Members of the club's general committee will discuss a restructuring of the cricket management at a meeting on Thursday.
If the plans are approved, Watkinson, who has been cricket manager for the last seven years, would oversee the whole cricketing side of the club, and a new coach would be employed to take charge of the first team.
"The chairman has been looking at the structure of cricket at the club right across the board including the first team, second team and Lancashire Cricket Board," said chief executive Jim Cumbes.
"If we are looking at the possibility of one person overseeing all the cricket at the club, they will not be able to be in charge of the first team as well, although Mike has attempted to do that over the last few years. But it is a big job.
"Mike is a keen and highly-qualified coach but at times he is pulled in all directions. He is in charge of the first team, but also needs to know what is coming through the Academy and where our next off-spinner or batsman are coming from. It really is a split role.
"If the plans are given the go-ahead on Thursday, the club will be keen to bring in a new coach as soon as possible, with pre-season training starting next month."
Although there are no obvious candidates, there are likely to be several people interested in what is seen as one of the biggest jobs in county cricket.
Former Sussex captain Chris Adams, who has been the bane of Lancashire over the last few seasons as his side has pipped them to the County Championship twice and in a Lord's final, was last week interviewed for the cricket manager's job at Surrey but may fancy a crack at the Old Trafford job.
Whoever takes charge will be handed the task of ending Lancashire's 74-year hunt for an outright County Championship title and with returning them to the one-day glories of the seventies and eighties.
It has been a hectic two months at the club since the end of the season, with Stuart Law being axed as captain and being replaced by Glen Chapple, VVS Laxman being confirmed as the club's main overseas player for next season and long-serving groundsman Peter Marron announcing he is standing down from the post at the end of the year, with his deputy Matthew Merchant being promoted.
ECB managing director Hugh Morris could not confirm reports that Andrew Flintoff and Steve Harmison have refused to return to India for the two-Test series following the terrorist attacks in Mumbai.
"I've not had confirmation from either Andy or Steve. What we are doing is pulling the (security) reports together over the next 24 to 48 hours and we will be putting that information to the players and their representatives," said Morris.
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milli vanillis toyboy uncle, stocky (02/12/2008 at 19:28)
Doin the door . selling programmes , running the bar etc,etc .
Bring back " bottletop " stu law + his best friend corky