Head, a part owner of the team who has worked alongside Frank Williams since the 1970s, took the new post of director of engineering.
"This is not a prelude to retirement," said the 57-year-old Briton, whose designs have secured nine constructors' championships and seven drivers' titles.
Head will focus on long-term issues, including planning for expected major changes to the regulations, rather than day-to-day technical matters and race strategy.
"It's up to me now to carry the ball," Michael, 33, told reporters.
"Ferrari have shifted things to a higher level and BAR and Renault have stepped up their game. We didn't do a good enough job and that's what we are in the process of correcting."
HIGH HOPES
Williams are fourth, 53 points behind Ferrari with just six races gone, after starting the season with a radical-looking 'tusked' car and high hopes of championship success for the first time since 1997.
"We're not making adequate progress as things are, so change was necessary," Head said.
"Clearly we weren't shy in saying what our intentions were for this year and we haven't achieved them," he added.
"The change is one that I decided on five weeks ago and it would have happened at the end of the year.
"The ideal plan for me would have been to move on at a time when Williams were strongly successful," added Head. "But it soon became obvious that a change needed to be made sooner rather than later."
Head said he would be attending fewer races, something that he welcomed, and denied that the changes had been made under pressure from restless engine partners BMW.
"I will be supporting Sam fully in his new role and I expect to be no less busy with the new challenges I have set myself," he said, also warning that the task ahead could be a rollercoaster.
"He's got to be prepared to take the brickbats as well as the praise," he said.
Michael was previously chief operations engineer at Williams, joining the team in 2001 from Jordan where he had worked as a race engineer for Ralf Schumacher.
"For me it's an ideal situation in terms of taking a step up," said the Australian. "Patrick will still be here and I'll still have the support of someone who has done it for 27 years."
Williams also said their new multi-million dollar second wind tunnel, hailed as the most advanced in Formula One, was now operational.
