If your health – mental or physical – begins to deteriorate, you must take medical leave and give the mandatory two weeks’ notice of quitting the job in writing. If you permit the abuse to continue, you’ll end up spending more money on medical expenses than you make by way of your salary.
Update your resume and start hunting for a better job
In case there’s no change in your boss’ behavior towards you, update your resume and start looking for a new job. This is the safest method of dealing with a psychotic boss, mainly because you’re avoiding any possible future interactions with him/her.
Write down everything that’s inappropriate
This is absolutely important. Write a memo whenever your boss speaks and does anything that’s inappropriate. Your memo should clearly state that the behavior is intolerable, affects your work considerably, and you want it to cease immediately. If the intolerable behavior happens again, mark a copy to the HR manager, or his/her boss, on your subsequent memo to the boss.
Never confide in co-workers
On the outside, most psychotic bosses appear as normal individuals. Therefore, there are high possibilities of your co-workers passing on all the information that you confide in them to your psychotic boss. Therefore, never make the mistake of confiding in co-workers about the differences with your boss.
There is no reason for you to stay there if he/she is acting irrationally.
However, if he or she continues acting "psychotically", it affects you and there is no way to change it, I would still say you had better find another place.
Contact the employee assistance group
Alternatively, you can contact the corporate ethics group to deal with a psychotic boss. Both these groups are non-existent in several smaller enterprises. However, where these groups exist, contacting them will confirm the duration of your issues with the psychotic boss.
Alternatively, explore transfer options within the company
Explore the options for a transfer to a different department under a new boss. If you’re a good employee, your company would strongly prefer to retain you at any cost. Your higher-ups will consider your request for transfer to another department favorably. Therefore, this is another effective method of dealing with a psychotic boss.
Make it clear you are not going to tolerate this behavior
To deal with a psychotic boss, speak with a confidant
This will help you in resolving your thoughts better. Avoid venting your anger. Stay calm and speak about genuine issues, not mere gripes.
Record your boss’ actions and inactions formally
Attach a formal memo with the documents of the project you’re working on currently. If your boss doesn’t respond to the memo, forward a copy of the memo to all the other members in the project team.