Prior to taking his first managerial job at Swindon MacDonald's career most notably included a spell as caretaker manager at Aston Villa following the resignation of Martin O'Neill on 9 August 2010.

MacDonald also worked as assistant manager of the Republic of Ireland, with his ex-Liverpool teammate Steve Staunton, who he used to coach at Aston Villa.

MacDonald was discovered by Leicester City while playing for his home town club, Inverness Caledonian, in the Highland League.

In April 1989, shortly before he left Liverpool, MacDonald, along with his teammates, rallied round the bereaved families of the Hillsborough disaster.

[3] In November 1994, MacDonald was named caretaker manager of Leicester City for a short period between the departure of Brian Little and the arrival of Mark McGhee.

[15] With the departure of Houllier and his number 2, Gary McAllister, the Villa hierarchy let it be known that MacDonald and Gordon Cowans would have futures at the club no matter who the new manager was.

On 12 July 2013, he failed to attend a pre-season friendly with Forest Green Rovers at The New Lawn for what was described by Swindon as 'personal problems' and after six months in the job, it was announced that he had quit the club the following day.