I am just finishing my second year as a chair in a larger department than OP's (20) and was brought in from the outside because the place was incredibly dysfunctional with a chair just as OP's predecessor is described. I have learned a number of things in this kind of situation:
Ask the dean for more money for your operating budget NOW and get the commitment NOW. In my case, I made it a condition of hire; the dean said "sure." When I asked why, if it was that easy, had it not been done before, the dean said "no one asked."
Have monthly, not biweekly, meetings. You must lead them firmly, and you can't allow tangents to go on for more than 60-90 seconds (really). If they last more than an hour, you're talking too much! There is enough information presented to chairs by the deans, and enough work to spread around, that a monthly meeting really is adviseable. That way too everyone knows that, say, Mondays at 3 are always free since no one schedules class for that time because that's meeting day! Publish the agenda several days in advance.
Stop the moaning about the past as soon as you can and focus on the future.
Say yes to reasonable requests whenever possible.
They don't really mean it when they say "shared governance." What they mean is you do all the work and they approve your drafts. That's just the nature of being a chair. They also mean that you get to make the very hard decisions and they never have to take the heat.
You get to make the hard decisions. Make them and stand firm.
They don't mean immediate change now. They mean "make my life better right now." You may not be able to do that; you may have to demand more from them, or take away a RA, or something. They want you to do what they want you to do, but sometimes your colleagues cannot see the forest for their own personal trees. Sometimes you need to make decisions in the best interests of the department or its programs or its individual faculty, which may conflict with immediate needs and concerns. You have to be the long-term, big-picture thinker here.
Do not give in to department bullies. Sometimes they yell "shared governance" because they don't realize that just because you are smart enough to discount their opinion doesn't mean you discount everyone's opinion. Of 20 people, I have a couple who are real doozies. I consult with their colleagues before consulting with them so my back can be even straighter than usual.
Set standards for student and colleagues' scholarship. That means, for students (and, presumably, colleagues), no plagiarism. For colleagues, that means do some damn scholarship and get published.
Your scholarship will likely suffer but do not cancel your talks. Don't. You will have so much more legitimacy, particularly when raising those standards, if you can walk the walk.
Don't be surprised when people--perhaps, or especially, those who were your staunchest supporters at the outset--turn on you. Those who claim to want strong leadership actually only want strong leadership when it agrees with them. The ones who have been sitting back watching will likely be your go-to people; the loudmouths will fume about your tyranny (and get all dramatic about it) but since no one listens to them it won't matter. If you are consistent and fair, you will do well by everyone, and most of your colleagues will see this.
Are you scared? Don't be...this is a very rewarding, but very challenging, job. Did you see:
http://chronicle.com/jobs/news/2007/05/2007050101c/careers.htmlI circulated this to my fellow chairs, and most agreed this essay gets it right.
Feel free to PM me with any specific questions or concerns.