First, they need to decide which of the activities important to the faculty will be the responsibility of the chair, and how this service will affect the teaching and research component of the chair's academic charge. Second, those important activities that will not be performed by the chair need to be done by someone. This should be specified, along with compensation in terms of release time from either teaching or research expectations. Since the chair position primarily involves service, and since service is seldom adequately recognized, faculty without full rank and tenure should normally be discouraged from acting as department chair. Teaching, research and service are all valuable to any department, as well as to the college.
All valuable activities deserve to be rewarded.
Each department needs to develop a reasonable combination of duties and rewards.