Henry says Dalglish and No2 Steve Clarke, now in charge of West Bromwich Albion, failed to inspire the players.
"I think you could say the response to Kenny and Steve (from the players) was lacking," Henry told the Daily Mail. "The play was lacking, so that entered into our considerations.
"When I first discussed with Kenny making a change before he took the job, he spoke about that if he ever were to take it and we danced around it, we discussed what role he would take at some point.
"Kenny did say that if it was the manager’s job, he would only do it until we had the right young man to come in for the long term. We spoke about it two or three times before he actually took the job.
"He was always saying no one man is bigger than the club. Everyone knows what it meant when he came back, how he brought all the disparate elements back together.
"There were a lot of different directions and he unified the club internally and externally. He did an incredible job of getting us all on the same page."