Back when I first started writing and submitting short stories and poetry to speculative markets, I wondered why editors didn't give more helpful feedback to authors, especially for items that came close to what they were seeking. Since I've now been editing for over eight years, with both e-zine and print anthology experience with Raven Electrick, Sporty Spec, and the upcoming Cinema Spec, I've learned some of the reasons for using form rejections, and now send out a healthy proportion of form rejections myself.
-Time constraints. I used to give feedback on all but the most hopeless submissions, but as the volume of submissions increased, I realized it can take up to 10 times longer to write a brief and tactful reason why a piece was rejected than it does to send a form rejection. Sometimes it's difficult to pinpoint exactly what the problem is without a lengthy analysis, and sometimes it's hard to phrase the criticism tactfully. While I try to be as writer-friendly as I can, the form rejection has become my friend both in terms of freeing up my own time and of speeding up my response times to authors.
-Author reaction. Although I've received only a few negative e-mails from authors complaining about their rejections, I do see the rare negative comment posted on forums or blogs about a personal rejection I've sent. (I still use personal rejections, though sparingly, for things that were held for a second reading, but were ultimately declined.) Some people don't respond well to personal rejection, no matter how tactfully phrased (they always seem to ignore the praise). It leaves me wondering whether it's worth the extra time to craft a personal rejection, if some authors aren't finding them encouraging or useful.
-Rewrite problems. Sometimes, as an editor, I've thought that an author is really onto something, but the piece isn't quite there yet. I've found that the most successful rewrite requests, though, involve very small and specific problems that can be easily remedied (e.g., "The ending seems a bit overdone. What if we deleted this sentence?") Once the problems get bigger and more amorphous ("too much telling, not enough showing," for example), authors inevitably change things I liked, and still don't fix the problem. At that point, the piece is even harder to reject, because of all the extra effort the author has put in, but I still have to say no. Thus, I've been shying away from rewrite requests/offers more and more.
I hope a few writers will find this analysis useful.