Watson has been involved in greyhound racing, pairing up with Tottenham Hotspur teammate Stuart Nethercott to buy Elegant Brandy, who won the 1995 Grand National.
In 1996, he was signed by Swindon Town manager Steve McMahon. Newly promoted to second tier of the English Football League – Watson helped them avoid relegation.
Watson moved on to Rotherham United in July 1999, astute Millers' manager Ronnie Moore signing him on a free transfer. In his first season Watson helped Rotherham to promotion from League Two, narrowly missing out on the title.
After over 100 games at Rotherham his knack for promotions was spotted by then Reading manager Alan Pardew who at first, took Watson on loan before signing him permanently in March 2002 for £150,000 – where he promptly repeated the trick, guiding the Royals to promotion from League One, in his now customary second place.
He was released by Colchester at the end of the 2007–08 season, and then signed on a free transfer for Luton Town. However, Watson failed to make an impact at Luton as a result of a knee injury that kept him out of action for much of his contract duration, and he was released at the end of 2008.
After his release from a playing contract at Luton, Watson was given the position of first-team coach by Luton manager Mick Harford on 14 January 2009. After Harford's departure on 1 October 2009, Watson continued in his coaching capacity under new boss Richard Money until May 2010, when he left the club.
Following the departure of Aidy Boothroyd from Colchester United to take the manager's job at Coventry City on 20 May 2010, Watson expressed an interest in taking up the vacant managerial position at his former club.
In May 2015 he was appointed manager of Maldon & Tiptree However, Watson left the club after only eleven days to take up the position of assistant manager to Teddy Sheringham at Stevenage. He left his position in February after Teddy Sheringham's departure.
In August 2016, Watson was appointed Assistant Manager at Eastleigh. In January 2017 he was appointed to the same position at Whitehawk but left the club after just two games, following a change of manager. In March 2017 he was appointed manager of Bishop's Stortford.
