@melissa_kreider , I wouldn't say self-selection is a recipe for disaster but typically more common is randomized groupings I find. The biggest negative to self-selection in an online classroom that I have seen is often (if no preparation is provided), students will start selecting at the top so the students that move ahead early in the course and are on task join the first groups and occasionally towards the end you get multiple procastinative (is that word?) students together versus a nice mix. But I've not seen it be a huge issue...just one possible negative.
If you do self selection, I would do some preparation ahead of time as you suggest. Allow participants to join into a discussion ahead of time and drive them to talk about aspects of the work they will be doing together so they can find commonalities as you mention. Setup the discussion so perhaps they form groups around their discipline, their time zone (only relevant if synchronous work is required), their schedules.
If it's something your client feels strongly about, just offer them the pros and cons and be sure to provide clear directions to students to find the signup up and to develop perhaps an ungraded assignment with a date to be sure they remember to signup and go for it.
The design of the actual group work is usually much more critical I find to the success than the actual group formation But group formation does play a role definitely so I'm glad you are not discounting the importance of it.
- Melanie
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