Watkinson took over from Bob Simpson in 2002 and will still retain influence over matters on the field, but his day-to-day job will mostly involve matters upstairs.
"County cricketers are now full-time professionals and require more time, more resources and more structure than ever before to help with their own development and performance," he said. "At the other end of the scale you now have strict employment laws, appraisals, contracts, agents, and all the other important administration that needs to be dealt with on a daily basis.
"The scope of my role as cricket manager has increased considerably over the last 12-18 months due to the demands of modern-day cricket and the modern player," he said. "I see this as a positive move for the club to give the team of players the resources that they need to perform to their best, and it's a good opportunity for me to spread my involvement through different areas of cricket within the club and the county."
The new coach will work alongside Lancashire's new captain, Glen Chapple, who replaced Stuart Law after the 2008 season. However, Chapple admits possible candidates don't spring to his mind.
"You can't help but think which coaches are out there and who might be interested," Chapple told the Manchester Evening News. "It is not quite like football where the turnover of coaches is quick. And, if I am honest, I would struggle to know who the good coaches are out there, who are without work at the moment or who are interested in coming to England or moving to Lancashire.
"It is for the club to put some work in and find out who the candidates are. But the new coach needs to be in place as soon as is practical and possible."
The reshuffle in personnel represents a watershed for Lancashire's acrimonious winter. Law and Dominic Cork were both released - neither were particularly happy with the decision - and even their long-standing groundsmen, Peter Marron, has left for new pastures.