The job losses, which could result in the agency losing around 20 per cent of its workforce, will be spread across all departments and could reach the highest levels of its management.
Lace called staff together last Friday evening to warn them that Grey was about to enter a four-week period of consultation.
The move follows mounting concern by Grey chiefs that the agency is not only ineffective in competing for local business but also that it may not be providing a sufficiently high level of service to its bedrock multinational clients Mars, Procter & Gamble and Glaxo SmithKline.
At the same time, Lace is continuing in his search for a big-name executive creative director to succeed Tim Mellors, who is due to leave Grey later this year.
Lace said: "This is all about making sure that the agency is structured in a way which not only makes us more competitive, but enables our clients to get much more upstream strategic and creative advice. It's particularly important that we provide the most effective possible service for our multinational clients here in the UK."
Lace stunned the industry when he quit as the chief executive of TBWA/London in October to fill the long-vacant chief executive role at Grey.
Lace has committed himself to improving Grey's creative standing in the industry and he is working towards creating a new position for the agency as a creative force.
Lace is the chairman of Nabs, the industry charity, which is coping with a wave of agency job losses.