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I build participation points into all my courses --- normally about 10% of the overall class grade --- but how do I calculate this?  The answer may shock you...

For the the minor part this is informal attendance (not necessarily from a formal role call) but from work produced in class: be it a filled-in handout; an artifact of group work in-class etc; or on some days just a simple sign-in sheet.  My peers in the department and some of my TAs have used a polling question to gauge attendance (although it is not a  formal attendance question).  My problem is that participation does not look the same for all students - some are gregarious and obviously engaged, others are quiet (but still actively engaged) and others fail to show up at all!   

That being said, the main 'tool' I use for assigning participation grades might shock you --- I ask the students twice throughout the semester to grade their own attendance.  I use an index card to facilitate this.  To my surprise, they are far harder on themselves that I would ever be.  Here is the slide I use:

My rule of thumb is: if the student's own grade varies more than two points from my assessment of their participation, I adjust their grade.  If not, I give them what they assign themselves.  Try it once and you will be surprised how honest they are about themselves.