How to Manage a Bad Boss—And a Lame Economy

One expert thinks the workplace will improve—especially if workers insist on it.

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Do. More. With. Less. Everybody knows the mantra. With jobs scarce and the economy barely recovering from a brutal recession, employers are milking workers for all they can get.

[See 11 firms that overdid the layoffs.]

So is this the future? Or do brighter days beckon? To get some clues about the direction of workplace trends, I spoke recently with Stanford University professor Robert Sutton, author of the new book Good Boss, Bad Boss and the 2007 bestseller The No Asshole Rule. Excerpts:

What's happening in corporate America? Profits are strong but nobody's really hiring. We're transitioning to a "new normal," but it's not clear what that is yet. What do you see?

The poster child for the new era is HP. Look at the era of Mark Hurd [the former CEO, who left recently]. He did a brilliant job cutting costs. But HP has two major problems. There are surveys and other signs that HP's morale is way down. In one survey, the CEO got just a 25 percent approval rating. The way out is innovation. But where is it? The only thing I've seen is a way to extract more ink from a printer. A lot of employees have left, others are lying in wait. Over the last five years, HP has been one of the last places people in Silicon Valley want to work. It's terrible. Efficiency-driven. HP lost its soul after it merged with Compaq [in 2002]. I think that represents the short-sightedness of corporate America.

Overall, HP is doing okay, isn't it? One of the reasons HP has done well enough is that Dell shot itself in the head. It's really good to compete against stupid companies.

[See how to tell when the recession's really over.]

What's an example of a company that's doing better? Intel is an interesting comparison. They increased their R&D budget during the downturn. That's what good companies do.

There's one manager at Intel, Patricia McDonald. She had to do a big layoff in Oregon. Intel's a pretty hard-nosed company, usually performance is the top priority. But she said, during the downsizing, our top priority is going to be helping the people who got laid off find new jobs. By the way, she ran a plant that exceeded performance targets.

What are the biggest changes affecting the workplace right now? The biggest change these days is probably the nature of the basic employment contract. Most companies don't have pensions anymore, you can take your 401(k) with you, there's no incentive to stay loyal. Layoffs are everywhere. HP never had layoffs until about 10 years ago. Even Google has had layoffs.

Sometimes layoffs are an economic necessity. But there used to be a psychological contract: It used to be, we'll take care of you. Now it's more like: Take care of yourself and maybe we'll help if we're in a good mood. People criticize young people for having no loyalty and for going wherever they want. But why do they owe anybody loyalty? They and their parents have been treated like shit.

[See 7 new rules for getting ahead.]

You hear a lot of slogans about how companies need "talent." But in the real world, it's hard to believe companies are thinking about talent right now. Mostly they just seem to be cutting costs. At any one time, an organization must do three things: Make money and cut costs if that's what it takes to stay in business, innovate, and keep and maintain talent. They don't always do those three things all at one time, and now, you're right, one thing is more dominant. Cutting costs.

But there are still companies that care about talent. Look at Apple. One thing about Apple, for all the focus on innovation, they are also superb at efficiency. And Steve Jobs is surrounded by such good people.

The Big 3 consulting firms, Boston Consulting, McKinsey, and Bain. All three firms cut so deeply after the dot-com bust, they've been in a hiring frenzy.

Unfortunately, most people can't get a job at Apple or one of the consulting firms. And a lot of companies seem like they couldn't care less about morale. Workers complain about work conditions or doing more with less, and the usual answer is: Tough. You're lucky to have a job. Does morale still matter? It does. The test will be, which firms come out of the downturn better off, and which come out worse off. Some companies have cut all their training programs, for example. If you're the CEO, that's not irrational, because you have a choice: Cut training programs, or cut people. It's interesting because look at the Japanese, for example. They've never had the cult of personality at the CEO level, like some American companies. It was always training and development that helped them get ahead. Procter & Gamble still does this well. G.E. has retained a commitment to developing people. But a lot of other companies have cut it completely.

Bain did a study after the dot-com bust and found that companies that were the first and deepest to lay people off had the worst stock performance. Worse than companies that laid off slower.

[See how to tell if your company's a loser.]

Do you think that will be the case this time around? Could be. The reason is, it takes longer to retrain people who do sophisticated work. So if you're getting rid of those people, you're not going to be as competitive.

One of the obvious trends seems to be that companies are hiring more contract workers and fewer full-timers. Is that going to last? It's kind of like the Hollywood model. Every film is a project, so everyone in Hollywood is a project employee or a contract employee, for that film alone. Pixar is an exception, a throwback to the old studio system, where people worked for one studio their whole career. But in today's Hollywood model, having a strong reputation and a good network is what matters, because that's how you get your next job. Silicon Valley is somewhat similar to the Hollywood model. People go from one project to another.

Is this where the broader economy is heading? I hope not, because it's a picture of extreme instability. Basically you throw out a lot of bets, and most fail. And you never know whom you can trust. There are studies that show for high-end contractors, they have more autonomy and more satisfaction. But if you're not at the high-end, it sucks.

Even so, people need to look out for themselves more these days. What should they do? Everybody needs to look out for their own skill set. And that can be exhausting. You always need to ask what more you need to learn. A lot of companies have gotten rid of leader development. So if you aspire to management you might have to find your own leader-development classes. Find your own mentors. People need to rely more on their social network and their occupational network, and less on employer promises.

[See 3 ways Obama could boost hiring.]

What's an occupational network? An occupational social group is different from a work group. It's a networking group, including people you used to work with. Some of these groups really take care of one another. To make that work best, find members of your group with the best jobs and the most prestige.

With all the pressures weighing on companies, are bosses getting worse? Or did the bad bosses get washed out in all the layoffs? It's not all gloom and doom. There's some evidence a lot of people think their job is okay and their boss is okay. It's important to remember, not everybody who's working is miserable.

But it's still true that a lot of people quit because of a bad boss, not a bad workplace. What matters most isn't your company, it's your immediate work group and your immediate boss.

Why don't mean bosses get caught more often? You'd think that companies would use all the layoffs to weed out the bad bosses. Some of the biggest assholes are really resourceful. I call them strategic assholes. They network ad nauseum. They kiss up and kick down. As long as they're performing well, they're tolerated.

[Find out if you are a "zombie consumer."]

If you're stuck with a bad boss, what are your options? If possible, get out. If you can't get out, try to have a conversation with your boss and explain how you feel. To do that, you must make the political calculation that you'll survive that kind of conversation. If you have a nice but incompetent boss, you'll probably be okay. If your boss is a raging narcissist, it's probably not going to work.

If you have a boss who's a bully, document everything you can but don't go after your boss by yourself. Go after your boss with co-workers. It's kinda like Alice's Restaurant. If there's just one of you they'll think you're crazy. But if there are three or four of you they might think it's a movement. It does take a physical and psychological toll when you have an abusive boss. Even on your family.

Some people with lousy bosses just argue with them and live with it. The smart employees kiss the boss's ass until they run out the door.

Well that's part of the problem for a lot of people, isn't it? There's no place to run. Yeah. So if you are one of the people with a bad job and a bad boss, the best thing to do is learn the fine art of emotional detachment and not giving a shit at the low moments of your life. That's humbling but it can be pretty constructive. You have to learn not to give a shit about company politics. It's the art of not letting it touch your soul.

[See why American workers need to toughen up.]

As you get feedback from people who read your books, is there anything that surprises you? Yes. In some ways, having a nice boss who's incompetent is worse than having a bad boss who's a complete jerk. I hadn't thought enough about the nice but incompetent boss. People don't just want a non-jerk boss, they also want a boss who's competent.

Are you pessimistic about the state of working America? No, I'm not pessimistic. Nobody is saying the bottom is going to fall out. When things sweeten up, you'll be amazed.