(1) On the ground floor, you need to pick up the ingredients to make the potion of defedation, together with the jar to put them in. Both are in the store-room just to the SE of the central square in the lich lab. Put one set in the backpacks of each scholar you want to convert to lich.

(2) You now need to go to the upper floor, go to a small room in the east of the lich lab, read the instructions pinned on the wall, and do what it says. (IIRC, basically you have to first click on the mixing bowl, or cook pot, or whatever they call it, and then on the burner.) If each of your scholars does not now have a potion of defedation in his/her backpack, you've done something wrong.

(3) Each of the candidates for lich should now drink the potion they have prepared, and it is at this point that they formally become candidates to be liches. (IIRC, this shows up if you press and hold the Z key.)

(4) Now you go to the bottom floor of the lich lab and enter the central square. And I warn you, the bottom floor of the lich lab is not a safe place. Save your game often, and don't be ashamed to run for it if necessary. You need to press the button on the console on the catwalks, and then at floor level, enter the one chamber of the lich machine that still works, and either press the button or throw the lever (or whatever).

Your characters (or you) don't at any time need to hold any of the ingredients or implements in their/your hands, they just need to be in the right characters' backpacks.