The fallacy of the pie

Photo by Nina Strehl on Unsplash

I was thrilled to have The Spinoff republish a version this article: read it here

As most Kiwis’ discussions have done lately, I was recently catching up with a friend and our conversation turned to what happened in our city on March 15. After we shared our experience of that day and what we knew about the finite details, we turned to the broader consequences of the attack: public safety, extremist philosophies, and the generosity of New Zealanders.

The outpouring of public grief and solidarity has swept the country by full force, and for a small population, people have given a lot of money to various organisations supporting the victims. Givealittle has racked up nearly $10m for an organisation called Victim Support, an exceptional not-for-profit which provides 24/7 access to professional support services for victims of crime and trauma, as well as giving financial assistance and advocating for the rights of victims. They look after 30 Local Group Committees, with a workforce of over 600 volunteers and 120 paid staff based at 62 offices across New Zealand. This was one of the first gifting pages set up in the wake of the tragedy, and enabled people from all over the world to feel like they were doing something right after something so wrong had happened.

Just hours after the page opened and the donations were pouring in so fast that Givealittle crashed, rallying cries were posted online, and they sounded like this:

“Excuse me can you please make sure this money isn’t going to salaries??”
“I don’t want my donation going into a big pot for overhead. How do I know where Victim Support will be using my money?”
“100% of all these funds MUST go directly to the families. Otherwise it’s a scam.”

Victim Support reacted quickly and put out a statement on Givealittle about how the funds would be used, saying:

Thanks to those who have asked for more detail around how these funds will be used to support victims and their families.
We want to be really clear about this, this money is being ring-fenced and is NOT for Victim Support’s regular operating costs…
We’ve been overwhelmed with donations – more than we thought possible – and we now need to create more formal processes than would be needed for the much smaller fund we expected this page would create.

Look at how Victim Support’s work has increased in the last four weeks:

The number of victims being supported is well into the hundreds and this will continue to grow, particularly as family continue to enter New Zealand.
Our National Contact Service is continuing 24/7 and has been managing increased call volumes of 40-50% since the terror attacks.
Needs for support are being experienced nationally, including from family members residing outside of Christchurch and entering New Zealand from overseas.

Victim Support now has an immensely larger workload than when they did their strategy and financial planning for 2019 last year. In 2018 their budget was nearly $12m, most of which was provided by central government funding; they have now received close to that just in donations in the first quarter, a situation no-one could have predicted.

The needs of the Muslim community and those affected by the tragedy are immediate, severe and exceptionally complicated. The media spotlight will be hot on this organisation. The way they use the donated funds will be scrutinised carefully. Victim Support need to react quickly and correctly, distributing not only a huge volume of funds fairly to a distressed group of people, but also keep up with the increased volume of phone calls, emergency psychosocial counselling and other incredible work that they do. Victim Support’s regular mahi has not suddenly stopped politely to make way for this tragedy – we all know life doesn’t work like that.

Photo borrowed from here

In saying that these funds have been “ring-fenced”, this means that Victim Support will not use any of this money to make their services more efficient or effective, to hire more staff to take the pressure off their existing workforce, or to share the impact of their life-saving work. And Victim Support cannot do this because of the pervasive social ideas that surround how charities spend the money they are donated.

This is not commonly talked about outside of the charity sphere, so for the record, this view is completely my own. Victim Support’s permission was sought before this article was published, and it was granted without endorsement. I have no association with Victim Support, other than as a far-flung admirer. At the high risk of disagreement, I have chosen to take a stand because as someone who is passionate about the difference not-for-profits can make, this kind of insidious thinking stifles the impact charities dream of having.


When you think about a charity you love, how do you know the work they’re doing is ‘good enough’? How do they show you their good work, their responsible stewardship, their financial acumen? Rather often, they’ll put it in a pie chart. We see it in Annual Reports and website footers the world over – here’s what percentage we spent on programmes, and here’s how little we spent on everything else.

In principal, this makes sense. The money goes (mostly) to where the charity says it’s going to go; by keeping overheads low, as much money can go to the cause as possible. But when you dig a little deeper, you will see how this restricts charities’ ability to innovate, take risks and actually contribute meaningfully to the problems they desperately want to solve.

I can’t go any further without paying immense tribute to Dan Pallotta and his 2013 TED Talk; if you’re interested, his articulation of this concept will do a far better job than I can:

Dan Pallotta: The Way We Think about Charity is Dead Wrong

The crux of Dan’s argument is that the not-for-profit sector is disadvantaged seriously against the for-profit sector, due to systemic issues such as the viscerally negative reaction in our society to people making money by doing good, the fear of risk-taking, the lack of time to prove the effectiveness of what the charity is trying to achieve, and restricted access to the stock market to invest. This is perpetuated by the dangerous question: “what percentage of my donation goes to the cause?

Here, without acknowledging it, we have grounded ourselves in the economic concept of the Fixed Pie Fallacy – the assumption that there is only a fixed amount of something available, so the pie can only ever be as big as it is now. While often referred to when talking about labour, it can also apply to wealth. Because there is seemingly “only so much money to go around”, extraneous costs must be kept as low as possible; the less money you spend on fundraising, the more money there is available for the cause.

The Fallacy of the Pie perpetuates the concept that regular operating costs are “overhead”, not an integral part of the charity’s financial expenditure, and underneath that is the insidious idea that the only thing that matters is the cause being fundraised for, and that any overhead is bad and should be kept as low as possible.

When a charity is fixated with making one slice of the pie as small as it can be to please donors, what people don’t realise is that they are cutting off their nose to spite their face: they’re effectively limiting the whole size of that pie, because the only part of the pie that can make the whole pie bigger is the overhead.

Dan says it beautifully: “Fundraising is the one thing that has the potential to multiply the amount of money available for the cause that we care about so deeply… [and] this is what happens when we confuse morality with frugality. We’ve been taught that the bake sale with five percent overhead is morally superior to the professional fundraising enterprise with 40 percent overhead, but we’re missing the most important piece of information, which is: What is the actual size of these pies?”

If charities were able to increase the amount they spent on recruiting and paying staff well, trusted them to make smart decisions, made sure everybody had the resources they needed to do their jobs effectively, shared the organisation’s impact and made donors’ experience with the charity one of connection and purpose, then the pie will grow. It’s as simple as saying that the charity that does the best job at raising money will raise the most money. Sadly, “there is no accounting terminology to describe this kind of investment in growth and the future, other than the demonic label of ‘overhead’.”

Image borrowed from here

How can an organisation be expected to increase their workload and output without using money to do so? If it were a business, this simply wouldn’t happen – would a company that’s just raised $10m of seed funding be restricted to spending it all only on their product and not on employing the best people for the job, making sure the infrastructure and software is right, marketing their product properly and future-proofing their income stream?

People working for charities are not compensated as well as they are in the corporate world, though their work is changing lives. They must work with fewer resources to do their jobs properly, relying on favours and handouts to get their cause in front of people. They must keep their side of the business as lean as possible, so that the money is spent on the programmes and the people that need it. While this works in a short-term, pie-graph-ruled society, the misunderstood side-effect is that the vision stays small, the risks stay minimised, and the dreams of the not-for-profit being truly able to solve the problems they work on every day stay unrealised.

And here we find ourselves back at the questions being aimed at Victim Support – is all this money going directly to the families? It’s controversial to say it, but I don’t think that it should. It’s unfair and unethical to expect Victim Support to continue providing their current services on top of a massively increased workload without a consequential increase in financial support for their operations. The most effective way to help more people isn’t by giving Victim Support more money for their programmes, it’s by trusting and enabling this incredible team to do what they need to do.

(I do need to acknowledge that it gets a little bit more complicated here, because around 10% of Victim Support’s funds in 2018 were fundraised; the rest were given by the government. While this decision to give every dollar to the victims may indeed be supported by an increase in government funding for Victim Support’s operations, this wouldn’t be the case for many, many not-for-profits who aren’t supported by the government, and do equally as important work.)

I am not suggesting that charities shouldn’t be held accountable for what they say they’re going to spend their money on and what they do spend their money on. There are trustees, auditors, public financial accounts, Charities Services, journalists and academics to do that. What really needs to shift is the way charities talk about how they use donated funds. Not-for-profits need to use money to risk, cause effective change, and solve the problems they are there to solve, with the ultimate goal of making themselves redundant. The public also needs to be better educated about the role of charity in society; we need to learn to trust a charity to spend the money they are donated, the best way they know how.

So now is absolutely the time to point out my hypocrisy – I know I would have said exactly the same thing if I was on Victim Support’s fundraising or executive team. To say anything other than, “these funds have been ring-fenced” would have resulted in severe backlash and criticism from the public about why Victim Support took this stance, amid immediate calls of abusing the situation for their own financial gain, misleading donors and betraying the victims and their whānau. March 16 was not the time to have this discussion.

Still, in closing, I’d like to speak directly to the crew at Victim Support.

Whether you are counselling those affected, liaising with police, writing grants, sorting the accounts, organising fundraising events, keeping the social media feeds up to date, meeting with the government or doing the administration that it takes to keep an organisation afloat, I’m really sorry that you have had to “ring-fence” these funds. I know why you did it, and I don’t blame you for your decision; I am disheartened by our society’s archaic view of charities and the position you have been forced in to.

I highly respect your work, and I’m sorry that you couldn’t use some of these funds to pay staff fairly, to get the resources you need, and to share your impact widely – because those are the things that will ultimately enable you to reach more people with your incredible services, change lives for the better and do yourselves out of a job.

I’m sorry that we as a society aren’t educated about this enough to trust you, as the kaitiaki (guardian) of the vulnerable and the true experts in this area of need, to spend those funds best and most fairly on whoever needs it.

Image borrowed from here

One Reply to “The fallacy of the pie”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s