The British team has not won a race since 2012, and has had only two podium finishes (both at the same race) during that same period.
"We're just not good enough," he told Sky Sports. "We are here to win races and we're not winning races - but we are going in the right direction."
The McLaren boss, however, was a lot more positive of the team's 2017 prospects.
Next year will see a raft of aerodynamic regulation changes, as well as the scrapping of certain engine development restrictions,and Dennis hopes that McLaren will be able to make some progress next year.
"Our new engine is running on the dyno now and that's several months earlier than our engine last year," added Dennis. "We are well advanced on the car and making really good steps."
Bahrain International Circuit - Winter testing