Oh! This is where I’m a bit of a viking!
I’ve helped train more than 15,000 moderators over the years (for real), across communities of all shapes and sizes, and I’ve developed some pretty blunt-force opinions on this particular subject. Shocking, I know. 
So one of the biggest mistakes I bump into is communities treating moderation as a promotion for being a good lil’ community member. It really, really isn’t. Being a prolific contributor, or even a legendarily loved one, doesn’t necessarily mean someone has the temperament, judgment, or patience to moderate other human beings (or bots).
I’ve always looked for folks who demonstrate good judgment when no one is watching. And that doesn’t always mean activity-level. These are the people who welcome newcomers, try to de-escalate arguments without being prompted to do so, and understand that being right and also being helpful aren’t necessarily the same thing. I want someone who can disagree with me thoughtfully on stuff since that’ll be a better long-term person than someone who agrees with everything I say.
My grandfather used to say “If you’re a dumb person, surround yourself with smart people who will tell you what to do. If you’re a smart person, surround yourself with smart people who will disagree with you.” Erring on the possibility that I may be catastrophically dumb and most of what I’ve built is statistically improbable but not chancing it, I surround myself with a mixture of both in any moderation corps.
Here’s some things I’ve found particularly important:
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Recruit for temperament, train for competence. You can teach someone the tools, policies, and procedures. Teaching someone not to be a jerk when they’ve got a little authority is considerably harder. Fasted way to discover tyrants is to give them a heaping pile of power and step away.
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Give people a runway. Start with informal community stewardship, move into mentorship and shadowing, and gradually introduce responsibility. Don’t just hand someone the keys to the kingdom and wish them luck. Also have to model the behavior you want to see.
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Build a place for moderators to be human. Private spaces where they can ask questions, disagree, vent a little, and learn from one another are enormously valuable. Nobody should feel like they’re making difficult judgment calls alone. Moderator Discussions as a private area should feel like a very cozy spot. Keep it super casual and chill. Like a little VIP lounge. Chairs are comfier, drinks are free, that kinda thing.
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Make escalation and accountability normal. Moderators need to know when to ask for help, and leadership needs to be willing to back them up while still holding them accountable. Disagreements between mods should be escalated, and handled quickly.
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Treat burnout as an operational problem. Rotate responsibilities, encourage time away, and make it abundantly clear that nobody needs to sacrifice their mental health to keep a forum tidy. I’ve seen wonderful moderators burn themselves out because they felt personally responsible for everything happening in their communities. Don’t channel Atlas. The world is not on your shoulders. Step away. And, try to have enough moderation in place so that if half the team implodes at any point, there’s still enough kicking around that the community won’t collapse. Especially if it’s a volunteer role.
On the handbook idea, I’m a big fan. I’d actually start with a living document that includes real examples of decisions and the reasoning behind them. A helper bot could make that knowledge much more accessible, but the real value is in capturing the institutional judgment of the team, including the messy edge cases where the guidelines don’t give you a very satisfying answer. I also like to include a bit on interpersonal communications. Always take the Most Respectable Interpretation of someone else’s input. Never turn away the newbie. All are welcome.
And one last thing that I think gets overlooked far too often: moderators need to feel like they’re part of building the community, not just janitorial. Give them a voice in policy, direction, and community culture. Recognize their contributions. Invest in their growth. Let them propose new initiatives and drive those. These people are the critical pillars around which your community forms.
Last tidbit I’ll share, is sometimes the loudest voice and biggest troublemakers make the best moderators. Nothing like handing the noisiest complainer power to change the problems they see in the world. I like to reserve this to maybe 1-2 out of 10. Otherwise you end up with homogeneity of groupthink and it gets a little static and authoritarian fast.
The healthiest moderation teams I’ve worked with weren’t necessarily the ones with the most elaborate rules or the largest number of moderators. They were the ones where people trusted one another, understood what they were trying to accomplish, and genuinely enjoyed doing it together. They stick together, too, for decades. Get that culture right and model it yourself, and lots of the rest of the stuff starts falling into place.
Hope this helps!
-Joe Pishgar