Schools minister Estelle Morris has told Walsall LEA to advertise the posts or face privatisation.
The ultimatum was given to a delegation from Walsall, including acting chief executive Hardial Bhogal, during discussions about the implications of the borough's damning LEA report.
In a report to councillors, Mr Bhogal said: "A new management team will need to be put in place.
"It is proposed that steps should be taken to appoint a brand new senior management team via national advertisement."
In a clear criticism of management, the Office for Standards in Education said Walsall lacked strategic direction or proper operational control.
The LEA was also told it had been too slow to restructure its schools inspection and curriculum services and it had poor relationships with schools.
Five staff have been named on a list of at-risk jobs which will be advertised, although Walsall stresses the job losses will be through redundancy rather than dismissal.
They are CEO Humphrey Smith, Derek Lever, responsible for school inspections, John Round, special educational needs, Peter Sheppard, governors, and Edwina Wright, in charge of finance and personnel.
Mr Bhogal told The TES the five staff had been informed that their positions were "at risk" but he said it was important to remember that they may not be the only employees to go.
Walsall will hold talks with the Department for Education and Employment about its approach to introducing the new management team - and says redundancies may not be restricted to the five named officers.
The management shake-up is part of a package of re-organisation which is expected to see the council taking a stake in a joint-venture company to run education services, as an alternative to full-scale privatisation.
But the Government has taken an approach towards Walsall which is far too heavy-handed, according to Graham Lane, education chairman of the Local Government Association.
"The Government, it seems, have been acting as control freaks by telling local authorities directly what they are going to do," he said.