Holistic
Unless you are an elite side, you can probably only win so many games in a season. There is only so much effort that can be put in, and you will always get flat performances and off days. And this season, Liverpool have had an above-average return in the cups (mostly against Premier League sides) and a below-average return in the league. The squad, and the sides fielded, have not been at the level to do consistently well in both.
Swap the cup and league results in specific fixtures and things would look very different. City at home (drawn) and away (lost), United at home (drawn), Chelsea away (won), and Stoke home (drawn) and away (lost) would suddenly become: City at home (won) and away (drawn), United at home (won), Chelsea away (won), and Stoke home (won) and away (won). That would leave the Reds a fairly incredible 10 points better off in the league; but still not in the top four, and with no chance of a trophy.
Its easy to say that these teams may have not been trying as hard in the cup games (though all fielded strong teams), and of course, cause and effect from changing one result would mean subsequent results wont necessarily have remained the same.
But the crux is this: Liverpool played at least as well, if not better, against these teams in the league matches when dropping points than they did when beating them in the cup. In particular, Stoke away, City at home and United at home were games where the Reds played better in the league, but didnt take their chances. It can start to feel fairly arbitrary why a side takes its chances one day and not another. Why did Liverpool play worse in those cup games but win?
In the bigger picture, my belief is that winning cups can lead to league improvement the following season, even if its not guaranteed. At the same time, too many cup games in a single season can harm league form.
In 1997, Middlesbrough had a lot of good players, and reached both domestic cup finals. Do bad teams do that? one, perhaps, but two? They were, at the very least, a top half of the table side on paper, with Ravanelli, Emerson and Juninho in the XI. But they were relegated. Had they got those wins in the league instead, theyd have been safe.
Sheffield Wednesday lost both 1993 cup finals to Arsenal. The Gunners won a European trophy the year after, and the domestic double in question came just two years after their most recent league title. Their league position that season when winning the two domestic cups? Tenth. (Three places below Wednesday.)
Liverpool won the FA Cup, League Cup and Uefa Cup in 2001. At the time, coming third in the league (with 69 points) seemed a big deal, but the following season the Reds had no such cup fortune, but finished 2nd with 80 points. Its not inconceivable to think that the side could have reached 80 points a year earlier had its efforts been focused on the league, but when theres a bigger sense of excitement arising from the cup games, more emotional energy seems to go into it.
But while cup games can harm your sides health, its difficult for a manager to eschew them and focus purely on the league. This is particularly true of managers under pressure, and that usually means a newly appointed boss trying to make a mark, and those who have gone a while without silverware.
Theres also the issue of the Carling Cup being in February. Does a sense of winning something with three months left cause a slackening in intensity in other competitions where the rewards arent as easily attainable? Spurs in 2008 and Birmingham last season both crashed badly after the win, while Arsenal self-combusted after losing last years final. You cant really coast after winning the FA Cup, as its the end of the season.
Inheritance
Its only fair to note Kennys starting point.
While I believe Rafa Benítez left a fairly strong squad in 2010, it was not his best; the money-grabbing of Gillett and Hicks had helped see to that, particularly when promising the Spaniard the money from the sale of Robbie Keane to reinvest (on Stevan Jovetić

, before withdrawing it to leave the side a striker short.
Roy Hodgson then took that collection of players, and, with a fairly neutral net-spend, succeeded in making it considerably worse.
By the time Kenny Dalglish took over, the following players were in the first team squad: Paul Konchesky, Christian Poulsen, Milan Jovanovic, Danny Wilson, Jonjo Shelvey, Joe Cole, David Ngog, Soto Kyrgiakos, Ryan Babel, Daniel Ayala, Danny Pacheco and Jay Spearing. Thats eleven players you wouldnt want to rely on, either because they were too young, or just not good enough.
On top of this, Hodgson had brought back the increasingly injury-prone Fabio Aurelio, who had excelled under Benítez when available, but who was released in 2010 because of fitness issues. That makes a dozen players who werent of much use, without talking about reserve goalkeepers.
As teenagers, Shelvey, Wilson and Ayala had a lot of potential, but were young and raw. They had a handful of starts between them. I was sad to see Ayala sold, but Sebastian Coates looks an even better prospect.
Pacheco had ability, but wasnt quite good enough. Spearing had been improving, but slowly. Jovanovic suffered the fate of the man who signed him (Benítez) being sacked before he even arrived, and as with Djibril Cissé six years earlier, it may have contributed to a poor start (which never got better).
For all his talent, Joe Cole looked consistently unfit and peripheral, and did so on £100,000 a week. And at £1.5m each, Kyrgiakos and Ngog were never going to be more than hit-and-miss squad players; but bargains all the same when compared with Poulsen and Konchesky, who cost roughly £5m each ludicrous fees for thirtysomethings. Ryan Babel was a potential match-winner, but never quite worked out how to use his talent effectively, beyond the occasional inspired cameo.
Raul Meireles was Hodgsons one successful, albeit unspectacular signing. Before Hodgson got going, Benayoun and Mascherano two of the stars of the 86-point finish in 2008/09 had departed, and as such, Id come to expect roughly 6th place from the Englishman, given that 7th in 2009/10 was seen by many as an unacceptable underachievement. But when Dalglish turned up, the Reds were 12th and losing games.
Emiliano Insua now doing well at Sporting Lisbon and Alberto Aquilani now at the mighty Milan were already out on loan. With Benítez edged out of the door, the young Insua had been earmarked as not good enough by Christian above his station Purslow, as had Lucas Leiva. (Yes, Liverpools player of the season-in-waiting was being hawked around by Purslow, with Hodgson equally ludicrous in his desire to be rid of Agger.) By the time Dalglish took over, Insua and Aquilani had been ostracised. They might not have been perfect, but they were better than Konchesky and Poulsen.
The only players Dalglish could definitely build a team around were Reina, Johnson, Agger, Skrtel, Lucas, Gerrard, Kuyt (for a couple of years) and Torres; seven Benítez signings, plus the clubs best-ever Academy graduate.
Also in the squad, Carragher was beyond his peak, but could obviously still play a part, and in the wings, Maxi was a quality player, with a year or two left at the top, who had yet to shine. Raul Meireles was not always convincing in the first XI, but due to injuries, ended up deputising for several players (although had yet to score when Dalglish turned up). And Martin Kelly, blooded by Benítez towards the end of his tenure, was a promising prospect, although like Shelvey and Ayala, very raw.
But then Torres, after three goals in five games under Dalglish after just nine in 20 under Hodgson, made it clear he wanted to leave, dating back to broken promises by the club back in 2010. And Gerrard soon suffered serious injury. This season, Lucas followed suit. Hodgson, in getting Liverpool to a lowly 12th, may have not spent much money, but he did have Torres, Lucas and Gerrard: the heart of the team. He also had Carragher, who was 18 months younger than now.