Hey, that really sucks and I’m sorry it’s happening to you. You sound very competent and like you take pride in your work.
Here’s my advice:
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Don’t quit without another gig lined up.
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Start looking for a new job now. A bad boss can ruin even a great job, and managers in particular are hard for a company to get rid of. She’ll likely be in that position awhile. You’ve got a boss who is incompetent and has already displayed some loose ethics. You don’t want to stick around that.
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Incompetent bosses can sometimes be a good thing because they’re easy to fool. Consider pulling back on your work production so you can focus on designing a great resume and prepping for interviews.
And remember the most important rule: “A company will get rid of you just as soon as it’s convenient for them to do so. You should be ready to do the same to the company.”