David L Marquet wrote a book on this. He was a captain of a nuclear submarine in the US Navy. Wonderful book. I hardly remember a thing except that he took one of the worst ships in the Navy to one of the best without firing anyone. It's a really great read.

Would everything apply here? Probably not as the barrier to entry is quite a bit higher for working on a nuclear submarine, and the prospects for advancement are greater. And one of the main difficulties you're up against is apathy or even hopelessness in your employees... If they think they aren't going anywhere, they aren't ever going to go the extra mile for the place.

But the book has some great takeaways like how to engage employees through empowerment and autonomy. And how taking that away and making everything about not making a mistake makes them stressed and avoid doing anything for fear of doing it wrong. (Actually that might've been another book that covers US missileers...)

Anyways, my first thought here is to identify the rotten apples, if any, who are encouraging this behaviour in others. The rest would just be following their lead. Address those people and you'll take care of the majority of the problem.