Bruce Dyer was causing the Sky Blues defence problems and should have done better on 22 minutes when he was played in by Gavin Mahon and had time to turn and shoot, but fired straight at Luke Steele.
Dele Adebola was providing the greatest threat for Coventry and forced a good save from Lee on 25 minutes.
The giant striker controlled brilliantly and played a one-two with Stern John, before forcing his way past two defenders in the box.
Lee came off his line well to block but paid the ultimate price, colliding with his own defender James Chambers and was stretchered off to be replaced by Alec Chamberlain.
Steele was called into action again just after the half-hour mark when Neal Ardley ran on to a loose ball and aimed a low shot straight for the bottom corner, but Steele stretched to save well.
Coventry finally broke the deadlock on the stroke of half time when Stuart Giddings played a low ball into the box, which Adebola backheeled into the path of McSheffrey who turned and drove past Chamberlain.
Watford tried to hit back after the break – a Chambers cross was well met by Heidar Helguson but his header flew over.
McSheffrey then missed a golden chance to double Coventry's lead on 54 minutes when Stephen Hughes' free-kick flew through the defence and fell at his feet, but he hit the bar from two yards.