That lesson is going to serve them well in the workplace.
Teach students that they are entitled to bad behavior, bad work habits, and deadlines? Fuck deadlines
The next generation is going to have a hard time competing in the global workplace against cultures that do enforce reasonable consequences for fucking up.
Many kids are not that lucky. In my experience, the kids (my peers) who were doing drastically badly weren't lazy. They had something else going on - a bad home life, or serious mental health issues.
But fortunately I'm not starting out from scratch. People have made those experiments already. Grades suck.
Among other things that do work, guided retrospectives are one idea I would be tempted to implement. (Hell, we software developers know that too: when we want to get better, we hold retrospectives, we don't ask the scrum master to assign a letter grade!)