The son of a Brooklyn truck driver who raised his family in the housing projects, Schultz watched his father struggle through his career without health benefits or corporate kindness, and he never forgot the experience--even as he became a Xerox salesman and vice president for a Swedish housewares manufacturer before joining and building his coffee chain in the 1980s.

"You don't start out by saying, 'I'm going to create the world's largest coffee company.' You start with a sensibility that says, 'I'm going to create a different kind of company,' " explains Schultz in his latte-colored office. "And you have to follow the path of doing the right thing by making decisions that are true to your mission and cause. You refer to your heart, conscience, and memory."

You also keep innovating if you want to keep leading. As Charles Smith, a management consultant, says: "Exceptional leaders cultivate the Merlin-like habit of acting in the present moment as ambassadors of a radically different future, in order to imbue their organizations with a breakthrough vision of what it is possible to achieve."

Schultz is still showing his team what's possible to achieve. Take Starbucks's new music business, for example. By producing CD s and distributing them in its stores, the coffee chain is transforming how music is discovered and delivered to consumers. "We didn't have a music business several years ago, and now we have 65 people on that team," marvels Schultz, who received a personal visit from the British rock band Coldplay several months ago. "Customers have given us license to be in music," he adds. "Can we still preserve our core business without diluting the integrity of the coffee experience and community in our stores?"

There's little question that Schultz's other recent innovation--buying a water company and contributing a nickel from every bottle sold to organizations who get clean water to children around the world--reinforces Starbucks's image of integrity. "This effort says a lot to our people and customers," explains Schultz. "It speaks to the heart of our company."

Schultz continues to speak to Starbucks's heart by constantly pushing for renewal and reinvention. Despite his company's accomplishments, he knows it is not a corporate utopia. "Being a great leader means finding the balance between celebrating success and not embracing the status quo," he muses. "Being a great leader also means identifying a path we need to go down and creating enough confidence in our people so they follow it and don't veer off course because it's an easier route to go."

And to make sure his managers understand where he wants Starbucks--and them--to go, Schultz is emphatic at his town hall meeting that he will not permit complacency or an entitlement culture to take hold. "I don't want to put people up against a wall," he tells the group. "But it's harder to stay here than to get here, and, if there's an enemy or adversary, it's within. I just want us to remember that."

As long as Schultz keeps caring, they are not likely to forget.

BORN: July 19, 1953 EDUCATION: B.S., Northern Michigan University FAMILY: Married, two children SPORTS FANATIC: Star high school quarterback, went to college on a football scholarship, owns the NBA's Seattle Supersonics ON MANAGEMENT: "There's no long-term shareholder value if it isn't linked to building long-term values for your people."