Droga5 has laid off about 5 percent, which is approximately 40 people, in its New York office.
The layoffs were across all major departments at the agency, including several people in HR. Droga5 declined to comment on specifics around the job cuts.
"Droga5 has made the difficult decision to reduce its workforce in New York by approximately 5 percent in order to reshape the business in line with current business demands," an agency spokeswoman said in a statement. "We express our gratitude to the affected employees for their many contributions to Droga5."
According to people with knowledge of the matter, two Droga5 clients – Tencent and Mattress Firm – have significantly reduced their scope of work with the agency recently. Droga began working with both companies in the middle of last year.
Mattress Firm did not respond to calls for comment. Tencent was not immediately available for comment.
The staff reduction also follows Droga5 parting ways with Chief Creative Officer Ted Royer after putting him on leave and hiring an outside firm to handle an internal investigation in the shop's HR processes earlier this month. In late January, Droga held meetings throughout the agency to discuss HR matters.