After he retired, Wathan became the manager for Kansas City's AAA Omaha Royalsfarm club and he was promoted manager for the big-league Royals on August 28, 1987. He managed five seasons in Kansas City, having two winning seasons in 1988 and 1989 and finishing second in the American League West both times. He was fired early in the 1991 season after a 15–22 start.
In 1992, Wathan began the season as the third-base coach of the California Angels, but he was named acting manager midway through the campaign when Buck Rodgers was badly hurt in a bus accident and took a medical leave of absence. Wathan led the Angels to a 39–50 record until Rodgers was well enough to return. He spent 1994 as a Boston Red Sox coach, worked as a color analyst on Royals telecasts in 1996 and 1997, and has worked as a scout and minor league instructor for a number of organizations since. In 2006-07, Wathan was a roving baserunning and bunting instructor in Kansas City's farm system, and in 2008 he served the Royals as a special assistant to the director of player development.