The Scot returned for a second spell at Liverpool in January and came close to securing European football after the club endured their worst ever start to a Premier League season.
And McManaman says Dalglish is the perfect man to take Liverpool forward. "He has this great way of dealing with people. Whether it's the person who works in reception or the guy on the car park, everyone has a high opinion of him," he said.
"Players love playing for him and he commands respect. He was a great player himself so he's been there and done it. He knows what works and what doesn't work.
"People I speak to at the club now talk about how much the atmosphere has changed. They are more relaxed.
"Kenny has also brought back the old Liverpool values which were so admired. Everything is done behind closed doors and what goes on in the dressing room stays in there.
"All that combined makes for a happy group of players and when you've got that you find they try more for the manager."