boss asks you to prepare a document for next Thursday and then asks on Tuesday why you haven't finished, if you have an email or memo with the details of the request you have proof that they're wrong and made an error by asking for it early. This may no stop them from being hostile, but it will prevent them from punishing you for the error. If you do, you can very easily take the situation to human resources. You may not always be able to convince your boss to put every request in writing, but do your best. This provides you with evidence and will help you avoid he-said-she-said arguments.
Say you came out of the grocery store and returned to your parked car only to find a man with a flamethrower. Your car is missing, and he's just standing there with a smile on his face. Maybe the man stole your car and maybe he didn't, but you'd be unwise to engage him as he's holding a freakin' flamethrower. This is your boss on a good day. When you engage crazy, you will not win. You may do some damage, but you're in no position to come out of that battle alive. It may be hard to suppress your anger, but let it out in a safe place. Don't ever engage your crazy boss. It will not end well.
When you work in a hostile environment that you have no power to change, the only real solution is to look for work elsewhere. Of course, jobs can be hard to come by and you may not have the luxury of quitting on a whim, but that doesn't mean you can't try or at least plan for the future. Carve out a little time in your week to look for new jobs and don't be discouraged if you make no progress for awhile. Just stay on top of it and keep looking. Eventually you will find a way out and hopefully a new job with a much more reasonable employer.
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