Mourinho was sacked by his old club in December.
"I think he's tip-toeing at the moment," Merson told Sky Sports.
"I mean that in a way where he doesn't know what his best team is. I feel he's trying to keep everyone happy at the moment. What happened at Chelsea has knocked his confidence a little bit.
"Instead of going bang, bang, bang and making big decisions, it's been a bit more careful because of the situation of what happened at Chelsea. He needs to sort it out quickly and put out what he believes is his best team."