Blue Sky Budget or Negotiated Settlement?

Well it is that time again, budgeting starts for the next year and I was reminded of an article that I read that described budgets as one of two approaches.

1. Blue Sky - Reaching for the stars here - what could you do if you had no boundaries?

OR

2. Negotiated Settlement - The boss wants 25% and you want 10% so you settle on 15%.

The problem with both of these is neither one seems entirely rooted in reality. If you set a blue sky budget and then the organization can't ( or won't) deliver the amunition to fight the battle ( new products, more people, technical or marketing resources) then it ends up being an empty shell of a number that there is no reasonable chance to hit.

But if you choose the negotiated settlement route, you are accused of sandbagging or possibly underperforming ( or worse - just plain lazy).

Both are problematic at best but perhaps the solution lies halfway in between both approaches? I'm working on ones now and I have to dream big but also temper that with what is achievable ( will I have the resources?) against the backdrop of the market.

Time will tell.