I'm just a nursing student...but this is my second career. I've been in management for 15 years. I also have a bachelors degree in management.
You are very emotional about this...I think your first step would be to try to separate the hurt that you are feeling (he's saying bad things about you) and try to think about this completely logically. One of the first things they teach you in business school is the difference between emotional thought and logical thought. Specifically, there are three likely things that keep you from making a decision when you need to make one. 1) you don't have enough information (so ask more quesions) 2) YOu have inaccurate information (so double check the information you have in front of you) and 3) You are too close to it emotionally. You need to put your emotions behind you, and get on the "logical side" of your brain. You have a golden opportunity to build a strong team member here:
Here's what I would do :
I would have an informal, comfortable chat with this person. Lay it all out on the table. Tell him that you understand that he is bad mouthing you, and that is not okay...especially coming from him. Reinforce with him that you made him charge nurse because you respect his abilities. (You are framing the conversation...making sure that he does not feel threatened, and improve the chances of him opening up to you.) So because he is this great person, and nurse, you feel some issues might be coming out a little sideways...perhaps there is some kind of frustration he is feeling (something you did, said or didn't do, or something that is wrong with the working environment) and its coming out sideways with the bad mouthing. Then ask him what is going on.
Then shut up and take notes on what he says. When he starts pointing at your notes and saying "make sure you add this..." you have him back as a team member and not as an adversary.
Sidenote: don't apologize unless you really did something wrong. Thank him for letting you know...tell him that you were aware of these issues, but did not realize they were affecting him so adversely.
Identify problems...there will probably be some easy fixes that you can do right away. If you can find something that you have to fight for on his behalf he will love you and be a great employee again...even if you fail. As long as he knows you tried, it was a valiant effort, and you kept him informed along the way. (most reasonable employees will)
For example. The problems of dictating tasks to other nurses are symptoms of other workplace issues. He's trying to solve another problem, and this is the way he has decided to handle it. Identify that other problem. However, the patient advocacy problem is his problem...just write down the problem (you might need to bring it up--and how this information came to your attention) and don't say anything else--just write it down. This is going to be what he has to solve after this meeting.
(Do you see here that the list is turning into the advisary here, these items are what the real problem is and not you.)
Summerize the meeting with listing the problem areas discussed, and ask him if he has anything to add. Encourage him to come to you first if he has any more issues...make sure he understands that badmouthing you to others does nothing but create a negative working environment, and if you hear that he has done it again you will have another talk, be written up, whatever. Let him know that you will "understand" the first time, but if it happens again there will be consequences. If he wants to be a manager, he needs to act like a manager...therefore managerial problems are discussed with other manager. Period. Same goes for the other issues, such as dictating to other nurses. Not acceptable. Some of these problems you need to bring up and let him know that he needs to solve these problems, on his own...and immediately...like the patient advocacy problem. This is when you are firm.
If you need a little more backbone during this part of the conversation, say to yourself...No one likes a whimpy boss. (this is what I do...)
Then work your behind to solve these issues...reinforce that coming to you with problems fixes them, and makes him a star as well as you. He will learn that he can talk to you, but he cannot disrespect your leadership. Make sure you give him feedback on the other issues both good and bad.
In the business world I would also let my boss know that I had this employee problem, and how I was going to solve it. This does three things...first, shows them that you have your act together and are solving a small personnel problem on your own before it disrupts the work environment; second, warms them up...in case you need their help to solve a problem after the meeting; three in case for whatever reason he decides to go over your head to your boss, hopefully your boss will know to back you up and refer him back to you.
Good Luck! Let us know what you decide to do!